Abstract
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.
CHAPTER ONE
GENERAL INTRODUCTION
1.1 Background of the 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. Ames
4
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
