INTRODUCTION

Unarguably, taxation is an integral tool for ensuring national development in seemingly every developing and developed country, including Nigeria. It is a system of placing a compulsory levy on essential aspects of people’s lives, businesses, firms, and corporations thereby serving as a source of revenue generation for the government which in return incorporates these revenues into various essential sectors of that nation for the holistic development of such nation. Exploring the use of an analogy, it can be said that a taxation system is the root of every development in the country. At the same time, the stems are those sectors such as economic, political, and social which receive their nutrients from the root – the taxation system. However, as much as the analogy above describes what taxation is, it is important to note that for a root to develop, it must be watered. This process of watering can only be done through effective policy formulation and implementation, that is, policies must be put in place to ensure the efficient and wholly use of revenues generated from taxation in enhancing national development in a nation. In Nigeria, over the years, various tax reform policies as well as bills have been passed to intensify the process at which taxes are used for national development; and yet again, the country is on the verge of passing another bill for this same purpose. Now, the questions that bother whilst examining the taxation system in Nigeria and its relationship with national development, can it be said that taxes are reflective of national development in Nigeria? Also, scrutinizing the relations between policy formulation and policy implementation in Nigeria, is there a depth loophole between policy formulation and policy implementation in Nigeria most especially in the areas of taxation? In this essay, these thought-provoking questions will be exhaustively and comprehensively answered while referring to past and current developments in the nation. Additionally, the relationship between taxation and national development will be succinctly yet thoroughly examined.

TAXATION IN NIGERIA: AN OVERVIEW

Taxation plays a crucial role in the development of any nation. Its ability to shape a nation’s economic landscape and influence both its immediate fiscal well-being and long-term development trajectory makes it pivotal in ensuring encompassing national development in any nation. The profound impacts of taxation extend way beyond the sole act of revenue generation to the enhancement of national development.

In Nigeria, a multi-tier tax system is operated with the allocation of tax responsibilities among all arms of government: federal, state, and local. Each arm is structured to be involved in the administration of taxes in their various capacities. For instance, at the federal level, tax administration is handled by the Federal Inland Revenue Service (FIRS) and the Nigerian Customs Service (NCS) under the supervision of the Federal Ministry of Finance while at the state level, the State Inland Revenue Services (SIRS) handles tax administration under the supervision of the State Ministry of Finance. On the other hand, the local government administer taxes and levies as assigned to them under the Taxes and Levies (Approved List for Collection) Act. These arms are involved in the administration of different types of tax as statutorily allocated to them.

There are various taxes in Nigeria however the major ones include:

• Company Income Tax (CIT): This is a form of tax that is imposed directly on the taxable profit of registered companies.
• Value Added Tax (VAT): This is a tax levied and gathered on the sales of products and can be used to prevent the consumption of certain goods considered harmful to human health.
• Personal Income Tax: (PIT): This is a form of tax imposed directly on the personal income of workers most especially governmental workers.
• Petroleum Profit Tax (PPT): This type of tax is imposed on companies involved in upstream petroleum operations.
  Over the years, Nigeria has introduced several tax reform bills in Nigeria, an example of which is the current Tax Reform Bill proposed by President Bola Ahmed Tinubu on October 3, 2024, to contemporize its tax structure and improve revenue generation. This bill which contains four distinct bills has been said by economist scholars to be capable of skyrocketing Nigeria’s national development due to the vastness of its content. However, the issue that lies is if this bill is passed, can it be successfully implemented or would it end up like most reform bills?

TAXATION AND NATIONAL DEVELOPMENT IN NIGERIA

As earlier discussed, taxes are fundamental prerequisites for the development of any nation. Therefore, if effectively utilized, taxes are capable of financing national development in the following ways:

• Infrastructural Development: Through the revenue generated from taxes, governments can fund the construction of roads, bridges, electricity and various other social amenities such as water supply.
• Redistribution of Wealth: Through the implementation of tax policies such as progressive taxation and investment of revenues from taxation into the society, income inequality among members of a society can be managed and the wealth margin reduced.
• Education and Healthcare: With the use of taxes, the government can provide quality education and healthcare services. For example, with the use of the revenue generated from Education Tax (EDT) in Nigeria, the government has been able to set up bodies such as the Tertiary Education Trust Fund which functions to provide and ensure quality educational services across Tertiary institutions in Nigeria.

However, due to various factors in the relationship between taxation and national development in Nigeria, the reality of taxation in Nigeria is far from its theoretical role in national development. Some of these factors include:

• Evasion and Avoidance of Tax Payment: Due to the lacunae in the taxation system in Nigeria, it has become a frequent occurrence for taxpayers particularly wealthy individuals and corporations to evade the payment of tax thereby hindering revenue generation.
• Corruption and Mismanagement of Tax Revenue: As a result of deep-rooted corruption in Nigeria among governmental agencies, the revenue generated from taxation which should be invested in the nation is often mismanaged and embezzled, leading to a dearth in national development and the lack of public trust in the tax system.
• Policy Inconsistency and Implementation: The majority of the issues affecting taxation and national development in Nigeria are embedded in policy inconsistency and implementation. The inconsistency among taxation policies and poor implementation of these policies creates uncertainty and non-compliance. For example, the National Tax Policy (NTP) 2017 faces serious problems with implementation despite being a robust policy.

BRIDGING THE GAP BETWEEN POLICY FORMULATION AND IMPLEMENTATION

Over the years, the gap between policy-making and implementation in Nigeria has remained persistent, making it arduous for taxes to be reflective of national development. Some of the challenges enabling this problem include:

• Weak Institutional Framework and Lack of Enforcement Capacity: A major hurdle to tax policy implementation in Nigeria is the inefficiency of tax institutions and their inability to effectively enforce tax laws. Due to the limited enforcement capacity of tax authorities, corruption, and stringent bureaucratic processes of taxation, implementation of tax policies has continued to be a consistent challenge.
• Poor Tax Compliance and Widespread Tax Avoidance: Due to tax illiteracy in Nigeria and weak enforcement of policies, a large percentage of taxable individuals and businesses evade tax payments and also do not comply with tax policies.
• Multiple Taxation and Overlapping Tax Jurisdiction: As a result of how fragmented Nigeria’s tax system is, it is highly difficult to effectively implement taxation policies and payments. For example, a business may pay company tax, personal tax and several other levies to the local government thereby making the burden of taxation very high and difficult to comply with.

As earlier mentioned, there are various tax policies in Nigeria, but the major onus is how to implement these policies effectively and efficiently. Therefore, to bridge this gap, these strategies should be adopted:

• Strengthening Tax Institutions: Tax institutions should be strengthened by the digitalization of tax administration such as developing a centralised tax database, increasing the enforcement capability of FIRS and SIRS, provision of continuous and professional training for tax administrators would go a long way in ensuring that tax policies are obeyed and effectively implemented.
• Public Awareness and Education: Through the enlightenment of the public on the importance of taxation, it will be easier to boost tax compliance and payment. Also, the effective use of taxes by the government would help to reduce scepticism in taxation.
• Harmonization of Taxation and Reduction of Multiple Taxation: Harmonizing taxation across all levels of government can help ensure tax policy implementation and compliance. Also, the establishment of a taxpayer identifier number can help to track taxes paid by individuals and businesses.

CONCLUSION

Taxation, with no doubt, plays a pivotal role in the holistic development of a nation however as much as taxation is important, there is a need to effectively bridge the gap between policy making and policy implementation in Nigeria. Nigeria has yet again passed another bill as regards taxes but to ensure its success, the strategies provided in this essay can be employed to ensure effective policy implementation. Also, Nigeria can learn from the tax system of other countries such as Rwanda and South Africa to effectively develop its taxation system.

REFERENCES

1. Adebowale Ogunsola, “Taxation and Econmic Development”, (2023) 4(1) Malete Journal of Accounting and Finance, 25 – 27.
2. Ibid
3. Divine Ugochukwu, “An Overview of Tax Administration in Nigeria”, (2024).
4. Ibid.
5. Ibid.
6. Ibid, (n1).
7. Ibid.
8. Ashibogwu Nze Kingsley et al., “Personal Income Tax and Tax Compliance on Economic Development in Nigera”, (2024) 2(4) ISAR Journal of Economic and Buisness.
9. Ibid.
10. Andersen, “Nigerian Tax Reforms: Analyzing the Revised Tax Laws and Potential Impact on Businesses and Individual”, (2024).
11. Ibid, (n1).
12. Annette Alstadsaeter et al., “Tax Evasion and Tax Avoidance”, (2021) Journal of Public Economist.
13. Basset Edet, “Review of the Nigerian Tax Policy’s Impact on the Finance Act 2019”, (2020).
14. Ibid, (n3).
15. Ibid.
16. Ibid.