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Tax Administration in Nigeria: a Case Study of Federal Inland Revenue Service(Firs)

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    Taxation is a dynamic subject which grows with the constant change in the economic environment in which it operates, hence the need to review the regulating instruments from time to time. Nigeria is governed by a federal system hence its fiscal operations also adhere to the same principle, a fact which has serious implications on how the tax system is managed. The country’s tax system is lopsided, and dominated by oil revenue. It is also characterized by unnecessarily complex, distortionary and largely inequitable taxation laws that have limited application in the informal sector that dominates the economy.

    The primary objective of this paper is to prepare a case study on tax administration in Nigeria, with the specific objectives of examining the main tax reforms in the country; highlighting tax revenue profile and composition; analysing possible distributional impacts on the poor; discussing major problems that could prevent effective tax implementation in the country; and offering suggestions for reforms.


    In the Stone Age, tax was collected in Nigeria long before the coming of Europeans. It was collected by the Local Chiefs for the purpose of administration and defence.

    Every person was expected to give part of his or her proceeds from cultivation of land to the state. Those who were cultivations were required to give their sources for public work such as clearing the bush, digging the pit latrines, wells etc for the benefit of the community as a whole. Failure to render such services usually resulted in loss of properties, which might be reclaimed after payment of line. With the coming of Europeans, taxes were collected from individuals through local chiefs. In 1946, a legislative council was set for the whole country, which obliged the regional council with a large measure of financial responsibilities.

    After independence state government were to find out other sources of generating revenue. The first tax was introduced in 1904 in the northern region by Lord Lugard known as community tax. According to the tax laws the board can revise the assessment if it deems necessary, and can institute legal action against any tax defaulters in respective of his status in the community such legal rights have been derived by politician and poor administration of tax laws.


    A tax policy represents a key a resource allocator between the public and private sectors in a country. It is usually imposed on individuals and entity that make up a country. The funds provided by tax are used by the states to support certain state obligations such as education systems, health care systems, and pensions for the elderly, unemployment benefits, and public transportation. A nation’s tax system is often a reflection of its communal values or the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burden-who will pay taxes and how much they will pay-and how the taxes collected will be spent.

    In the case of Nigeria, the major sources of revenue include the following:

    • Oil sector such as petroleum resources.
    • Non-oil sector such as custom duties, taxes and other services.
    • Internal borrowing from organisations and financial intermediaries such as commercial banks, bonds, treasury certificates and call money.
    • The need for revenue from taxes cannot be over emphasized as this contributes significantly to government revenue.
    • The concept of taxation is as old as exchange process (whether barter or monetary) that gradually developed with civilisation.

    This is true as seen from the period of colonisation to date which is characterised by the establishment of Ordinances acts, decrees and edicts which govern tax administration in Nigeria. These acts include: ? Companies Income Tax Act of 1961 as amended by the Companies Income Tax Act (CITA 1979) establishing the Federal Board of Internal Revenue ? The Income Tax Management Act of 1961, which regulates the imposition of personal income tax throughout the Nigerian federation and ensures the avoidance of double taxation.

    The Tax Management Act came into being in 1st of April 1961 which amended all other regional tax laws and brought them into conformity with the federal laws. ?The subsequent Finance/Miscellaneous Taxation Provisions/Decree of 1987 as amended by Decree of 1993 which created the Federal Inland Revenue Service (FIRS) as an operational arm of Federal Board of Internal Revenue (FBIR) in compliance with the recommendations of the study group on tax reforms and administration in Nigeria set up in 9th January 1991.


    The Nigerian Federal Inland Revenue Service, FIRS, was created in 1943. It was carved from the erstwhile Inland Revenue Department that covered what was then the Anglo ¬Phone West Africa (including Ghana, Gambia, Sierra Leone) during the colonial era. Tax provides revenue to fund governance, ensures resource redistribution, streamlines consumption of certain goods and services, reduces inflation and generates employment. The Federal Inland Revenue Service is constitutionally empowered to collect taxes. In 1958, the Board of Inland Revenue was established under the Income Tax Ordinance of 1958. The name was later changed in 1961 when the Federal Board of Inland Revenue (FBIR) was established under Section 4 of the Companies and Income Tax Act (CITA) No. 22 of 1961.

    FBIR operated then as a department in the Federal Ministry of Finance. A further transformation took place in 1993 when the Finance (Miscellaneous Taxation Provisions) Act No 3 of 1993 established the Federal Inland Revenue Service FIRS as the operational arm of FBIR. The act also created the office of the Executive Chairman of the Board. In 2007, the Federal Inland Revenue Service Establishment Act, (2007), which granted autonomy to the service, was enacted. The FIRS is one of the Federal Ministries, Departments and Agencies (MDAs) undergoing massive changes.

    In 2005, Integrated Tax Offices, ITOs replaced the old tax offices -which were structured along tax types: Value Added Tax Office, Personal Income Tax Office, Petroleum/International Tax Office, Withholding Tax Office, and Area Tax Office. The new one stop-shop for all tax types lessened the burden of taxpayers, who can now transact their tax businesses under one roof. To cater to the interest of oil and gas companies, as well as marketing and service companies, airlines, shipping agencies and all companies with turnover of N1 billion- Large Tax Offices, LTOs were created.


    Many people are not aware of the existence and importance of the FIRS in Nigeria. The research work intends to identify the various taxes being administered by the FIRS and to see how the body is able to accomplish its objectives through emphasis on human resources development, staff motivations, professionalism, dedication and loyalty, accountability and transparency, excellent human relations, information and effective communication. The Nigerian tax system comprises of at least 39 taxes, levies and fees, including 8 Federal, 11 State and 20 Local Government taxes and levies as specified in the Taxes and Levies (Approved List for Collection) Decree No. 21, of 1998.


    The researcher decided to undertake this study in order to appraise tax administration in Nigeria, the problems, achievements and the impact of tax revenue yield for an individual and the government. To identify problems experienced which have led to low revenue from tax. To identify ways to these problems and to identify new policies and strategies adopted by the government which lead to increased revenue generation through taxes.

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    Tax Administration in Nigeria: a Case Study of Federal Inland Revenue Service(Firs). (2018, May 20). Retrieved from

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