The Concept of Taxation and Taxing Power in Nigeria


Taxation refers to the means by which a government or the taxing authority imposes or levies a tax on its citizens and business entities. The term “Taxing powers” describes a level of government’s ability to impose a tax through its laws, and set requirements for the proper collection and administration of the tax by either its own agency or that of another level of government[1]. Taxation is largely statutory, as seen in sections 4 and 59 of the constitution of 1999’[2]; and the tax law of a nation is usually unique to it, although there are similarities and common elements in the laws of various countries.[3]

In Nigeria, ‘the taxing powers of the government are rooted in the constitution’.[4] All government taxing agencies also derive their powers from the legislation, therefore no agency can tax citizens if they are not authorized to do so by any valid legislation in force. The Nigerian taxing system has come a long way from the several ordinances and proclamations put in place by the British Colonial Masters. ‘In Nigeria, tax administration is carried out by the three tiers of government, namely; the Federal Government, the thirty-six States of the Federation and the Federal Capital Territory, and the various Local Governments, through the machinery set up by the respective government’.[5]

The CFRN 1999[6]in its legislative list, provides for the distribution of various taxing powers in different degrees across all three tiers, with the bulk of it accorded to the Federal Government. Therefore, ‘each level of government is independently responsible for the administration of taxes within its jurisdiction’.[7]


By and large, when Nigeria became a federation in 1954, the issue of division of taxing powers among the Regions and the central government quickly emerged. As per Ayua 1996, the inquiry was examined at a Nigeria-protected gathering in London in 1957. At that gathering, it was concluded that the issue be alluded to a Commission. Thus, the Raisman commission was initiated to investigate the issue of how to designate taxing powers between the Regional and Federal state-run administrations, and make suggestions that would guarantee an evenhanded duty circulation. Prior to 1951 and 1953, two commissions were set up which were the Hicks Phillipson Commission of 1951, and the Sir Louis Chick Commission of 1953.

In its composite suggestions, Hicks Phillipson set down among others, the guideline of independent revenue, with the end goal of making the areas inside the recently settled league all the more monetarily confident, while Sir Louis’ suggestions to a bigger degree, reflected in Section 155-163 of the 1954 constitution request in-chamber. The Raisman commission report was submitted in June, 1958, the recommendations of his bonus according to the division of taxing powers between the levels of government, had a solid effect on the applicable arrangements of the Nigerian Constitution Order-in-Council, 1960, segment 70 of the 1960 Independence Constitution. The arrangements of segment 70 above were translated unto the Legislative List in the Schedule to the expressed Constitution of Nigeria 1960 in like manner. What’s more? This pattern of regulations has kept on developing in our different constitutions and regulation, up to the 1999 Constitution of the Federal Republic of Nigeria (as amended).


Under the 1999 Constitution of Nigeria (as amended), taxing powers is divided between the federal and state government. In general, each level of government’s taxing authority generally corresponds to how the Constitution divides its legislative authority. As a result, a level of government can only levy taxes on issues that fall under its purview. The provisions of the constitution provide for the authority of the Federal Government to levy taxes.[8] It provides that ‘The National Assembly shall have the power to make laws for the peace, order and good government of the Federation, or any part thereof, with respect to any matter included in the Exclusive Legislative list set out in part 1 of the second schedule to the constitution’.

The Exclusive Legislative List contains, inter alia, Customs and Excise Duties, Stamp Duties, as well as incomes, profits and Capital Gains. Therefore, the Exclusive Legislative List means that the major tax Acts such as the Stamp Duties Act, Capital Gains Tax Act, Personal Income Tax Act, Petroleum Profit Tax Act, Companies Income Tax Act, Customs and Excise Management Act as well as Education Tax Act, are all Federal Statutes of which the Federal Government has taxing powers over.

It is however important to state here that the Federal Government do not only have powers over taxation as stated in the Exclusive List, but also the Concurrent Legislative List.[9] The main reason for giving this so much tax power to the Federal Government is to avoid competing and conflicting tax jurisdiction, and to aid the Federal Government’s higher generation of revenue, in order to be able to meet the socio-economic responsibility of the central government. Notwithstanding the exclusive powers of the Federal Government to impose all the above-mentioned taxes, the Constitution authorizes the Federal Government, at its discretion, to delegate the administration of personal income tax[10], capital gains tax, and stamp duties to the State Governments by virtue of the provision of the concurrent legislative list.

The Concurrent List is set out in the first column of Part II of the Second Schedule to the 1999 Constitution (as amended). Therefore, the Federal Government can delegate to the State Governments, the power to collect and administer stated taxes. Also, it is by virtue of this provision that the State Governments are allowed to collect Personal Income Tax, Capital Gains Tax and Stamp Duties from individuals and unincorporated organizations resident within their respective territories. The revenue collected by the Federal Government from the personal income tax is paid into the Federation Account, subject to the right of the Federal Government to retain the expenditure for collecting the tax. The Federal Government always collects from members of the Armed Forces, as well as the Police Income and Capital Gains taxes on behalf of the States[11].

The position of the law in this regard is that where the law allows the Federal Government (for convenience sake) to collect Income and Capital Gains taxes from the individuals in the Armed Forces and Police, as well as Stamp Duties from companies, such taxes should be returned to the State from which they were derived (i.e. the States in which the taxpayer individual was resident, or in which the underlying transaction of the document stamped took place) and not to be remitted to the Federation Account .

Furthermore, provisions are made that the net proceeds of such taxes should be returned to the States on the basis of derivation. In addition to ensuring the security of life and property, it is the primary responsibility of governments around the world to provide their population with the most basic social amenities. Governments frequently fail to fulfil this obligation, usually not because they don’t want to, but rather because they are unable to. They lack the financial resources to do so. This is why taxation is very important as it is a source of revenue for the government.


Nigeria’s tax framework is described by superfluously perplexing, distortionary and generally unjust tax assessment regulations that have restricted application in the casual area that overwhelms the economy. For the tax framework across all tiers of government to be proficient and successful, it should create authorities that are generously compensated, all-around roused, appropriately coordinated, sufficiently prepared, very much focused and expertly slanted. The framework needs basic, clear and unambiguous expense regulations; evaluation and assortment methods should be direct, straightforward and client-accommodating. Nigeria should prepare extraordinary duty judges and lay out unique assessment councils; guarantee that charge consistence costs are insignificant, and embrace the mentality of ‘the taxpayer being the king.’


  1. University of Lagos ‘Division of Taxing powers under the 1999 constitution’ (<·> accessed 23 August 2022
  2. Law of Personal and Property Taxation I’ (The accessed Aug. 24, 2022.
  3. Baron Jean M.J. Van Houtte, ‘Tax Law’ (Encyclopedia, June 13, 2011)
  4. ‘Law of Personal and Property Taxation I’ (The accessed Aug. 24, 2022.
  5. Serah Sanni, ‘Nigeria: Basic Principles Of Taxation In Nigeria’ (, Dec. 2, 2019)
  6. Constitution of the Federal Republic of Nigeria 1999 (As Amended).
  7. ‘Nigerian Tax System: Structure and Administration’ ( accessed Aug. 24, 2022.
  8. Section 4(2) CFRN 1999 as amended
  9. Nwoke T, ‘Taxing Powers Of The Three Tiers Of Government In Nigeria’ (, 2022) Accessed 23 August 2022
  10. Section 2(2) Personal Income Tax Act, CAP 8 LFN 2004
  11. ‘Legal Framework And System Of Taxation In Nigeria’ (, 2022) Accessed 23 August 2022
  12. University of Lagos ‘Division of Taxing powers under the 1999 constitution’ (<·> accessed 23 August 2022

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