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Nigeria is a federation with three tiers of government namely; Federal, State and Local Government. These tiers of government have their different expenditure responsibilities and taxing powers (fiscal federalism). This has serious implications on how the tax system is managed in the country. The Nigerian tax system is lopsided and dominated by the oil revenue. It is also characterized by unnecessarily complex, distortionary and largely inequitable taxation laws that have limited applications in the informal sector that dominates the economy (Odusola, 2006 and Jibrin, et al 2012). The system is concentrated on petroleum and trade taxes while direct and broad-based direct taxes like the value added tax (VAT) are neglected. This is a structural problem for the country’s tax system.

The Nigerian tax system favours the federal government since it controls the buoyant tax components while the lower tiers have jurisdiction over the less profitable ones (Odusola, 2006). In most instances the federal government taxes the corporate bodies while the state and local governments tax individuals. In the areas of concurrent taxation such as the personal income tax, capital gains tax and stamp duties, the federal government retains the legislative power while sharing administrative capacity with the states.

The Nigerian tax system is sick and faced with many challenges. The country is yet to develop an effective and efficient tax system despite the fact that the enforcement machinery of our tax laws is porous that anybody can go against it without being punished and this does not augur well for our economy (Ogbonna 2010).

Those who are charged with administration of tax are not empowered with state of the art equipment to perform. They are not often than not so ill-equipped, so ill-trained and so neglected that they become disillusioned, discouraged, frustrated and therefore hardly give their best services. Therefore, from indications, tax administration in Nigeria is generally poor and inefficient.

The administration of tax in Nigeria is vested in the various tax authorities depending on the type of tax under consideration. Such authorities are the Joint Tax Board, which is the apex unifying body for all tax authorities in Nigeria. It is established under section 85 of the Personal Income Tax Act, (Amendment) 2011, Federal Inland Revenue Service (FIRS) established by Section 1(1) of Companies Income Tax Act (CITA) 1990. It is charged with the powers of assessment, collection of and accounting for all the taxes which the federal government is empowered to collect. The State Board of Internal Revenue in each state is another tax authority vested with the administration of tax in each state. It is established by Section 85A of the Personal Income Tax Decree (PITD), 1993. The Local Government authorities in the state also have specific tax functions. They are established by Section 85E of the PITD, 1993. It is the responsibility of these bodies to ensure that tax administration is strengthened in such a way that no leakage or loopholes of collectible tax is allowed. Contrary to this expectation, there are some administrative problems giving rise to such leakages and loopholes.

Tax administration is all about the machinery put in place to determine, monitor and enforce the collection of taxes by government of a country. To Kiabel (2011) and Soyode and Kajola (2006), tax administration is “the process of assessing and collecting taxes from individuals and companies by the relevant tax authorities, in such a way that correct amount assessed is collected efficiently and effectively with minimum tax avoidance or tax evasion. Ogbonna (2012) noted that tax administration “involves all the principles and strategies adopted by any government in order to plan, implore, collect, account and coordinate personnel charged with the responsibility of taxation”. It also includes the effective use of tax revenue for efficient provision of necessary social amenities and other facilities for the taxpayers.

Tax is a compulsory levy imposed on a subject or upon his property by the government to provide security, social amenities and create conditions for economic wellbeing of the society (Appah, 2004). According to Ogbonna and Appah (2012), tax is “a major source of government revenue all over the world”. Azubuike (2009) noted that government uses tax proceeds to render their traditional function such as the provision of public goods, maintenance of law and order, defense against external aggression, regulation of trade and business to ensure social economic maintenance.

Musgrave and Musgrave (2006) observed that the economic effects of tax include micro effects on the distribution of income and efficiency of resource use as well as macro effect on the level of capacity output, employment, prices and growth. Ogbonna (2010) stated that a tax is a compulsory payment imposed on income, profit, wealth, estate, property, goods and services of individuals and corporate bodies by the government for the sustenance of the government and for which there is no guarantee direct benefit. Taxes represent potent instrument of fiscal policy used by government to manage the economic development of the state. It constitutes a major aspect of the macro-economy (Aneke (2007) in Ogbonna (2012). Generally, the importance of taxation to a nation need not be over emphasized as it is a powerful tool of economic reform and a major player in every economy of the world.


Tax administration and collection is a major problem facing taxation in the world (Jibrin, et al 2006). According to them, bad administration and collection of tax has led to tax evasion. According to Udabah (2002), the problem of collection and administration are the major issues facing taxation. Tax administration is problematic because of high rate of illiteracy, poor tax awareness and inadequate orientation (Ogbonna, 2010).

Over the past two decades oil has accounted for at least 70 per cent of the revenue, thus indicating that traditional tax revenue has never assumed a strong role in the country’s management of fiscal policy. Instead of transforming or diversifying the existing revenue base, fiscal management has merely transited from one primary product-based revenue to another, making the economy susceptible to fluctuations of the international oil market.

The need to address this problem led to several tax  policy reforms. The tax policy reviews of 1991 and 2003, as well as the yearly amendments given in the annual budget, were geared towards addressing this issue.


The study sought to examine the challenges of tax reform and administration in Nigeria. Specifically, the study sought to;

  1. examine the major problems preventing effective tax reformand administration in Nigeria.
  2. assess the causes of non-compliance with tax laws and policy by individuals and firms in Nigeria.
  3. examine the causes  and proffer solutions to the issue of poor tax collection in Nigeria.
  4. Suggest solutions to the problems of tax reformand administration in Nigeria.


  1. What are the major problems preventing effective tax reformand administration in Nigeria?
  2. What are the causes of non-compliance with tax laws and policy by individuals and firms in Nigeria?
  3. What are the causes and solutions to the issue of poor tax collection in Nigeria?
  4. What are the solutions to the problems of tax reformand administration in Nigeria?


This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

1.6       Scope/Limitations of the Study

This study is on tax reforms administration in Nigeria.

Limitations of study

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).

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.

1.7       Definition of Terms

Tax: Tax is an involuntary fee levied on individuals or corporations and enforced by a government entity – whether local, regional or national – in order to finance government activities.

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 Administration: The development and formulation of Federal tax policy relating to existing or proposed internal revenue laws, related statutes, and tax conventions. Tax administration includes assessment, collection, enforcement, litigation, publication, and statistical gathering functions under such laws, statutes, or conventions.



Appah, E. (2004): Principles and Practice of Nigerian Taxation, Port Harcourt, Ezevin Mint Printers and Publishers.

Jibrin, S. M; Blessing, S. E. and Ifurueze, M. S. K. (2012): Impact of Petroleum Profit Tax on Economic Development of Nigeria, British Journal of Economies, Finance and Management, 5(2), 60 – 70.

Kiabel, B.D. (2011): Principles of Taxation in Nigeria, Owerri, Springfield Publishers.

Musgrave, R.A. and Musgrave, P.B. (2006): Public Finance in Theory and Practice, New-Delhi-India, Tata McGraw-Hill.

Odusola, A. (2006): Tax Policy Reforms in Nigeria – Research Paper No. 2006/3, United Nations University – World Institute for Development Economies Research.

Ogbonna, G.N. (2010): Burning Issues and Challenges of the Nigerian Tax Systems with Analytical Emphasis on Petroleum Profits Tax

Ogbonna, G.N. (2010): Burning Issues and Challenges of the Nigerian Tax Systems with Analytical Emphasis on Petroleum Profits Tax.

Ogbonna, G.N. and Ebimobowei, A. (2012): Impact of Tax Reforms and Economic Growth of Nigeria: A Time Series Analysis, Current Research Journal of Social Sciences, 4(1-2), 1-4.

Soyode, L. and Kajola, S.O. (2006): Taxation – Principles and Practice in Nigeria, Ibadan, Silicon Publishing Company.

Udabah, S. I. (2002): An Introduction to Nigerian Public Finance, Enugu, Linco Press, Nigeria Ltd.

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