Fiscal Federalism, Tax Reforms And Productivity: A Case For Direct And Indirect Taxes In Nigeria

Abstract

Of all sources of revenue to government, taxation is the most important. Owing to the inherent power of the government to impose taxes, the government is assured at all times of its tax revenue no matter the circumstances. With modifications as a result of different manifestos of opposing political parties, the government's ability to impose taxes is unlimited. It is in the light of the significance of this source of government revenue that its assessment, effectiveness and collectibility are paramount for optimal benefits. The objective of this study includes: The determination of the causes of effectiveness of tax assessment and productivity; and the advancement of policy recommendations aimed at achieving effective tax assessment and productivity in Nigeria. For this study to achieve its desired objectives, the researcher employed both descriptive and analytical techniques such as the simple regression technique while the Buoyancy/elasticity test was used to establish relationships in the determination of tax effectiveness and productivity. During the study, it was found that with the exception of one direct type of tax namely the company income tax (CIT), all other forms of taxes including the total federally collected taxes (FCTR) have low elasticity and therefore are not responsive to their tax bases. Base on our findings the CIT is the only form of tax which is responsible to its three tax proxy bases. In conclusion, if a tax is productive, its assessment is likely to be effective. Thus in Nigeria, since most taxes are not productive, tax assessment can generally be considered ineffective.


Journal of Research in National Development Vol. 4 (1) 2006: pp. 60-73