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The bulk majority of the tax evasion and tax avoidance is caused by inadequate machineries and lack of skilled personal in administrative tax bodies as well as the legal framework upon which their relationship rest. This result in many problems of the tax collection in Nigeria. It is in this regard that the topic of this dissertation entitled “A Legal Examination of the Role of Taxation in Revenue Generation and Economic Development in Nigeria” was chosen. This study is to present, explore and analyze the nature and extent of tax legal provisions relating to the role of taxation in revenue generation and economic development in Nigeria. It will also present how they are maintained, practiced, adhered to and suggest some ways and means of improving the present state of affairs. The study is composed of five Chapters. Thus, Chapter one dealt with the General Introduction, Background, Statement of Problems, Aims and Objectives, Scope of the study, Significance of the study, Research Methodology, Literature Review and Organizational layout. Chapter two discussed on Examination of Taxing power in the Federal Republic of Nigeria under the 1999 Constitution of the Federal Republic of Nigeria (As amended), and the brief history of Income Taxation in Nigeria. Chapter three is the bedrock of the whole work that discussed the role of taxation in the economic development of Nigeria with its legal perspectives. Chapter four discussed on significance of Taxation in Nigeria; Nigerian Economic Situation and Tax as incentive for economic growth. Chapter five which is the last chapter discussed on Summery, Findings and Recommendations that my hopefully be help in solving the problems.


1.1 Background ofthe Study
Tax is one of the sources of revenue for the government.1 This is so because for the achievement of aims, goals and objectives, an organization will need to have enough funds at its disposal. This importance assumes an accelerated dimension in the face of the present economic recession in Nigeria.2
Therefore, tax system is one of the most powerful means available to the government to stimulate and guide its economic and social development. In the life of any nation, taxation is an indispensable tool employed by the government for the promotion of their overall economic and social objectives. The crucial role that taxation plays in the development of Nigerian economy cannot be over emphasized.3 Though revenue generation seems to be the primary goal of the government when it levies taxes, however it not the only purpose of the government in levying taxes, but produces economic need for the government.
For instance, when investment, production, consumption and so on, begin to rise or fall dangerously, a change in the tax structure can stop or reverse the undesired trend. It is in
1Is-haq (2010) Repositioning the Nigeria‟s Tax System; Suggested Policy Measures University of Ilorin Press Ltd p.3 2 Jinghal L..M. (1995 ) The Economic Development Planning 28 Revised Edition, Publish offset Press, New Delhi 3 Is-haq op cit p
recognition of this crucial role of taxation in a country‟s economy that the United State Supreme Court has this to say in the case of Nichols v. Ames4 Taxation is one great power upon which the National fabric is base. It is necessary to the existence and prosperity of a nation. It is in the air she breathes. For natural men, it is not only the power to destroy… Taxation provides the main impetus for formulation and implementation of an optimal fiscal strategic policy. To this end state governments in Nigeria play and carry out important roles and responsibilities, for examples apart from Local governments State governments are the second tier of governments closest to the people. These governments coupled with other responsibilities they are saddled with they provides the people with social services, and to do this effectively they need to generate enough funds. Therefore, to generate enough funds for any government in order to discharge its responsibilities effectively it is a matter of concern to everyone. The accessibility of the income of the tax payer from all sources, including balancing charge, less allowable deductions for expenses, capital allowances and losses are the income of the taxpayers. There is the unreported case of a Professor who earned N3,000 from a part-time state appointment. He transferred the income tohis University faculty to be used for the advancement of education. The income had never come to his hands. The revenue successfully contended that the income was that of Professor and not that of the recipient of a gift, since the recipient had not earned it. The Professor may plead that this is good example of a legal tax avoidance to benefit mankind, and that an American case of the RITES Foundation may be cited as a precedent. The point here is that it must be proved conclusively that the income is that of the taxpayers.
4 (1935) T.C. 531
Tax rates are fixed by Government as a matter of fiscal policy. Over times, these rates have changed in line with government perception of economic realities on the ground. Tax rates in taxation makes for progression which translates into the higher the income, the higher the tax that should be paid. Taxation does not just relate to application of tax laws alone but alsoabout incidence. Tax incidence should be progressive as a pre-requisition of an efficient system of taxation. Other considerations would have arisen if chargeable income were taxed at the same rate. This would definitely be heavily weighted against those in the low income bracket. Thus, it will bring equity which government tries to promote through the policy of income tax rate as follows:
The difference between income tax and income rate is that income tax is charged on chargeable income whereas income rate is levied on total income. Income rate was abolished from 1977/78 year of assessment in respect of those who pay tax under Pay-As-You-Earn system.5 Instead, where the chargeable income is nil, a taxpayer will be liable to pay tax at the rate of 1 percent of his total income. This was abolished in 1998. 1.2 Statement of Problem

The problems of this research work are as follows:
1. Tax collection appears difficult because, the tendency of some corrupt and inept tax officials conspire with tax defaulters to avoid tax payment whichcripples the aims and objectives of the government‟s good policy.
5Decree No. No. 61 (Finance miscellaneous Taxation Provisions) Act 1977, see also Federal Gazette No.43, Vol. 64, 1 September 1977
2. There is also the problem of weak or inefficient and defective legislation. There are also inadequate machineries as well as lack of skilled personnel in the administration of tax that causes low revenue generation to the government.
3. The tax rates in Nigeria are very high. This makes it difficult to achieve adequate income tax compliance resulting into tax evasion and avoidance by tax payers.
4. Another problem is the excessive corruption and mismanagement of the funds by the tax administrators in the country which can adverselyaffect the disposition of the people‟s attitude towards the payment of taxes, for example, the House Committee on Finance reported that, over the years the Nigerian Government has lost billions of Naira in fraudulent and underhand dealings corruptly design by some banks to evade taxes,6and also corruption on the side of revenue collector‟s account for the low revenue generation in Nigeria.
1.3 Aim and Objectives of Study

The central aim of this research work is to appraise the legal assessment and the importance of Income tax in the economic development of Nigeria so as to achieve the following objectives:
1. To examine the basis of taxation for the purpose of identifying those important contributions of income tax to the Nigerian economic development, and suggest ways to avoid corrupt attitude by the inept tax collection officials that conspires with some tax defaulters not to pay the correct tax due or even refuse to pay tax at all.
6 Musa, A.K. and Ibrahim K.A. , (2013) , p.4, House of Representative uncovered massive Tax Frauds in Banks, published in: The Daily Trust Monday August 26
2. To examine and analyze the prospect and problems or major constraintsthat inhabits the smooth identification, assessment, collection and administration of income tax in Nigeria, there by result in the problem of tax evasion and tax avoidance.
3. Also to find out ways of enhancing good tax administration that will boost the positive attitudes of taxpayers towards payment of taxes. To also recommend the need for the judges and legislature to observe as much as possible moderate rates covering of tax statutes in order to avoid inadequate income tax compliance resulting in tax evasion and tax avoidance.
4. Lastly to recommend the introduction of task force which will supervise tax administrators and tax collection should be partitioned according to zones, and that the amount generated on tax should be published in any of national newspaper or magazine. This will eradicate mismanagement of tax fund by the tax administrators.
1.4 Scope and Limitation of the Study
This research falls under the law of taxation with reference to personal income tax. It covers geographically the whole of Nigeria including some other foreign tax jurisdiction and various tax enactments that are relevant to income taxation.
This work is limited only to the field of income tax and it deals especially with the prevailing economic situation in Nigeria with reference to the tax laws and cases. It may also be referred to some international treaties on taxation either because of the nature of the Received English Laws, or simply for the purpose of comparison to make the study robust.
1.5 Significance of the Study The significance of this project lies in its ability to be able to proffer solutions to the various roles of income tax in revenue generation and development of economy in Nigeria as a whole. The research will serve as guide and helps the general public to understand the importance of payment of income taxes and what the taxes are employed for. The research will also be useful to students, lecturers, policy makers at all levels and in different units of government. 1.6 Research Methodology The doctrinal method of acquiring information was used to accomplish this work, to wit primary and secondary sources were used. The primary sources include statutes and treaties on taxation law, government gazettes while the secondary Sources includes textbooks, Journals, articles, seminar paper, law reports periodicals and website. 1.7 Literature Review
Many writers and scholars have written on taxation from so many different perspectives. Almost all of them are unanimous in their belief that is difficult to specify what taxation is. Ola7 in his book “IncomeLaw on Corporate and Incorporated Bodies in Nigeria” gave detailed analysis of taxation as follows:
Income tax is one of the major sources of revenue of all government in Nigeria and is a factory to be reckoned within both state and local government budget. T he taxes collected come back to the tax payer in form of social amenities8
7 Ola C. S. Mg. Income Tax Law and Practice; Macmillan Publishers, London (1985) 8 AgyeiA.Kp (1977), Law on taxation, West African Book Publishers Ltd, Lagos
He argued that revenue collected through taxation help the government to execute both at the state and local government annual budget. AGYAI8a in “Principle of Personal Income Taxation in Nigeria” made a detail definition of tax problem in Nigeria and made a lot of observations on Tax administration. Tax collection, problems of assessment and understanding of tax-payers.He identified two significant problems leading to lack of enlightenment on the end result of tax money. He stated:
It is expedient to let people know how their tax money is being spent.(as I see)What is more important is to produce visible and tangible evidence that their money is being spent judiciously only then will the pay tax willingly9
RABIU10in his book “Nigerian Personal Taxation” talked about thelegal aspect of income Tax and said that the operation of any tax system of any country and the attitude of tax payers toward it, was strongly influence by the quality of its administration. AYUA11, in his book “Nigerian Tax Law” looked at the legal stand point of income matters. In other word the book examined the present state of law of direct income taxes and other matters. He said the law of the above taxes is found in two main sources as follows:- Statutes, as there is no common law of taxation. (ii) Reported decisions and dicta of the judges.
9Ibid 10 Rabiu S.A. Lagos, John West Publications Ltd (1986) 11 Ayua I.A. Ibadan, Spectrum Law Publication Ltd (1996)
The work of Ayua12 was acknowledged in this work. The author, in his work, dealt extensively with procedures of Personal Income taxassessment. He maintained that the shortcomings in connection with tax administration is that of enforcing the payment of income tax. He further maintained the view that it is in pursuance of ensuring Payment of Income tax that both the Personal Income Tax Act and Companies Income tax Act categorized various offences and punishments for violation of tax laws and regulations. He Stated that PITA laid down income tax offences and penalties, however, according to the author, the terms were toosmall and were not commensurate with the offence that were designed to defeat, and the penalty provisions were overlapped.
Ayua13further maintained that there is also problem of personnel; that tax officials are poorly educated and trained, and are, therefore, ill-equipped to do the job properly. He also exhaustively discussed the basis of collection Income tax and its importance in developing the Nigerian economy. This work covered the aspect that was not addressed by the above writers. From this literature review it was discovered that taxes are desirable for development, since it is the sources of generating revenue for the various arms of government. It is another way of making a mandatory contribution to government.
The work of Asada14discussed the nature and imposition of income tax. He stated that personal income tax is a form of taxation which imposes taxes on employees and self-employed persons. According to Asada, income of a person or individual which emanates from any of the sources
12 Ibid 13Ayua, I.A. (1996) Nigerian Tax Law, Spectrum Law Publishing, Ibadan 14Asada. D. (2012) the Administration of Personal Income Tax in Nigeria & some problems apart, Extracted from
http://dspace. UniJos.edu.ng/bit stream/10485/263/1/CJ 106-119
indicated as arises in Nigeria or abroad, whether or not it is remitted into Nigeria or received abroad and is not brought into Nigeria is taxable under personal Income tax. He highlights the problem of Personal Income tax in Nigeria as tax Administrative problem. That is, Collection, assessment, wide spread of corruption and absence of competent administration. He maintained the view that the need to improve the administration of the country‟s tax system cannot be over emphasized. According to the author, the assessment and collection of income tax from taxable persons have been difficult. He maintained that collection is one of the fundamental area of problem in the income tax administration. He lamented that the problem of collection of personal Income tax is more with the self-employed rather than collection and remittance of employed and registered taxpayers. He further highlights that there are difficulties inherent in the identification and assessment of self-employed Income. The author further stressed that the procedure provided under the a personal Income tax law gives a taxpayer ample opportunity to under-assess his or her income, there is lack of coordination between various governments department and there a numerous lacunas in the income tax law. According to the Asada, the mode of enforcement of income tax by the tax force is unheard of, as it is uncivilized method of enforcement. The work of Asada enumerated lots of problems; however, it did not provide possible solutions or recommendations to the identified problems.
This work, therefore, recommends solution to those problems. The current research work acknowledged the work of John.15The author .made a lengthy discussion on decentralized governments and a degree of revenue autonomy that is allowed to them by central governments. He pointed out some shortcomings of the sub-national governments, i.e. lack of adequate system to tract collection, low compliance, corruption and bribery, shortage of qualified staff, inadequate resources and poor records management, but he did not provide for the solutions. This dissertation covered most of the issues authorized, and provided recommendations toward solving the identified problems. The work of Ola16 was acknowledged in this research work. The author dealt with income tax in Nigeria, its importance to the economic development and challenges. The major problem ofpersonal income tax he raised was tax avoidance and tax evasion. He, however, did not provide the means by which tax avoidance or tax evasion can be prevented in the Nigerian personal Income tax system.
This dissertation dealt with issues of tax evasion and tax avoidance and provided solutions to solve those problems. The work of Ariwola17was also referred and acknowledged. The author gave the historicalantecedents of personal Income tax, from the enactment of ITMT 1961,which governed the taxation of individuals as opposed to Companies.
According to him, the main purpose of the Personal Income Tax throughout the Government and State governments will be avoided. He maintained that ITMA Federation is that double taxation of incomes by the Federal was later repealed and re-enacted as Personal Income Tax Act (1993).
15 John, L.M.(2003) Developing options for the Administration of Local Taxes; An International Review, A paper presented at the World Bank Workshop entitled, innovations in local Revenue mobilization, Washington D.C. June p. 24. 16 Ola, C.S.(1981) Income Tax for Corporate and Un-Incorporated Bodies in Nigeria, Heinemann Educational Books, Ibadan 17Ariwola, J.A. (2000) Personal Taxation in Nigeria, 4th Edition, J.A.A. Nigeria Ltd., Lagos
The work of Ogbonna and Ebinobowes18was acknowledged in thisresearch work, the authors in their work, represents a comprehensive assessmentof the impact of income tax on economic growth in Nigeria. The authorsdisaggregated tax into its components such as Excise Duties, Personal Income Tax, Companies Income Tax, Petroleum Profit tax, Value Added Tax and Education Tax, and discussed extensively on issues and challenges. This research acknowledged the contributions of the Value Added Tax to the development of Lagos State economic and provided recommendations as solution to the identified problems.
Owolabi and Okwu19 examined the contribution of Value Added Tax to the development of Lagos State economy. The author considered infrastructural development, environmental management, education sectors; youth and social development, health and agriculture, as well as transportation which he viewed that VAT contributed positively to the development of those sectors. However the author is silent on the Legal assessment of Income tax in the economic development of Nigeria. The current research is premised to assess the role of Personal income tax as well as other tax organs to the economic development of Nigeria. 1.8 Organization Layout This research work consisted five chapters. Chapter one deals with the general introduction, statement of problem, aim and objectives, the scope of the study, significance of the study, literature review, research methodology and organizational layout employed.
Whereas chapter two concerned itself with the examination of taxing power under the 1999 Constitution of the Federal Republic of Nigeria (as amended), definition of key terms, the
18 Ogbonna, G.N. and Ebimobowei (2012) Impact of Tax Reforms and Economic Growth of Nigeria in ;Worlu, C.N. op cit, p.217 19Owolabi, S.A. And Okwu, A.T.(2011) Empirical Evaluation of Contribution of value Added Tax (VAT) to Development of Lagos Economy in: World, C.N. op cit, p.216
purposes and functions of income tax, redistribution of income tax, reduction of adverse effects on inflation, reduction of unemployment, as a tool for effective fiscal policy and the imposition of income tax in Nigeria.
Chapter three takes a look at analysis of income tax and revenue generation in Nigeria, the role of taxation in the development of the Nigerian economy, rising of revenue for government services, recurrent expenditure, capital expenditure, distribution of income and economic revitalization.
Chapter four deals with the significance of taxation in Nigeria, Nigerian economic situation, tax as an incentive for economic growth and the effect of fiscal policy on economic development of Nigeria which are to stabilize all tax rates and exemptions from new taxes or modification duringthe period.
Chapter five, which is the last chapter, dealt with Summery, Conclusion Findings. In that chapter, Summery of the entire work was supplied, findings were enumerated and discussed and recommendations to the possible solutions to the identified problems that under smooth identification, assessment, Collection and administration of Income tax, as the second major source of revenue generation toward the economic development of Nigeria, was provided.11



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