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The political, economic and social development of any country depends on the amount of revenue generated for the provision of infrastructure in that given country. Governments require revenue to augment the spending needs to maintain an adequate level of public investment and social services. Taxes are the main source of raising revenue in both developed and developing countries like Nigeria (Aizenman and Jinjarak, 2008; Saeed and Sheikh, 2011). Nigeria as a developing country has a very low tax to

GDP ratio which is attributable to narrow tax base, inelastic tax system, complex tax laws, complex network of exemptions and tax incentives, weak tax administration and weak mobilization of provincial taxes (Aregbeyen and Fasanya, 2013). This situation is being strained by the oil revenue which accounts for about 80 percent of government revenue. The large size of Nigeria’s tax gap suggests that increasing the country’s tax effort in an equitable and efficient way requires reforms of both tax policy and tax administration. One of the major objectives of the Administration in Lagos State, in 1999, was to optimize the State’s tax potentials by achieving a very substantial, if not total, coverage of its taxpayer base. In simple terms, to bring all taxable persons into the tax net. To actualize this goal, the administration initiated the State’s Tax

Administration reform process. As part of the re-engineering process the tax payment process was reviewed and all payments to the Board were to be made directly to designated revenue collecting banks by the tax payers.

Payments into the Government coffers were electronically linked to data bases that issued electronic receipt to taxpayers and closely monitored by an independent consultant to the State. Personal electronic tax clearance cards (e-TCC) were introduced for the first time in Nigeria and indeed in Africa. Tax collection was made more transparent to the taxpayers as they could access their records via the internet, and this made tax payments, more convenient and transparent to the taxpaying public.

At the same time the government did comprehensive review of activities and events over the past years to look into the past process and revenue generation activities of the Board. This led to the appointment of new management in November 2005. At the introduction of the new Board, the position of the Chairman was upgraded to that of a Permanent Secretary, reporting directly to the Executive Governor. Some staff of the Board who could not fit into the vision of the new Board were redeployed to other Ministries within the Civil Service.

Other expectations of the Nigerian tax system according to the Presidential Committee on National tax policy (2008) include;

  • Encourage economic growth and development.
  • Generate stable revenue or resources needed by government to accomplish loadable projects and or investment for the benefit of the people
  • Provide economic stabilization.
  • To pursue fairness and distributive equity
  • Correction of market failure and imperfection.

In an attempt to fulfill the above expectation, the national tax policy is expected to be in compliance with the principle of taxation, the lubricant to effective tax system. The Nigerian tax system has been flawed by what is termed multiplicity of tax and collecting entities at the three tiers of government levels – Federal, State and Local government (Ahunwan, 2009).

According to the report of the presidential committee on National Tax policy (2008), Tax policy formulation in Nigeria is the responsibility of the Federal inland Revenue Services (FIRS), Customs, Nigerian National Petroleum Corporation (NNPC), National Population Commission (NPC), and other agencies but under the guidance of the National Assembly i.e. the law making body in Nigeria (Presidential committee on National tax policy, 2008). Suffice it to say that if there must be any effective implementation of the Nigerian tax system or attainment of its goal, the use of the national tax policy document remain absolutely essential. According to the Presidential Committee on tax policy (2008), “Nigeria needs a tax policy which does not only describe the set of guiding rules and principles, but also provide a stable point of reference for all the stakeholders in the country and upon which they can be held accountable. James and Nobes (2008) decried the inability of tax policy to meet up with efficiency and equity criteria against which it is being judged. It was further noted that tax policy is continually subjected to pressure and changes which most time does not guarantee outcome that are in line with the overall goal (James and Nobes 2008). Unfortunately, most policy changes in Nigeria are without adequate consideration of the taxpayers, administrative arrangement and cost plus the existing taxes. This has in no small measure hindered the effective implementation and goal congruence of the nation’s tax system. Citing (Bird and Oldman 1990), James and Nobes (2008) stated as follows “


The problem confronting this research is to determine the nature of tax reforms and its impact on revenue generation in Nigeria, applying a longitudinal analysis.There is a general lack of consensus among scholars on the contribution of tax revenue to the economic growth of nations. For instance, whereas Ariyo (1997) in his study on productivity of the Nigerian tax system documented a satisfactory level of productivity of the tax system before the oil boom, Festus and Samuel (2007) established that the role of tax revenue in promoting economic activities and growth is not felt in Nigeria. The two studies reflect that the oil boom has not improved the economic state of the country since before the boom, there was a level satisfactory and after the boom, the growth of economic activities deteriorated. The emergence of oil as a major tax revenue is one of the means a country‘s government devises in solving the economic problems of the country and to enhance government expenditure which isexpected to be beneficial to the citizens of such country through the provision of social and economic infrastructures (Adereti et al 2011). In Nigeria, this has not been the case because despite the tax revenue and expenditure reported year in year out by the government, the physical state of the nation in terms of infrastructure and social amenities is backward. This is evident in the lack of electricity supply, portable drinking water, basic health care delivery, bad roads, just to mention but a few. The gap in terms of the period covered is also a contributory factor to the disparity in the outcomes of relationship between tax revenue and an economy. The advent of the oil boom encouraged some laxity in the management of non-oil revenue sources like the company income tax and custom and excise duties. This calls for an urgent need in the improvement of the tax system to enhance the evaluation of the performance and facilitate adequate macroeconomic planning and implementation (Adereti et al 2011).


i)     To determine the nature of tax reform in Nigeria

ii)   To determine the effectiveness of tax reform policy towards revenue generation to government.

iii)  To investigate the impact of value added tax on the growth of the economy of Nigeria.


H0:Tax revenue generation in Nigeria is high

H1: Tax revenue generation in Nigeria is low

H0:Challenges to tax revenue generation in Nigeria is low

H2:Challenges to tax revenue generation in Nigeria is high

H0:The impact of tax reform on revenue generation is low

H3:The impact of tax reform on revenue generation is high


The study shall analyze tax reform policy and determine its effectiveness towards revenue generation to government.It shall also serve as a source of information on issues of tax reforms in Nigeria. This study is contemporaneous, that is, timely, because of the urgent need for ethnic groups, policy makers and implementers to understand the nature, scope and dynamics of the current agitation for resource control and practice qf true federalism. Also, the study relates to practical problems of Nigerian corporate existence, and it affects over 60 per cent of the population who are marginalized, deprived, alienated, neglected and dissatisfied with the current revenue sharing formula and federal structure. The study will help to guide and sharpen the focus of the Buhari government on its option for "political solution" to the issues of resource control in face of Supreme Court verdict. And in many ways, it will complement the theoretical platforms that had been erected in books on federalism. It will be a useful literature in understanding the struggle for resource control. Finally, the topic is unique, sensitive and controversial in the allocation of revenues between federal and the states, as it will illuminate gray areas.


The scope of this study covers tax reforms revenue generation in Nigeria over a period of 31 years (from 1981-2010). The trend of Company Income tax, Petroleum profit tax, Customs and excise duty and Value added tax are examined for the period to determine their correlation with the Nigerian economy which will be captured as Gross Domestic Product(GDP). The focus will be based on data obtained at the Federal Inland Revenue Service (FIRS).In the cause of the study, the researcher encounters some limitations which limited the scope of the study;

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

Inadequate Materials: Scarcity of material is also another hindrance. The researcher finds it difficult to long hands in several required material which could contribute immensely to the success of this research work.

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).


Tax reform: Tax reform is the process of changing the way taxes are collected or managed by the government and is usually undertaken to improve tax administration or to provide economic or social benefits. Tax reform can include reducing the level of taxation of all people by the government, making the tax system more progressive or less progressive, or simplifying the tax system and making the system more understandable or more accountable.

Revenue:In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover. Some companies receive revenue from interest, royalties, or other fees.

Mobilization:  Mobilization, in military terminology, is the act of assembling and readying troops and supplies for war. The word mobilization was first used, in a military context, to describe the preparation of the Russian army during the 1850s and 1860s. Mobilization theories and techniques have continuously changed since then. The opposite of mobilization is demobilization.

Revenue allocation:Revenue allocation is the distribution or division of total income, or revenue, in a business, corporate or government structure. It involves a complex process that entails how and where to allocate revenues in order to ensure the viability of departments and maintain the operating structure of the organization.

REVENUE GENERATION: These are the various ways in which local governments or organizational sources their income. Local government can either generate their income internally or externally. Revenue generation is a very important tool to every organization or local government, because this determines its survival.

FUND: The term ‘’fund’’ can be defined, as the amount of money or resources which has been made available for particular progrmmes or projects in the local government or organization.


This research work is organized in five chapters, for easy understanding, as follows Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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