A major strategy deployed by every economy, including Nigeria, for revenue generation, is Taxation. The term Taxation can be described to mean the act of imposing tax payment on citizens, business owners and non-citizens who carry out business in a country, by the Government. Put in a more relatable way, Taxation can be defined to mean a governmental system of collecting taxes from citizens, business owners of a country.

Owing to the essence of Taxation as a money generation strategy, Nigeria places heavy reliance and absolute seriousness on the issue tax. This has made Nigeria device means to ensure all her citizens and non-citizens who carry out business in Nigeria, comply with payment of tax. These various means and devices deployed by Nigeria for Taxation are unknown to a lot of persons. These strategies are in forms of sanctions and penalties placed to ensure that people pay the different types of types of tax that they are expected to pay. Taxes can be in different forms like the Companies Income Tax (CIT), Personal Income Tax (PIT), Value Added Tax (VAT), etc.

However, it has been noticed that most Nigerians do not comply with paying tax, so they device various ways to ensure they don’t remit their tax like evading and avoiding payment, not providing their accurate business or personal details about their income, general sale and profits and making fictitious transactions, and all of these greatly affect and reduces the revenue generation for the government.

This article therefore aims at enlightening the public by examining the defect of various tax compliance strategies for revenue generation in Nigeria, using the legislative and judicial perspective and proposing better ways they can be improved.

Tax as a Revenue Generation Strategy in Nigeria

Tax is a compulsory levy imposed by the government on workers income, business profits or added to production, cost of goods and services, transaction and consumption, as provided for by legislation. It has been defined to mean the compulsory financial charge or levy imposed by the government on persons expected to pay tax (taxpayers), and these taxpayers include business owners, citizens and non-citizens who carry out business in a country.[1]

Tax is a major strategy for revenue generation in Nigeria, so government makes it a compulsory contribution to be made by all taxpayers, to the government’s revenue. The taxes collected so far by the government are used to fund government projects, spending and other public expenditure, for the good of the country at large. It has been said that the development of any nation depends on the amount of revenue generated by the government for the provision of infrastructural facilities and that the money generated from tax is the key to unlocking the resources required for public investment and infrastructure growth.[2]

The Various Forms of Tax in Nigeria and their Regulatory Framework

There are several of forms tax in Nigeria and they are regulated by various enacted regulations. These various regulations make all taxpayers legally bound to pay tax; hence, taxpayers are legally required to collect, file and remit their tax to the government. Any failure to pay tax attracts an offence punishable by a fine or imprisonment, depending on the provision of any of the enacted legislations. The regulations include will be discussed below: Nigerian Inland Revenue service Act, Capital Gains Tax Act, Personal Income Tax Act, etc.

1.         Personal Income Tax (PIT): PIT is a tax imposed on individuals, families, body of individuals or trustees, that varies with respective income or profits (taxable income).  PIT is regulated by the Personal Income Tax Act 2011, and it provides that PIT shall be payable on the aggregate amount of personal income. This Tax generally is computed as the product of a tax rate times taxable income.

2.         Companies Income Tax (CIT): The CIT is a tax imposed on companies’ income or profits (taxable income). It is regulated by the Companies Income Tax Act Cap C21, LFN 2004.

3.         Withholding Tax (WHT): The Withholding Tax deductions are regarded as advance payments (or payments on account) of the relevant tax liability that will arise from the tax returns of the period concerned.

4.         Stamp Duties (STD): Items or persons subject to Stamp Duties tax are written documents relating things between individuals or companies or group of soles. Stamp Duties may include instruments such as financial transaction, article of association between companies, statements, deals, bonds etc.  This is regulated by Stamp Duties Act Cp S8, LFN 2004

5.         Capital Gains Tax (CGT): All the companies registered in Nigeria which earn any capital gains are liable to Capital Gains Tax. Capital Gains Tax is calculated and submitted with Companies Income Tax to FIRS through Designated Bank. Companies Income Tax (CIT): Under Companies Income Tax Act you have to pay Companies Income tax if you are a resident or non-resident company incorporated in Nigeria. It is regulated by the Capital Gains Tax Act Cap C1, LFN 2004.

6.         Value Added Tax (VAT): Any person or individual, corporate sole, organizations who consumes or buys any taxable product or service will have to pay a tax levy known as Value Added Tax (VAT) in Nigeria. etc

Tax Compliance Strategies and their Legislative and Judicial Examination

Despite having the legislation governing payment of tax, taxpayers in Nigeria are still not compliant enough in remitting taxes. The reason for this has been traced to the fact that there have been loopholes in the various tax legislation. In the word of Fatayi – Williams J.S.C (as he then was):

‘’..Its provisions are loose, cloudy and ambiguous in many places and riddled with loopholes. Implementation is not likely to be easy under such conditions’’[3]

Bearing the above in mind, some of these legislations will therefore be examined, with a view to identify the probable areas that need to be advanced, so that the legislations can be more effective in making people to pay tax.

1.      1,   The Legislative Provisions on Failure to Deduct Tax: Section 64 of C.I.T.A provides that where any person authorised to deduct tax under Sections 60 and 62 of C.I.T.A fails to deduct the tax within 30 days when it is due; the person shall be guilty of offence and liable to a fine of 200% of the tax not remitted in addition to the amount of the tax deducted in addition to the interest at the prevailing commercial rate.  Likewise, Section 62, 70 and 71 of P.I.T.A provides for liable on conviction to a fine of N5,000 or ten percent of the amount of the tax due in addition to the amount of tax deductible at the prevailing commercial rate. This penalty is not enough to deter taxpayers from paying tax, hence should be increased to a higher amount that would cost the taxpayer a tangible amount that he would not want to lose.

    2. Refusal to Give Tax Paying Less Tax Assessment: Section 48 of C.I.T.A, provides that where a company refuses to pay tax according to the amount assessed by the board organized by C.I.T.A or situations where a company pays lower than  the actual amount gotten from Tax Assessment, the board of C.I.T.A may at any time and as often as may be necessary asses such taxable person at such amount as may be necessary for the purpose of making good any loss of tax. The penalty is not refraining enough and  should be amended by providing a fine of about N1,000 or imprisonment for 6 months or both

3.     3. Failure to Pay Tax Arrears: Section 66 of CITA Cap and Section 96 of PITA provide that failure to pay tax arrears is a 0.5% penalty based on the amount of tax due for each month during which the taxpayer fails to pay. This penalty was upheld in the case of First Bank of Nigeria Plc v A.G. Anambra State.[4] So far, this penalty has not been properly effected in Nigeria, as most taxpayers keep devising means to avoid this penalty by showing that their failure to pay was due to reasonable, which are most of the time, not contested well enough by tax regulatory bodies.

4.    4. False Statements and Returns: It has been provided that makes false statement or representation shall be guilty of an offence and liable on conviction to a fine of five thousand Naira (N5,000) or imprisonment for five years or both.[5]

5.     5. Contravening the Provisions of the Tax Law: Section 84 of P.I.T.A and Section 71 of C.I.T.A provides that any person who fails to comply with any of the provisions of the tax laws or any rule or regulation made for which no other penalty is specifically provided shall be liable on conviction to a fine of N200. Where the offence is failure to furnish a return statement or information, the offender shall be required to pay the sum of N40 for every day during which such failure continues and in default of payments, to imprisonment for 6 months and the liability to such further sum shall commence from the day following the conviction or any day the court deems fit to order.

     The above provided penalties are still not good enough to compel taxpayers to pay tax, as they are not compelling enough.[6]


A cursory study of the various tax compliance strategies show that the strategies are not functional enough. The strategies provide penalties that are not commensurate with the gravity of the various offences provided by the various legislation. Nigeria should therefore ensure that the tax compliance strategies are reviewed and the penalties are made to be proportionate to the offences, so that taxpayers can be compelled to pay tax and more revenue will be generated for Nigeria.

The above notwithstanding, taxpayers are encouraged to pay tax and not evade or wait to be forced to pay tax, as it is for the benefit of the country.


[1] tax by wikipedia – Bing -accessed on the 22nd of October, 2021.

[3]  Philips A.O , “Nigerias New Capital Gains Tax” 3 Quarterly Journal of Admin(1969)  pp. 125 at 37

[4] (2000) 1 N.R.L.R pp. 129-142

[5] Section 88 P.I.T.A Cap P4 LFN 2004, Section 73 C.I.T.A Cap C2 LFN 2004

[6]  Umar Etsu Mohammed, ‘Legislative and Judicial Examination of Tax Compliance Strategy for Revenue Generation in Nigeria’, 2018, pg 78




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