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The history of taxation in the world, which Nigeria is an integral part, is

dated back to the pre-Christ era. Prior to independence, the Emirs, Obas
and Obis collected various taxes. The tax administers then was the Emirs',
Obas' and Obis' agents. The birth of Federal Board of Inland Revenue
(FBIR) could be traced back to 1939 when the Companies Income Tax
Ordinance was enacted. Since the first enactment, Nigerian taxation has
witnessed very dynamic changes. As the tax laws change, the
administering body (Federal Board of Inland Revenue) also witnessed
corresponding changes. It is a fact that business community is so dynamic
and gives no room for stagnation in the face of technological developments
and the need for more by revenue by government to meet the day to day
running of the country. Consequently, there is the need for constant review
of tax laws and its administration. Some of the earlier reforms the tax
system had gone through include:

Task force on Tax Administration (1978) headed by Alhaji Shehu Musa.

The thrust of the reform includes:

Introduction of the withholding tax regime.

Imposition of 10 percent special levy on bank's excess profits

Imposition of 2.5 percent turnover tax on building and construction


The study on the Nigerian tax system and administration (1992) headed by
Prof. Emmanuel Edozien and the thrust of the reform include:

Establishment of Federal Inland Revenue Service (FIRS) as the operational

arm of Federal Board of Inland Revenue (FBIR).

Setting up of revenue services at other tiers of government (states and


The study group on indirect taxation (1992) headed by Dr. Sylvester Ugoh
had the thrust of the reform as policy shifts from direct to
indirect/consumption tax. This brought about the introduction of Value
Added Tax (VAT).

At the end of this presentation, I hope that this distinguished audience

would have been better informed on the key objects of the current reform,
the achievements so far attained and action plans for 2005 and beyond.

Objectives of the reform

The objectives of the tax reform include the following:

To reposition the FIRS for greater effectiveness and efficiency in meeting

the revenue demands of government.

The administrative objective: All aspects of capacity building at all levels of

tax administration, such as management and technical skills development;
career paths that are intended to attract and retain high quality staff.
Modern organizational structure; that is taxpayer focused and IT driven:

Improved integrity and ethical standards;

Reasonable financial and administrative autonomy;

Protection of the taxpayers' rights through professionalism, taxpayer


Fair hearing and adjudication of cases and prompt refund mechanism.

Other reasons include:

In most economies, tax is the major source of income for national

development while the contribution to total revenue in Nigerian is still lower
than desired especially with regard to non-oil taxes.

To achieve other fiscal objectives and improved services delivery to


Expand the tax net.

More services – Education, consulting, counseling etc.

Linkage to (CAC) other stakeholders.

Improved policy regime.

Scope tax exemptions/waivers.

Build the FIRS institution.

Right selection/positing off staff.

Right development of staff.

Right systems.

Right controls.

Formulate a national tax policy.

Amend tax law (simplify; clarify).

“The new FIRS” funding system should ensure its financial independence,
and empower it to deliver on its expended responsibilities. Also remarkable,
is the provision requiring the FIRS to publish its annual audited accounts,
which should encourage transpencey and accountability. It is hoped that
the Minister of Finance, will, in exerting his/her statutory powers of
determining how the accounts of the FIRS would be kept, be guided by
global best practices.”

“Institutionalizing refund of excess tax payers is long overdue. The refund

system has not worked in the past with respect to refund of excess input
VAT over output VAT and excess withholding tax deduction vis-à-vis final
tax liability. Taxpayers cannot wait to see the proposed refund system
deliver cash to their outstretched hands”

The proposed amendment will, hopefully, spur the private sector to fund
research, developmental and academic activities of the country's tertiary

This is an indication that the reform is working for research and

development by encouraging investment in research.

The paper concluded among other issues that.

The proposed FIRS bill is a demonstration of Government's resolve to
strengthen the Tax Administration and collection machinery in Nigeria ”.

The highlights of the Bills encapsulate the Federal Government's reform

agenda for Nigeria Tax system and administration, which include the

Restructuring of the FIRS

The FG has declared its intention to transform the FIRS into an

autonomous agency.

The FIRS Bill, 2005, is the principal instrument by which the FG seeks to
achieve this objective. Personnel matters recruit, reward, discipline,
development is also a matter for consideration.

Improved funding for enhanced effectiveness- retains suitable percent of


A clearer refund procedure

Amendment to Tax/Regulatory Laws PITA

This bill intends to amend the provisions of the existing PITA by introducing
the following into it:

A more equitable income tax structure and thus encourages voluntary


Penalty provisions updated;

Consolidated allowances percent of total emolument introduced.


Update penalty provisions and ensure that provisions are consistent with

Update penalty provisions and ensure that provisions are consistent with
Greater incentives for donations to tertiary and research institutions buy
making such deductions tax deductible expenses.

This was so important to the business community that KPMG professional

commented that:

“The proposed amendment with hopefully, spurs the private sector to fund
research, developmental and academic activities of the country's tertiary

Greater responsibility and accountability on officers of the companies for

the acts or omissions of those companies.


Update penalty provisions to be consistent with the current realities

NNPC to provide FIRS with comprehensive information on Joint Venture,

PSC. Sole Risk and Contract Service in the upstream sub-sector of the oil
industry for more effective taxation of the industry.

Encourage donations to tertiary and research institutions by making such

donations tax deductible.


Remove all inherent ambiguities in the law;

Introduce zero rated goods and services;

Non-oil exports

Do not funded projects

Update penalty provisions increase VAT rate from 5 per cent (this is
intended to compensate for the propose reduction in Companies Income
Tax rate).

Change revenue allocations formula to align with experts to help in

executing the reform as conceived.
Other organs of government appear not to have seen anything different in
the duties being discharged by the FIRS hence work against the reform
agenda or at bet be indifferent.

The challenges standing between the realizations of the agenda include:

Passage of the draft FIRS and other bill into law;

Conducting Training needs analysis to facilitate a comprehensive and all

embracing training program;

Putting in place corporate plan documents for both short and medium term;

Meeting the stipulated conditions attached to accessing the donors funds.

Corporate image; to distinguish FIRS from other Government agencies


The imposts of the reform have started to manifest as noted in the


Enhanced uniformity and standards in application of laws and procedures:

Co-ordination the various tax types of companies and monitor their


Reduction in functional duplications and waste;

Information cross-referencing;

Faster service delivery to the taxpayers and

Higher revenue collection profile.

It is hoped that your have been well informed about the thrust of the reform.
I hope that the reform will uplift the tax administration in Nigeria to an
enviable height.

The process of change can sometimes be slow, demanding and painful but
a successful definitely, will justify all the efforts and resources expanded.
We shall succeed not only in trebling the revenue collection performance
target by the year 2007 but also in building a Revenue Service with a brand
new image which will be a pride to Nigerians home and abroad.