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By Blessing Billions/Basis/Thursday, November 18, 2021

What Are The Roles Of Taxation In Nigeria?

                              
                            

Introduction

Taxes are crucial because governments collect this money and use it to finance social projects. Without taxes, government contributions to the health sector would be impossible. Taxes go to funding health services such as social healthcare, medical research, social security, amongst others, it does not only pay for public goods and services it is also a key ingredient in the social contract between citizens and the economy. Holding governments accountable encourages the effective administration of tax revenues and, more widely, good public financial management. It protect property and the environment taxes make business possible pays for roads and schools and bridges and police and teachers, pays for doctors and nursing homes and medicine and during an emergency, like an earthquake or a hurricane, taxes pay for rescue workers, shelters and services.This post will provide information on "What are the roles of taxation in Nigeria?" and also provide answers to questions regarding the Roles Of Taxation In Nigeria.

What is Tax?

Tax is a important financial charge or some type of levy imposed on an individual or legal entity (taxpayer) by a governmental organization in order to fund government spending and various public expenditures an failure to pay or resistance to taxation is punishable by law, it may be of direct or indirect taxes and may be paid in money or as its labor equivalent. In order to pay for public, common, or agreed national needs and for the functions of government Most countries have a tax system in place and charge a tax on an individual's income as well as on corporate income.

Strategies For Effective Revenue Generation

  • Introduction of additional sources of revenue
  • Providing an incentive for extra efforts of the revenue generation staffs
  • Periodic raiding by officer of the revenue generation
  • Efficient and effective collection of existing taxes
  • Public enlightenment and campaign

Institution Responsible For Taxation System And Its Management

  • Company Income Tax CIT
  • CIT is placed on the gain or income of any company accruing in, derived from, brought into or received in Nigeria. CIT is payable by all incorporated companies in Nigeria and also includes taxes on the profits accruing to non-resident companies carrying on business in Nigeria and is paid by both private and public limited liability companies. It is one of the taxes administered and collected by the Federal Inland Revenue Services (FIRS). The tax rate is 30% and it is applied on the chargeable profit of the company. It should be noted that oil companies are liable to pay tax under CITA at the CIT impact significantly on the economy of Nigeria since it serves as a stimulus to economic growth in the areas of fiscal and monetary policies.
  • Value Added Tax (VAT)
  • VAT is a multi-stage tax imposed on the value added to goods and services. It is a collected by the FIRS on behalf of federal government and are imposed on goods and services as they are rendered and consumed during production or distribution stage. It is also said too be a tax burden that is transferred on from the manufacturer to the wholesaler via the retailer and finally to the consumer who ultimately bears incidence and the burden. It is also referred to as a consumption tax is essential on economic operations including imports, they are imposed on virtually all forms of goods and services. VAT rate in Nigeria is one of the factors contributing to the collapse of the real sector of the economy because it disrupts the manufacturing sector by accelerating astronomical increase in the prices of goods and services.
  • Petroleum Profit Tax (PPT)
Petroleum Profit Tax (PPT) is placed on any entity (individual or companies) that are engaged in the extraction and transportation of petroleum products. PPT is an important tax in Nigeria in terms of its contribution to the country’s total revenue as it contributes over 70% to government revenue and 95% to foreign exchange earnings. This tax which became effective under the PPT Act 1959 and has undergone several amendments provides for disposals. Aside of provision of revenue to government through PPT,this body also serves as an instrument for regulating participants in the petroleum industry. and gives rise to the enactment of different laws regulating taxation of incomes accruing from petroleum operations.

Importance Of Taxes In Nigeria

  • Education
  • Funding Education is one of the most deserving recipients of tax payments, when rightly channeled money from taxes is could be used for furnishing, funding and maintaining the public education system.
  • Governance
  • This is a crucial component in the smooth running of country affair, Good governance ensures that the money collected is utilized in a manner that benefits citizens of the country. This money also goes to pay public servants, police officers, members of parliaments, the postal system, and others. Indeed, with a proper and functioning form of government, there will be no effective protection of public interest.
  • Health
  • Government contributions to the health sector would be unrealistic without taxes as they go to funding health services such as social security, social healthcare and medical research.Huge money from taxes is spent on improving healthcare in the country.Over the years, the quality of service rendered by government hospitals has improved massively and this is because of taxpayers paying tax.
  • Business Boost
  • The concept of taxation is also important to businesses so that governments can fund this money back into the economy in the form of loans or other funding forms, For business to flourish in the country, there has to be good infrastructure such as roads, telephones as well as electricity.Governments collect money from taxes and it plugs this money into development of this infrastructure and in turn promotes economic activity throughout the country.
  • Nation Growth
  • Without taxes, it would be impossible for the government to run the country because Income tax is one of the biggest sources of income for the government and as such people stop thinking that income tax is a burden and avoid paying the same, because it will directly impact the growth of our nation and may result in social collapse.
  • For Funding Other Sectors
  • Without taxes it would be impossible for governments to raise money to fund certain projects,as some of the tax money is also channeled to aid projects such as pensions, unemployment benefits, childcare amongst others
  • Welfare Schemes
These schemes benefit millions of people and require lots of money to fund successfully. So by paying tax, you play your role in the success of these schemes and also provide the government with the ability to work on more welfare schemes and programs.

Why Is It Important To Pay Tax?

Taxes are crucial because governments collect this money and use it to finance social projects. Without taxes, government contributions to the health sector would be impossible. Taxes go to funding health services such as social healthcare, medical research, social security, etc.

What Are The 3 Purposes Of Taxes?

We pay taxes for three major reasons:
  • To provide revenues for the government
  • To redistribute wealth from the rich to the poor
  • To avoid negative externalities
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