The history of modern taxation in Nigeria is traceable to the reforms initiated in the first decade of the 20th Century in Northern Nigeria by the High Commissioner of the then Northern Protectorate, Sir Fredrick Lugard. Lugard issued the Stamp Duties Proclamation in 1903 and followed it with the Native Revenue Proclamation in 1906. The Native Revenue Proclamation 1906 systematized all pre-colonial taxes that existed in Northern Nigeria by defining taxable rates, procedures for assessment and collection as well as penalties for default. This made away with the arbitrariness that was the case in the pre-colonial era and introduced the four certainties essential in modern tax practice: what to pay, when to pay, where and who to pay to. Following the amalgamation of the Northern and Southern Protectorates in 1914, the Colonial Government re-issued the Native Revenue Proclamation as the Native Revenue Ordinance 1917, but the application was still restricted to the northern territories. The application of the ordinance was extended to the western and eastern territories in 1918 and 1927 respectively to enable the levying of income tax in those regions. Another major reform took place in 1943 when the Nigerian Inland Revenue Department, the precursor to the Federal Inland Revenue Service, was carved out of the Inland Revenue Department of British West Africa. The Inland Revenue Department was renamed the Federal Board of Inland Revenue under the Income Tax Ordinance No. 39 of 1958. This change was reechoed again in 1961 when the Companies and Income Tax Act No. 22 of 1961 established the Federal Board of Inland Revenue, FBIR. CITA 1961 also established the Body of Appeal Commissioners as the first point of call in the resolution of disputes between taxpayers and the Board concerning assessment and payment of tax. Also, the Income Tax Management Act 1961 created the Joint Tax Board and charged it, primarily, to ensure uniformity of standards and application of personal income tax in Nigeria.
In 1993, some major changes took place with the passage of the Finance (Miscellaneous Taxation Provisions) Act No 3 of 1993 and decree 104 of 1993. While decree 3 reviewed the composition of the FBIR and also established the Federal Inland Revenue Service (FIRS) as the operational arm of the FBIR, decree 104, among other things, reviewed the functions of the Joint Tax Board. The history of tax administration changed dramatically again in 2007 with the granting of financial and administrative autonomy to the Federal Inland Revenue Service through the passage of the Federal Inland Revenue Service (Establishment) Act 2007. The passage of the FIRS Establishment Act was an actualization of one of several reform initiatives that arose from the recommendations of the Study and Working Groups on Nigerian tax system. The Study Group, headed by Professor Dotun Philip, was set up by the Federal Government in 2002 and submitted its report in 2003. The report of the Study Group was reviewed by the Working Group headed by Mr. Seyi Bickerseth and the implementation of the harmonized report of the two groups commenced in 2004.
The changes that have occurred in the tax system since 2004 cut across organizational restructuring of the Federal and State authorities, the enactment of a National Tax Policy, funding, legislation, taxpayer education, dispute resolution mechanism, taxpayer registration, human capacity building, automation of key processes, refund mechanism and several other areas discussed in detail in the handbook Federal Inland Revenue Service and Taxation Reforms in Democratic Nigeria – 2012. Political and socio-economic factors usually provide the context for every reform process. In the case of the 2004 reform era, the need to shift emphasis from oil to a more sustainable source of funding has been the overriding consideration. Of particular importance is the need to develop the non-oil tax segment and increase its overall contribution to the national coffers. Focused determination, support of key stakeholders and enabling political and legal environments have been critical in the successes recorded to date.
Federal Inland Revenue Service and Taxation Reforms in Democratic Nigeria – 2012
For more details on the FIRS Reforms, Please click here to download excerpts of the handbook -