Sunday, September 12, 2010

Tax law; Analytical approach on double taxation in nigeria.

 

                                                      

              CHAPTER ONE:      SCOPE AND DEFINITION OF TAXATION
1.1                                  INTRODUCTION
 At present, everyone considers a government as an independent entity /organization. The system of taxation is therefore considered as a way of earning income by the government so that after its collection, the president or the
Governors on behalf of public may spend it prudently for their welfare. The system has therefore becomes a necessity as without sufficient income, governments cannot deliver what they are supposed to deliver[1]. The essence of the system is to therefore collect sufficient funds from public[2] and then use those funds prudently for the welfare of the same public.

 The concept of tax is as old as mankind itself and had taken different shapes and dimensions dating back to the earliest primitive period to the present modern time. Then it could be in the form of community services and payment of tributes to the head of the society. However, the point must be made that even during those olden days, refusal or default in payment of tax either by rendering the necessary community services, payment of the required tribute or rendering of any acceptable obligation or duty in satisfaction of such tax demand to the appropriate community head and authority was often met with instant punishment and penalty[3]

  It is common knowledge that even prior to European colonization of Africa, many feudal kingdoms had in existence well functional and efficient tax systems that the white men during the era of colonialism merely re-arranged and strengthened[4] In the contemporary society, government as the ultimate authority levy taxes usually in the form of monetary payment/either directly or indirectly. No generation or age has escaped the incidence of taxation and has indeed become an integral part of human obligation to the authority in every society and age. No wonder it is often said that Death and taxes are two inevitable facts of life[5] However, a crucial distinction exists between the two; death is a meta-physical fact, while taxes are man-made fact. As such, death is in fact inevitable but taxes are not. The metaphysical is absolute and immutable; the man-made is subject to the choices and actions of man.

 Consequently, tax laws have always been couched in coercive and compulsive terms to the end that every taxable person is obliged to pay tax .This is so  in order that the government should be able to raise enough financial revenue towards providing such essential services that the government is committed to and, indeed has undertaken to provide.
  1.2                                     OBJECTIVES OF THE STUDY
The classical purpose of taxation is the raising of funds to meet government expenditure. In fact, from time immemorial, taxation is one form that has been the most important source of government revenue. However, time has changed, so also the circumstances. While raising revenue is still a major objective of the tax system, there are other equally important objectives. These are the redistribution of wealth and the management of the economy.

With the increasing disparity in wealth distribution in the society and with a view to forestalling social upheaval that likely may occur, governments therefore have often resorted to using the tax system to distribute wealth. This can take the form of imposing a progressive rate of tax on incomes; the imposition of wealth taxes; tax on luxury items and on gifts and bequests etc.

The tax system can also be used to direct the course of the economy. It is often to encourage, contain economic activities through the provision of tax incentives, granting of capital or investment allowances, tax credits etc. In fact, the tax system is a very potent weapon of economic regulation in the following respects.
First, taxes affect the amount that is available for spending by the private sector of the economy. Correspondingly, an increase in tax rates and gathering efficiency will affect the amount available for government spending. Not only, that, such increase or decrease no matter how minimal may have inflationary or deflationary effect on the economy. Secondly, and particularly in the case of taxes on income, there is tendency of their imposition to encourage or discourage particular activities[6].

Through the selective grant of incentives, allowances, tax holiday’s reliefs in the case of double taxation, the tax system can be used either consciously or otherwise to encourage private investments in certain area. Also, this phenomenon may not be conscious governmental policy but purely accidental. This occurs frequently in relation to the ability of taxpayers to take advantage of loopholes in or of badly drafted tax legislation[7]

On the other hand however, double taxation is thought to be objectionable since it makes overseas profits more expensive than domestic profits, it discourages a person from trading overseas and so interferes with international trade. The ideal situation would be one in which there was neutrality both between the tax burdens of a person from trading at home and abroad and between a resident and a non resident trading in the same country. Until however there is one tax system within a country and a one tax system common to all countries. It will be impossible to achieve these objectives.


1.3                          HISTORY OF TAX LAW IN NIGERIA
Income tax was first introduced in Nigeria in 1904 by the late Lord Lugard when community tax became operative in Northern Nigeria[8]. He later made changes
which culminated in the Native Revenue Ordinance of 1917. An amending ordinance that extended the provisions of the 1917 ordinance to southern Nigeria was passed in 1918.The first ordinance applied to Abeokuta in Ogun State and Benin City in Bendel State, and in 1928 it was extended to Eastern Nigeria. Nigeria income taxation in modern form, however, began in 1940 although there was a simplified type of tax dating back to 1927; Northern Nigeria was the first of the regions to levy direct personal taxation- under the Fulani Emirs, prior to the advent of the British.[9]

The Native Revenue Ordinance of 1917, 1918 and 1928 were later incorporated in the Direct Taxation Ordinance No. 4 of 1940 Cap 54,  hereinafter  referred to as the  Ordinance , which repealed the Native Revenue Ordinance Cap 74, in the 1923 edition and the native Direct Taxation (colony) Ordinance No. 41 of 1937. This ordinance was discriminatory as it applied to Natives in Nigeria elsewhere than in the township of Lagos.[10]
1.3.1                         THOSE THAT DETERMINES THE TAXABLE INCOME
Those who determined the taxable income, or the original in-land revenue departments, where the Resident, who was the officer appointed by the Governor to be in administrative of the province in question, together with any other administrative officer authorized by the Resident to perform any duties imposed upon the Resident under the Ordinance; the chiefs ,elders and other persons of influence in each district; any native authority which by native law and custom was recognized as the tax-collection authority; any native  authority appointed by the Governor to be a tax-collection authority; any
 village council, district headman or other suitable person or group of persons appointed by the Governor. By Ordinance 14/53 a new section, 15B, enacted that a Lieutenant-Governor might appoint a Divisional or District council as tax-collection authority and that notwithstanding the provisions of section 15, the Lieutenant Governor could appoint a Divisional or District council to be the collection authority for its area and that such tax-collection authority might, with the approval of the Resident, appoint any local council or town or village or area committee, district head or other suitable person or group of persons to be a tax-collector within any part of the area of its authority or of any community within the area. The provisions of the new section applied to the Western Region only .A new section 15A, enacted by Ordinance 16/50, provide for every district council to be appointed tax collection authority for its administrative area.

1.3.2                  DUTIES OF TAX COLLECTING AUTHORITIES
The duties of the tax-collection authorities included the giving of information, the supervision of collection of tax in their area, and accountability of tax collected to the Resident or the payment of such taxes into the treasury by the District Council. Penalty for non- accountability of tax was a fine of #400 or imprisonment for two years, or both. A similar penalty provision existed for those who were guilty of corruption in regard to tax collection.
1.4                       DEFINITION OF TAX
       There has been no universally accepted definition of tax even though it has been variously defined both judicially and by learned authors .The  functional and essential nature of tax influenced its definition, in the case of  NICHOLAS V. AMES:[11]  by the United States supreme court as:
      “The one great power upon which the whole national fabric is base.
     It is necessary to existence and prosperity of a nation as is the air he
     Breath to the natural man. It is not only the power to destroy, it is also                  
      the power to keep alive’’.
Again it has been stated that;
 Nowadays, a tax is invariably an enforced contribution of money, exacted                     pursuant to legislative authority. If there is no valid statute by which it is
 imposed, a charge is not a tax. But it is backed by written law and it has 
the other identified characteristics of a tax, even if it is called other names
 like toll, tribute, tallage, gable, impost, duty caston, excise, subsidy aid,
 supply or other names[12]
It could be seen from this definition of tax that it is an enforceable monetary
contribution backed by legislative authority. As a result of the essential and
Obligatory nature of tax, tax is also seen as a responsibility, which every taxable
Person is obliged to render.
The issue of taxation is not a matter of choice, whether one is to pay or not. It is
a legislative demand by the government and mandatory for a citizen who has
attained taxable age to pay.

Taxation has been defined as a general concept for devices used by
Governments to extract money or valuable articles from members of the
community and organizations by the use of law- in other words, it is a levy
charged by Government either central, state or local Government on income,
property, commodities and services[13]
Justice Latham of the Australian Supreme Court has stated that
          “A tax is a compulsory exaction of money by a public authority for public
          Purposes,” or ‘taxation is raising money for the purposes’ of government
         by means of contributions from individual persons’’.[14]                                            
Also Justice Roberys of the United States of America Supreme Court rightly opined in 1936:
          ‘’A tax in the general understanding of the term, and as used in the
        Constitution signifies on exaction for the support of government. The word
         has never been thought to connote the expropriation of money  from one
        group for the benefit of another’’.[15]
These judicial exposition reflect our understanding of tax” or taxation’ in this
country. The constitution empowers the federal and state Governments to
 govern within their respective jurisdiction.[16] It is trite that the government need
funds to govern in other to fulfill the functions assigned by the constitution.[17]
However, Taxation can be defined as a compulsory levy imposed on a subject or
 upon his property by the government having authority over him or the
 property. Inherent in this definition are two important elements. The first is
that the levy must be compulsory and voluntary or subject to the receipt or
conferment of any benefit on the payer.
Secondly, it is an imposition by government[18]. Though governmental activities
are usually expected to be beneficial to the society and even the individual, such
 benefits are, however, not always enjoyed, contemporaneously or
proportionately to contributions by individuals. It is not unusual therefore, that
subjects will not voluntarily contribute to the support of the government which
  is ordinarily seen by the individual as an inanimate, detached and remote
entity. Thus the element of compulsion is an essential ingredient for determining
whether a particular demand for payment by the government from individual is
taxation.
  1.5                       SCOPE OF THE STUDY
The word “tax” in the context of this work is one of very wide import.
However, qualified as it has been, by the word “legislation” its meaning is
limited to such imposition of financial burdens that can only be undertaken by
the Government vis-a-viz its citizens, and corporate entities.
Taxation in this sense generally means raising money for government by means
of contribution from persons .Thus the legislation raising money for the
purposes of government may be directly imposing pecuniary burdens in respect
of persons or things subject to its jurisdiction who are required to pay it, which
may be and is generally described as direct taxation .In Attorney General for
Manitoba V. Attorney General for Canada [19], considering  S.92 head 2 of the British North America Act and whether a tax is or is not direct within the meaning of the section, the judicial committee of the privy council,

 By successive decisions of this Board the principle as laid down by Mill and other political economists have been judicially adopted as the test for determining whether a tax is or is not direct within the meaning of S.92 Head 2 of the British North America Act. The principle is not a direct tax is one that is demanded from the very person it is intended or desired should pay it. An indirect tax is that which is demanded from one person in the expectation that he shall indemnify himself at the expense of another. Of such taxes excise and customs are given as examples.
This work will also cover the multiplicity of taxes arising from states, federal and local government which often times hampers the growth of small scale industries.
More to be mention in this work are double taxation that arises because different countries have different Laws and no country takes cognizance of revenue law of another. [20]  It will also ex-ray the double taxation agreements between Nigeria and other countries of the world and incentives available as a result of these agreements.

1.6               IMPORTANCE OF TAXATION IN NIGERIA
Income tax is one of the major sources of revenue of all governments in Nigeria[21]and it is a factor to be reckoned with in both the state and the federal governments’ budgets. The taxes collected come back to the taxpayers in the form of social amenities, Income Tax has encouraged[22] or discouraged some activities in the private sector, depending upon whether the policy of the government is towards discouraging or encouraging such companies. It reduces the net return on investments and also decreases the balance available for private savings.

 It is an all-pervading subject which affects the lives of nearly everybody, and no major accountancy or legal problem can be satisfactorily solved without a consideration of its tax aspects. Benjamin Franklin, a statesman and philosopher, observed that “in this world nothing is certain but death and taxes”.  Taxation is particularly important to businessmen, who enjoy the benefits of water supply, electricity (where they work) and land allocation.

 Income tax has social effects. Personal reliefs, reliefs in respect of children and tuition, relief on insurance policy premium, and dependent relatives’ relief affect the social structure of the whole country.  The fiscal effect is that the cost of collecting these taxes by the Governments is considerable. Professional fees paid by taxpayers to accountants and the cost to unpaid employers in deducting tax under the Pay-As-You-Earn system (PAYE) and holding the taxes so deducted to the governments is also enormous.

 Income tax also has some effects on publication movements and the extent of business carried on. A state with low income rate will find that more people are moving into that state, while traders will leave states with high income tax rates or engaged in various schemes of tax avoidance and tax evasion.

The importance of income tax is also shown by the fact that one of the problems inherent in any federal system of government is the allocation of taxing powers between the federal and the state governments. In May and June 1957, when Nigeria leaders were planning the forms of federalism they wanted, a two-member fiscal commission known as the Raisman Commission was appointed to study and to make recommendations as to the allocation of taxing powers between the then Regional Governments and the federal Government. The commission tendered its principal report in June 1958[23] . Section 4(1) of the Nigerian constitution enacts that the provisions relating to fiscal arrangements can only be amended by a two-thirds vote in each House of the federal parliament, consented by each legislative chamber of at least three of the former regions.
                              

                                                  LITERATURE REVIEW
1.   I.O Agbede in his book titled “Tax administration in Nigeria” stated that Double taxation may occur within a state or a locally but by and large it is in respect of foreign income that the problem of double taxation has provoked international awareness. This work shall make adequate use of this test book more especially on his opinion about Double taxation in international level. I will also use this book within the context of Nigerian law with reference from law approach to foreign revenue statute.
2.   Desmond .I. Nworji in “Personal Income Tax Law and Accountants in Nigeria” was of the opinion that Double taxation Arrangement is that made by Nigeria with the Government of any country outside Nigeria for the purpose of granting relief for tax paid in that other country on the same income brought into Nigeria by a taxpayer. On this note therefore, I will utilize this literature on different agreements entered into between Nigeria and other countries and ones yet to be completed.
3.   I.A. Ayua also stated in his book “The Nigerian Tax Law” emphasized that it is now generally recognized that taxation has an important and established role in any economy. He stated that there is hardly any Government today that does not rely or make pretentions to rely on one taxation measures not only to provide the much needed revenue for socio-economic development but also to reduce the inequalities of wealth in the society. In view of this project “Tax Law, analytical approach on double taxation in Nigeria” will ex-ray this book on the importance of Tax Law and why Government stick to it irrespective to various complaints from taxpayers.
4.   S.M Adesola in his book titled “Income Tax and Administration in Nigeria” will be a very useful material to this work “Analytical approach on double taxation” as I will utilize its system of tax administration in Nigeria, style of double taxation and most importantly on the area of double taxation relief arrangement with other foreign countries.
5.   C.S Ola in his book “Income Tax in Nigeria” is another useful material to this work as it will provide useful explanation on different type of taxes levied by the Government. It will also ex-ray double taxation relief and computation of taxable income. Since the writer dwell much on historical background of tax in Nigeria and taxing powers of government, I will also make viable use of his book to capture these vital subject matter of this project.
6.   According to the Butterworth’s UK Tax guide which made additional impact on double taxation relief and on it point of view will assist to review in this project the ideal situation where there would be neutrality both between the tax burdens of a person trading at home and abroad and between a resident and non-resident trading in the same country.
7.   Hayton and Tilry in their book “Capital Transfer Tax “critically ex-ray the United Kingdom agreement between other countries which by implication serve as a mirror between Nigeria and other countries. As a matter of fact, this book will go a long way revealing to this work the historical background of double taxation agreement especially that between and United Kingdom.
8.   According to Nelson –Jones and Smith in “Practical Tax Saving” critically examine the operation of double taxation relief, dealt with same special points which must be observed in order to obtain relief for underlying tax where the shareholding in the overseas company is held by more than one company, therefore this point notwithstanding is going to contribute immensely into unilateral double taxation relief and also features into other relevant part of this project.
9.   In comprehensive aspect of taxation written by R.G. Williams reveals another aspect of double taxation which is that countries tax the income of their own residents from whatever it arises and the incomes of non-residents in so far as it accrues within the country concerned. This also will serve as another aspect that will enrich this topic “Analytical approach on double taxation in Nigeria “as most of the data collected by the author will contribute immensely to this work.
10.   In Whiteman and Wheat craft on “Income Tax”, I gathered the view that double taxation relief is a difficult subject; it is apparently to say that system of income  taxation in the United Kingdom has a number of complication ; However the system of other countries are difficult but are frequently equally complicated . Hence any attempt to reconcile two, or more different systems is bound to raise considerable problems. Therefore this work is set to treaty these difficulties arising from each country differently and reconciles where there is a relief to the neighboring country.
11.   WWW. Answers.com/topic/double-taxation. In this site, I discovered that taxation principle to income taxes that are paid twice occurs because corporations are considered separate, legal entities from their shareholders. As such corporations pay out dividend payments, income tax liabilities for the shareholders that receive them even though the earning that the cash to pay. The dividends had already been taxed at the corporate level. Therefore since this work is on double taxation, relevant parts of this site are going to contribute immensely to this project most especially on corporations and their shareholders.











                           CHAPTER TWO:       NIGERIA TAXING SYSTEM
   2.1                   HISTORY AND DUTIES OF TAX AUTHORITIES IN NIGERIA
The history of taxation in Nigeria predated the colonial era. At that time, tax was an affair between the local chief and his subject and taxes were paid in kind of security and common services[24] .During this colonial era, the pool tax was a source of revenue for both the local and the regional governments. The local authorities administered the essential and collection of the tax.

 The gradual erosion of the role of the local authorities as tax administrators started with the Raisman Commission of 1958 which formed the basis of the modern Nigerian taxation as we have it today. The role was further marginalized by subsequent constitutional arrangements.[25] These developments made taxation in Nigeria predominantly federal, state and even local Government affair. However, with the promulgation of the VAT Decree No. 102 of 1993, which replaced the sales tax Decree of 1986, the personal income tax Decree No. 10 of 1993 which replaced both the income
Tax management Act (ITMA) 1961 and the Income Tax (Armed Forces and other persons) Special Provision Act, The Education Tax Decree No. 7 of 1993, it would appear that taxation in Nigeria is fast becoming more of a federal Government affair.
2.1.1               THE BOARD OF INTERNAL REVENUE
The Board of Inland Revenue is the administrative authority responsible for the imposition and collection of tax from the income of individuals within a particular territory.[26] It was referred to in the Personal Income Tax Decree (PITD) as “Tax Authority” and defined as:

 The person or body of persons responsible under a law of a territory imposing tax on the  Income  of individuals for the administration of that  law[27].The Board was re-established under section    854 of PITD. According to this section;
1.       There shall be a board to be known as the State Board of Internal Revenue(hereinafter in this  Act referred to as “the State Board”) whose operational arm shall be known and called State Internal Revenue Service”(hereinafter in this Act referred to as “the state service”)
2.       The State Board shall comprise;
(a) The executive head of the state service as chairman, being person experienced in taxation and to be appointed by the Governor from within the state service;
(b)Three other persons nominated by the commissioner for finance in the state on their personal merits;
(c)The Directors and Heads of Departments within the state services;
(d)  A Director from the state Ministry of finance.
3.       Any five members of the state Board of whom one shall be chairman or a Director, shall Constitute a quorum.
4.       The Secretary (who shall be an ex-office member) to the state Board shall be appointed by the Board from within the state service.
5.       Notwithstanding that the Legal Adviser to the State Board is at any time a member of the State Board, he may appear for and represent the State Board in his professional capacity in Proceedings in which the State Board is a party; and the Legal Adviser shall not in such Circumstances give evidence on behalf of the State Board.
6.       The Secretary shall summon a meeting of the State Board whenever the business requiring its attention so warrants, or upon any request of a member, and a majority decision of the members on any matter obtained by him in written correspondence shall be treated in all requests as though it were a decision of the State Board in actual meeting unless any has requested the submission of the matter to such meeting.
2.1.2               FUNCTIONS OF THE BOARD
The functions of the board are set in the section 85 BCO of the Personal Income Tax Decree (PITD). According to the Decree, the State Board shall be responsible for;
(a)    Ensuring the effectiveness and optimum collection of all taxes and penalties due to the government under the relevant laws.
(b)   Doing such things as may be deemed necessary and expedient for the assessment and collection of the tax and shall account for all amounts so collected in a manner to be prescribed by the commissioner.
(c)     Making recommendations, where appropriate to the Joint Tax Board on tax policy, Tax Reform, Tax Legislation, Tax Treaties and Exemptions as may be required from time to time.
(d)   Appointing, prompting, transferring, and imposing discipline on employees of the state service.
(e)   Generally controlling the management of the service in matters of policy subject to the provisions of the law setting up the service.
 The State Board shall be autonomous in the day-to-day running of the technical, professional and administrative affairs of the state services. The Technical Committee of the Board was established under S.85 (1) comprising;
(a)The Chairman within the state Board as chairman;
(b)The Directors within the state services;
(c)The Legal Adviser to the board;
(d)The Secretary to the Board;                                                                                                  
  Section 85 C (2). The Technical Committee shall;
(a) Have powers to co-opt additional staff from within the service in
 the discharge of its Duties;
(b)Consider all matters that required professional and technical expertise and make recommendations to the state board;
(c) Advise the State Board on all its powers and duties specifically mentioned in S. 85B of this Act;
(d)Attend to such other matters as may from time to time be referred to it by the Board.
   

2.1.3               FEDERAL BOARD OF INLAND REVENUE (FBIR)
 The Federal Board of Inland Revenue is responsible for taxation of all corporate bodies [28] throughout the federation. It is a creation of statute under the Companies Income Tax Act of 1961 (Section 3) and later invalidated under the Companies Income Tax Act of 1979, S. 31(1) of the CITA which state as follows;
“There is hereby established a Board of which the official name shall be the Federal Board of Inland Revenue”
 The members of the Board shall be[29]
(a) A chairman who shall be the director of the Federal Inland Revenue Department;
(b)Four Deputy Directors of the Federal Inland Revenue Department;
(c) The most senior of those officers holding or acting in the post of Legal Adviser and Assistant Legal Adviser in the Federal Inland Revenue Department who is available from time-to-time or acting in the office of Principal Assistant Secretary with responsibility for revenue matters in the Federal Ministry  of Finance;
(d)A representative of the Nigerian National Petroleum Corporation;
(e) A representative of the Department of Customs and Exercise; and
(f) The Registration of Companies.
2.1.4              POWERS AND DUTIES OF THE BOARD                           
 The powers and duties of the board are stated under section 2 of the Act. It is reproduce hereunder;
1. The due administration of this decree and the tax shall be under the care and management of the board who may do all such things as may be deemed necessary and expedient for the assessment and collection of the tax and shall account for all amounts so collected in a manner to be prescribed by the commissioner.
2. Whenever the board shall consider it necessary with respect to any tax or penalty due, the Board may require, hold and dispose of any property taken as security for in satisfaction of any such tax or penalty or of any judgment debt due in respect of any such tax or penalty and shall account for any such properly and the proceeds of sale thereof in a manner to be prescribed by the commissioner;
3. The Board may sue and be sued in its official name and, subject to any express provision under any subsidiary legislation or otherwise, the Board may authorize any person to accept service of any document to be sent, served upon or delivered to the Board.
4. The Board may by notice in the Gazette or in writing
       (a) authorize any person within or outside Nigeria to perform or exercise on behalf of the Board, any power or duty conferred on the Board other than the powers or duties specified in schedule 1, or to receive any notice or other document to be given or delivered to, or served upon, the Board under or in consequence  of this decree and any subsidiary legislation made there under; and
(b) With the consent of the commissioner, authorize the Joint Tax Board (J.T.B) to perform or exercise, on behalf of the Board, any power or duty conferred on the Board including the powers or duties specified in schedule 1.
5. In the exercise of the powers and duties conferred upon it, the Board shall subject to the authority, direction and control of the commissioner and any written director order or instruction given by him after consultation with the chairman shall be carried out by the Board; provided that the commissioner shall not give any direction, order or instruction  in respect of any particular person which would have the effect of requiring the Board to raise an additional assessment upon such person or to increase or decrease any assessment made or to be made or any penalty imposed or to be imposed upon or any relief given or to be given to or to defer the collection of any tax, penalty or judgment  debt due by such person, or which would have the effect of altering the normal course of any proceeding, whether civil or criminal, relating either to the recovery of any tax or penalty or to any offence relating to tax.
6. Every claim, objection, appeal, representation or the like made by any person under any provision of this Decree or of any subsidiary legislation made there under  shall be made in accordance with this Decree and subsidiary legislation;
7. In any claim or matter or upon any objection or appeal under this Decree or under any subsidiary legislation made there under, any act, matter or thing done by or with the authority of the Board, in pursuance of any provisions of this Decree or subsidiary legislation made there under, shall not be subject to challenge on the ground that such act, matter or thing was not or was not proved to be in accordance with any direction, order or in instruction given by the commissioner.
2.1.5                      THE JOINT TAX BOARD (J.T.B)

 The Board of Internal Revenue is the administrative authority responsible for the imposition and collection of the tax from the income of individuals within a particular territory (Usually within a particular state). It was referred to in the PITD as “Tax Authority” and defined as:
 “The person or body of persons responsible under a law of a territory imposing tax on the income of individuals for the administration of that law “
The Board consists of one officer from each state and one nominee of the Federal Public Service Commission, who, as in the case of the state nominee, must be experienced in tax matters. In addition, the Board advices the Federal Government on double taxation arrangements and ensure that uniformity is maintained in the application of the Act throughout Nigeria. The Board also exercise powers conferred upon it by any Federal Law imposing tax on the profits of finance, in place of the Federal Board of Inland Revenue. It approves pension funds and provident funds, and keeps a list of such approved funds, which it circulates to state tax authorities. The Board serves as a clearing house for tax disputes and as a forum for heads of Inland Revenue Departments.
2.2                     CONFLICTS OF TAXING POWERs

 Basically, the power to tax is one of the plenary powers of the government   which need not be formally conferred upon it. In a single tier system, I.e. unitary system of government, there is no problem with the definition of the power. Consequently, such a government can impose any form of tax, for any purpose and at whatever rate that pleases its fancy. In effect, such government is not subject to any constitutional limitation. The only limitation one can possibly infer is perhaps practical and that is, it may be restricted by practical considerations like ease of assessment and collection; the effect such tax may have on the political fortune of the of the government, especially if it operate in a bi-party or multi-party democracy where the government has to seek the mandate of the electorate on a periodic basis.

 However, in a federal setting, because of the inherent conflict situation always existing between the central and the constituent governments, it is essential that powers are allocated and defined in the fundamental law of the system. Thus, such fundamental laws (usually constitution) delimit the extent to which each level of government can go. Beyond this limit its action is regarded as being ultra vires and unconstitutional. Apart from the version of elimination or minimization of conflicts between the central and the constituent governments, the need to define allocation of powers particularly in the field of taxation is underscored by the interest of the taxpayers for it is not in the nature of man to voluntarily  part with his property especially when it is to an abstract entity such as governments, therefore, there is the need for certainty in the area of who has what power to tax in any particular circumstances.

 This part therefore will attempt to examine the scheme of division of taxing powers and its multiplicity effect under the 1999 constitution, and the constitutionality of some of the existing state tax statutes in view of the overriding provision of the constitution[30] .

Taxing power within the context of this work means the power of a level of government to impose a tax by its own law and prescribe  condition and due administration of the tax either by its own agency or that of another level of government . This is distinguished from the power to merely collect taxes or levies which is executive or administrative in character.
  
2.2.1               FEDERAL TAXING POWERS

Although there are multifarious taxes in Nigeria [31]only four of them are specifically mentioned by name in the Exclusive duties, export duties and stamp duties. In addition item 59 of the Exclusive Legislation List[32] vests the federal government with powers on taxation  of incomes, profits and capital gains’’ pursuant to which the personal income tax,[33] company income tax,[34] petroleum profit tax[35]  and capital gain tax[36] have been imposed.

 It is important to note that not all these taxes are collected by the federal government or even accrue to it. As a matter of fact, of all the federal taxes, only custom duties, excise duties, export duties, companies’ income tax and petroleum profits tax are administered by the federal government through its revenue agencies. The exclusive control of the federal government over these taxes is quite logical. Federalism presupposes the existence of a minimum degree of fiscal economic cohesion and uniformity.

 It may be pertinent to ask the question whether the taxing power of the federal government is limited to taxes specifically allocated to it in the constitution, either or by reference to the tax based. In other words, does the taxing power of the federal government extend beyond custom duties, excise duties, export duties, stamp duties, personal income tax, companies income tax, petroleum profits tax and capital gain tax? In view of the specific allocation of these taxes to the federal government, it has been argued that all other taxes are residual to the states based on the principle of expression “unius est exclussio alterius”. On the other hand, this argument was said to be wrong and contrary to the fundamental principle that taxation is an inherent power of government, subject to the provisions of the constitution[37] .

It was held to be correct, therefore that the taxing powers of each level of government broadly follow the division of legislative powers under the constitution. Hence, each level of government can exercise taxing power to the extent of its legislative powers. Therefore, the federal government can impose tax on any of the 67 subject matters on the Exclusive Legislative List pursuant to its implied power in item 68. This received the judicial support of the Supreme Court in the celebrated case of Attorney General, Ogun State V. Alhaji Ajinka Aberuagba[38]. From a purely legal angle, the federal government may, for instance, impose privilege tax on ownership of arms pursuant to item 2 of the Executive List. However, the government for reasons of expediency may choose to raise the required revenue (or otherwise regulate the particular activity) by imposing a fee or levy. The point being apparently made here is that there are no legal fetters on the powers of the federal government if it chooses the tax option.
2.2.2               THE STATE TAXING POWER

Unlike in the case of the federal government, no tax is specifically reserved for the state government under the 1999 Constitution. The only reference in the constitution to the power of the state governments in relation to taxation is constrained in item D, 9 and 10 of the concurrent legislative list. Therefore, in order to determine the scope of the taxing powers of the state, we must turn to the provisions on the legislative powers of the state; we must turn to the provisions that provide that;

 The house of Assembly of a state shall have power to make laws for the peace, order and good government with respect to the following matters that is to say-
(a) any matter not included in the Exclusive Legislative List in the second schedule of this constitution;
(b)any  matter included in the concurrent legislative list set out in the first schedule to this constitution to the extent prescribed in the second column opposite thereto and
(c)any matter with respect to which it is empowered to make laws in accordance with the provisions of this constitution.[39]

It is clear from the above provisions, that state governments have plenary powers to make laws on any subject matter that is not on other the Exclusive or Concurrent Legislative Lists. Their power in respect of those on the concurrent legislative list is subject to the doctrines of inconsistency and covering the field. Consequently, they are not legally competent to taxes such as capital gains tax or any other tax whose base falls within any of the 67 subject matters reserved for the federal government on the Exclusive Legislative List.

One of the implications of the techniques of division of legislative powers between the federal and state government is that which the taxing power of the federal government can be specifically enumerated those of the state are left open-ended.[40] An attempt was made recently in the taxes and levies (Approved list for collection) Decree[41] to delimit the scope of the taxing powers of the states. In practice, however, Lagos state has imposed taxes on Estate duties,[42] betting duties,[43] casino tax,[44] [45]entertainment tax, merriment tax,[46] sales tax,[47] personal income tax,[48] tenement tax[49] etc.
2.2.3                LOCAL GOVERNMENT TAXING POWER

Since the local government reforms of 1974, local government council in Nigeria have gradually, emerged from the status of purely administrative units into constitutional establishment.[50]Section 7(1) of the constitution guarantees a system of local governments by democratically elected local government power to participate in the economic planning and development of its area. Each state is also mandated by the constitution by its own laws, including those set out in the fourth schedule of the constitution.[51] Once a state law has defined the structure and functions unless the law is amended.[52]

 The enhanced status of the local government councils raised the question whether or not they have independent power to raise their own taxes.[53] As a matter of strict conceptual analysis, Nigeria federalism is a partnership between the federal government and the state. Hence section 2(2) of the constitution provides that
        “Nigeria shall be a federalism consisting state and a federal capital territory,”
 Consequently, the division of legislative power under section 4 of the constitution involves only the federal and the state governments. Also, it will be observed that matters that the constitutions mandates the state governments to vest in the local government council are within the residual matter of the states. The implication of this is that local governments have no legislative power of their own and cannot impose any tax on any subject matter whatsoever.

It is also be noted that the provision of the schedule 4 of the constitution do not directly vest the local government councils with the power to collect taxes rather, a state government must first enact appropriate  enabling laws, which will determine the taxable persons, assessment procedure and method of collection, recovery and penalties for delinquency. And where such a law has been enacted, a local government council will exercise power within the limits prescribed by the law. For instance, where the local government changes rates it must be within the range prescribed by law. Any exercise of power beyond the limits allowed by the constitution or the enabling law will be ultra vires and null and void.

In Shell Petroleum Development Company of Nigeria Limited Vs Burutu Local Government Council,[54] the respondent raised an assessment of over #30m on the appellant being the tenement rates for 1981to 1993. Although the appellant did not object to the published rating, it refused to pay as assessed. Rather it only paid #32,998.30, which it considered to be the amount due. The respondent sued to recover the balance. At the trail, it was considered inter alia, that the property that formed the basis of ratings were jointly owned by the appellant and the Nigerian petroleum corporation (NNPC) and therefore not subject to tenement rates. A copy of this joint venture agreement between the appellant and the NNPC which showed an ownership ratio of 20% to 80% share holding in favor of the federal government was tendered and admitted in evidence, it was held that the respondent was wrong in levying rates on the oil storage tanks or tank farms and oil pipelines, which are not privately owned.

 An attempt by Apapa Local Government Council to impose a mobile advertisement tax on companies for display of corporate names on vehicles via the Apapa Local Government vehicles Mobile Advertisement Bye-law No.1 of 1999 was successfully challenged by eight companies in the Case S.D.V. Nigeria Limited and others Vs. Apapa Local Government Council,[55] where the applicants were granted an injunction restraining Apapa Local Government from implementing the Bye-law. According to the trial judge, the mere display of the applicant’s names on their vehicles for the purpose of identification, without advertising any product, does not amount to advertisement or sign board.
2.3                       CLASSIFICATION OF TAX
Taxes are classified as whether they are levied on income or expenditures that is direct or indirect taxes.
1. DIRECT TAXES: These taxes are imposed on income of individuals and organization. The examples of direct taxes in Nigeria include the following;
(a) Personal income tax: This is tax levied on income of individuals which earned either from employment, trade, business, vacation or profession.
(b) Company income tax: This is tax on the income of corporate organizations which are registered under the Companies and Allied Matters Decree of 1990.
(c)Capital Gain Tax: This type of tax is imposed on any gain made by individuals or organizations from disposing of capital assets.
(d) Petroleum Profit Tax: This tax is levied on the profit of companies which are into petroleum operation in Nigeria.
2. INDIRECT TAX: These are taxes on goods and services produced inside or outside the country. The incidence of indirect taxes is later passed to the buyers of the goods and services. The following are classified as indirect taxes in Nigeria.
(a) Import Duties: These are levied on goods and services which are produced in other countries but imported into Nigeria for consumption.
(b) Export Duties: These duties are imposed on goods and services produced in Nigeria and exported to other countries of the world.
(c) Value Added Tax: This tax was introduced in 1994 in Nigeria and it is levied on selected goods and services purchased by individual and organization.
(d) Excise Duties: These are levied on goods and services produced within Nigeria for local consumption.
2.3.1      CLASSIFICATIONS AS TO THE RATE OF TAX

Another way of classifying tax is according to structure of the rate. The rate can structure as follows:
(a) Progressive Tax: Under this, as the tax base increases so rate of tax increases. In Nigeria, progressive tax rate is applied on personal income tax only.
(b) Proportional Tax: The rate of tax under the proportional tax is constant in respect of the level of taxable income. Nigeria company income tax is a good example of proportional tax.
(c)Regressive tax: A tax is said to be regressive in nature, if the rate of such tax decreases as tax base increases. Value Added Tax (VAT) can be described as regressive tax because the burden is more felt by the poor than the rich.
(d) Retrogressive Tax: This is where the rate of tax rises at decreasing rate as a result of increase in tax base, such tax is called retrogressive tax.
2.3.2                         NIGERIAN TAX LAWS

 The following are the laws promulgated to regulate the administration of taxes in Nigeria:
(a) Personal Income Tax Decree 1993: This Act was promulgated as decree No. 104 and became effective on 25th August 1993. The law repealed and replaced income Tax Management Act of 1961.
(b) Company Income Tax Act 1959: This Act was re-enacted as Companies Income Tax Cap 50 LFN 1990. The Act was promulgated to impose tax on the income of corporate organizations operating in Nigeria.
(c) Petroleum Profit Tax Cap.1959:  This Act has undergone several amendments before it was re –enacted as petroleum profit tax Cap 354 LFN 1990. The Act imposes and regulates the administration of petroleum profits tax in Nigeria.
(d) Capital Gain Tax Act 1967: This Act came into effect on 1st April, 1967. It has gone through some amendments before it was re-enacted as Capital Gain Tax Cap 42 LFN 1990. The Act was passed into law to impose tax on the gain made by individuals and organizations as a result of disposing of capital assets.
(e) Value Added Tax Decree 1993: The Decree was passed into law on 1st December, 1993 as 102, The Decree levies on selected goods and services
  purchased by individuals, groups or companies.
2.4                        FOREIGN AND LOCAL TAXES

A chain of court decisions probably commencing with the decision of Lord Hardwicke in Boucher V Lawson in 1735[56] firmly established the rule that the forum court will not take notice of the revenue law of another country. In that year, the House of Lords, upholding the decision of the court of appeal rejected a claim for the recovery of capital gain tax levied by Indian Government on a trading in India but whose major assets have been transferred to England shortly before it was wound up.[57] Lord Viscount Simmonds took the opportunity to say that he was
                    Greatly surprised to hear it suggested that the courts of this                   
                    Country would and should entertain a suit by a foreign state to
                     Recover a tax.
The rule that “country takes notice of the revenue law of another country” may have far-reaching consequences if applied indiscriminately. It is therefore necessary to determine the extent of its application from decided cases.
       So far, the courts have classified as revenue law, and as such, unenforceable, statutes, imposing customs duties,[58] succession duties,[59] municipal levy,[60] profit tax,[61] stamp duty[62] Capital Gains Tax,[63] state insurance contribution and income tax. The rule against the enforcement of foreign personal or property taxes appears to have been rather rigidity enforced.
2.4.1                      COMPANIES FOREIGN PROFITS
Profits of any company accruing in, derived from, brought into or received in, Nigeria[64] in respect of any trade, business, rent, dividend, interest etc are taxable under the Companies Income Tax Act 2004. Profits of Nigeria Company are deemed to arrive in Nigeria wherever arising and whether or not they have been brought or received in Nigeria. Only so much of the profits attributable to the operations in Nigeria of a non-Nigerian Company is deemed to accrue from Nigeria[65].

2.4.2              THE INTERNATIONAL OR LOCAL TAXES

The issue of international or indigenous income taxes is a contemporary one, which the various stakeholders in Nigeria-economic and legal sectors have been showing conscious reactions. Apart from the international and corporate taxes, the international multiple taxation plays a major role in any economy. However, while the earlier double taxation has to do with international would have to be determined between the federal and state governments, and perhaps the Local Government. This is often determined, as discussed earlier, by who has jurisdiction, to what extent, what is the interpretation of the law? And what are the recent court decisions. These two concepts mentioned above shall be treated in the next chapter.

CHAPTER THREE:          DOUBLE AND MULTIPLE TAXATION
3.1                                   CAUSES OF DOUBLE TAXATION
Double taxation occurs when the same transaction or income source is subject to one or two taxing authorities. This can occur within a single country, or may result when different sovereign states imposed separate taxes, in which case it is called international double taxation. Double taxation may also occur within a state or a locality but by and large it is in respect of foreign income that the problem of double taxation has provoked international awareness.

 The chain of High Court decisions probably commencing with the decision of Lord
Hardwicke in Boucher v Lawson in 1735[66] firmly established the rule that the forum court will not take notice of the revenue law of another country. Up to 1936 the suspicion lingered that the superior courts might take a different view of the matter. In that year, the House of Lords upholding the decision of the court of appeal rejected a claim for the recovery of capital gain tax levied by the Indian Government on a company trading in India but whose assets have been transferred to England shortly before it was wound up.[67] Lord Viscount Simonds took the opportunity to say that he was
’greatly surprised to hear it suggested that the court of this country would and should entertain a suit by a foreign state to review a tax.[68] ‘’

The rule that “no country takes notice of the revenue law of another country” may have far-reaching consequences if applied indiscriminately. It is therefore necessary to determine the extent of its application from decided cases. So far, the courts have classified as revenue law, and as such, unenforceable, statutes imposing custom duties [69]  Succession duties,[70]  Municipal Levy,[71]  Profit tax,[72] Stamp duty,[73] Capital gain tax,[74] State Insurance Contribution,[75] and income tax.[76]

The rule against the enforcement of foreign personal or property taxes appears to have been rather rigidly enforced. As the law now stands, it appears as if payment of such taxes by one person on behalf of another either from his own purse,[77] or from the property (in his custody) of the person taxed[78] can neither be received in the forum court nor be pleaded in part satisfaction of the obligation owed to the person taxed. Moreover, judgment based on such foreign taxes cannot be enforced in the forum[79].
3.1.1                EFFECTS AND CONSEQUENCES OF DOUBLE TAXATION

The consequences of double taxation are to tax certain activities at a higher rate than similar activity that is located solely within a taxing jurisdiction. This lead to unnecessary relocation of economic activity in order to lower the incidence of taxation, or other, more objectionable forms of tax avoidance. Business especially have had the most trouble with double taxation, but individuals also might find it uneconomic to work abroad if all of their income  is subject to taxation by two authorities, regardless of the origin of the income. The problems that double taxation presents have long been recognized, and with the growing integration of domestic economics into a world economy, countries have undertaken several measures to reduce the problem of double taxation. This shall be treated under chapter four.
 In the light of the courts anti-social sympathy for tax evasion the problem of imposing and collecting taxes of foreign income became rather acute. For, while the criminal law seeks to extent itself through the devise of extra diction there was virtually no means of reaching absconding tax defaulters. Each country virtually became an asylum for tax defaulters and haven for smuggled goods. The basis imposing taxes was stretched to include residence, habitual residence, nationality, domicile, location of property, head office of corporation, place of business activities, country of derivation of income etc.

The methods and means that have produced international double taxation may be summarized as follows;
(a) Double taxation arises from the co-existence of personal and impersonal tax liability. That is, a person may be subject to tax on the same income in one country on account of his personal status, residence, nationality, domicile and in another country because the source of his income is situated within its territory. In effect, property may be taxed in the country where it is situated and also by the country where its owners resides.
(b) A person may be simultaneously liable to personal tax in various countries. This may arise when different criteria of personal liability to tax. For instance, one country may impose personal tax on account of nationality while another may base its personal tax on domicile or residence of the person concerned within its border. Furthermore, taxes may be claimed on the same criteria which are differently defined in different countries. For example, a person may be claimed as domiciled or resident in different countries in each of which he fulfills the legal conditions for such a status.
(c) Finally, various countries may apply different tests of impersonal tax liability. For instance, tax on salaries and remuneration for professional activities may be demanded by the country where the act is performed, where it is paid for or where the employee or professional man resides or belongs by nationality or domicile.

For many years the revenue authorities and the common law courts were indifferent to problems of double taxation. The best they could do was merely to reduce the taxable income from abroad by the amount of tax paid on it before being brought into the forum. However, when taxation in most industrial and trading countries assumed high rates particularly after the First World War the prevailing attitude of indifference to the problem of double taxation was abandoned. More so, since the profit of foreign trade by which the developed countries live were reduced out of all proportion to the risks. Again, the complexity of the different national system of taxation called for urgent solution to the problem of international double taxation.
3.1.2          CASES OF DOUBLE TAXATION CONCERNING DIVIDENDS

Section 26 of the 1961 Act [80]covers cases of local double taxation that is, without any element of foreign income. Dividends are assessed on proceeding year basis. The material date of a State Revenue Department should watch is the date the dividend was declared and not the date the dividend was received by the taxpayers, or the accounting year of the company. Ascertainment of the proper date is relevant in determining the proceeding year basis.

Relief is given in respect of tax payable on the dividends, and each state is entitle under section 26(3) of the 1961  Act[81] to claim the amount of relief from the Federal Government.
Example; Dr Agbakoba, resident in Anambra State of Nigeria, received incomes as follows;
Salary, 5/10/2009 -4/09/2010                                                                7,190.00
Dividends (gross) from Salomo (NIG) L.T.D. proceeding year,
Declared 4/09/2010                                                                                        527.50
Total income                                                                                                  7,717.50
Less relief                                                                                                       1,078.00
Chargeable income                                                                                      6,639.50
He suffered Pay-As-You-Earn tax of 1,200 on his salary, and tax of #89.80 on dividends.
Tax due                                                                                                         1,164.17
Tax suffered on dividends and PAYE                                                       1,289.80
Refund due                                                                                                       115.63
The Anambra State Internal Revenue will in turn claim tax on #89.80 back from.
 Federal Government
3.2              CAUSES OF MULTIPLE TAXATION
Multiple refers to anything that is more than two. Multiple taxation is therefore said to occur when the same income is subjected to more than one tax treatment. Double taxation, triple taxation etc. are common examples of multiple taxation (emphasis mine). The main issue here, however, is that the same income or money is taxed more than once.[82]

The precise origin of multiplicity of taxes in Nigeria may not be easily traceable but it became widespread from the late 80s when revenue accruable and disbursable from the Federal Authority by each tier of Government and many local governments in the country to seek for alternative sources of revenue internally. Paradoxically, the operatives in charge of these sources of finding, rather than remitting collected taxes to government coffers found it more convenient to embezzle such funds, either under-declaring the amount collected or manipulating the system to their personal advantage.

The abuses were further compounded with the emergence of “Tax Collectors” whom then became fashionable while the manufacturers became the easy victims of the heretical methods adopted by such contractors in extorting money. Such methods include:
(a) Mounting of roads;
(b) Use of Motor Park touts for extortion;
(c) Sale of stickers;
(d) Use of joint revenue (JORA) and Joint Accelerations Association (JAAS) especially at local levels for illegal taxes and levies collection; and
(e) Arbitrary assessment and collection of extra constitutional taxes and levies.
3.2.1 IMPLICATION OF DOUBLE AND MULTIPLE TAXATION IN NIGERIA
Proponent of keeping the “double taxation” on dividends point out that without taxes on dividends, wealthy individuals could enjoy a good living off the dividends they received from owing large amounts of common stock, yet pay essentially zero taxes on their personal income. As well, supporters of dividend taxation pointed out that dividend payment are voluntary actions by companies and, as such, they are not required to have their income “double taxed” unless they choose to make dividend payments to shareholders. More so, double taxation can arise within a country. This is usually a situation where different state in the same country taxed individuals or corporations on the same subject matter at the same time or the same taxing period. [83]

To say that Nigeria’s economy is presently distressed will amount to restating the obvious of the course, the signs are everywhere. Infrastructure decay, lack of critical skills for business development, poor regulatory environment, and the near absence of the political will to enforce contracts amongst other obligations. As a result, cost of production continues to skyrocket, leading in recent times to migration of businesses to neighboring countries. And to compound these problems is the challenge of multiple taxation and double taxation which has become a nightmare for manufacturers, merchants and petty traders[84].

Only few months ago, the economy of Nigerian was practically brought to its knees following the one-week warning strike by umbrella unions of food and cattle dealers based in the northern part of the country and doing business with the South, who were protesting alleged multiple and double taxation, extortion and other injustices meted out to their members as they carried out their businesses. They claimed to have earlier met the commissioner of Agriculture of the affected states and even obtained an injunction[85] restraining officials of these states from collecting illegal taxes from their members all to no avail. As a result of their strike, food items like beef, tomatoes, beans, rice, vegetables, chicken, carrot, onions, yams etc. immediately disappeared from the markets and where they existed the prices went out of the reach of the common man.

This is a true reflection of what the country has become. For several years, Manufacturers Association of Nigeria (MAN) had complained on the challenges its members were forced to go through as they moved their product around the country without anybody caring to listen. Apparently not being able to cope with the pressure any longer, the country’s manufacturing sector had become a shadow of its past, contributing presently less than 4% to national G.D.P. Perhaps in a bid to boost internally generated revenue (IGR), the different states and Local Government Areas across the country have heavily descended on the poor manufacturer, merchants and petty traders, who daily move their wares to different parts of the country. They are everywhere harassed and bullied by different Regulatory Agencies and state officials[86]. To worsen matters is the activity of touts evenly distributed across the country, who in most cases parading council officials seeks gratification from people doing business in their areas of operation. In all cases the accumulated cost is transferred to the poor consumer.

We are aware that in some countries food is about the cheapest commodity. This is due to Zero taxation on food items with agricultural produce heavily subsidized. But the case in Nigeria is rather different. Multiple and Double taxation became an issue in Nigeria from 1980s following dwindling national revenue, which gave rise to states and Local Government Areas seeking alternative sources. Most of these states have gone ahead to engage the services of Revenue Consultants , who  often with the mindset of making profits both for themselves and the government, go out of their way to impose all sorts of taxes not covered by the constitution. Thus, the more the taxpayers transport their wares across the country the move they are confronted with incidents of Double and Multiple taxes, legally and illegal imposed[87].

3.3           EXEMPTION PROVIDED BY DOUBLE TAXATION

Every double taxation treaty to which Nigeria is a party grants by exempting certain classes of income from tax in one, order, of the territories which are parties to that treaty. The effect of such exemption is that those classes of income are charged in only one of those territories. In the past the exemption is one territory applied only if tax was chargeable in the other territory[88].

Following the enactment of the Finance Act 1972[89], many of the treaties to which the United Kingdom was a party have been renegotiated. The wording of the new treaties is much closer to that of the model draft treaty and in the exemption crosses it is usually provided that specified income shall be exempt from tax in one territory if it is derived and beneficially owned by a resident of the other territory. Various classes of income are dealt with in the different treaties. Some are exempted by all of them, others are only exempted in some of them. Similarly, capital gains may be included.

One problem which each treaty deals with is the extent to which one territory may tax the profits of a business or commercial undertaking which conducts operations in that territory but is based in the other territory. Clearly each territory wishes to tax the profits that are earned in that territory but it is by no means easily to define such profits, particularly in the case of a large international organization. Hence every treaty endeavors to define the profits attributable to the operations in each territory; in doing this a test is applied which is usually less onerous than the normal United Kingdom rules already considered [90]; in a few  cases they impose tax in the United Kingdom which would not otherwise have been chargeable.

Treaties may also modify the United Kingdom provisions for deducting tax at source in certain cases where the income in question is exempt or partially exempt by treaty provision from United Kingdom tax, subject to authorization by the inspector of Foreign Dividends. Such income is then payable without deduction of tax or deduction of tax at a reduced rate, and, in cases where the payer of the income would have been otherwise entitled to retain the tax deducted, further provisions enable him to claim an adjustment or repayment tax[91].

3.3.1          TYPES OF EXEMPTION PROVIDED BY DOUBLE TAXATION AGREEMENT

Article 3 of double taxation agreement[92] between Nigeria and United Kingdom provides that unless a permanent establishment is maintained in Nigeria, the profit of a United Kingdom enterprise in Nigeria are not taxable in Nigeria, and vice versa. By permanent establishment is meant a branch management or other fixed place of business. A place of business maintained mainly for purchase of goods is not a permanent establishment. Activities of bonafide broker or commission agent do not constitute permanent establishment, neither does an agency unless the agent habitually contracts on behalf of his people or has a stock or merchandise from which he regularly fills orders on behalf of his principal.

The remuneration of a teacher or a professor [93] who is resident for not more than two years in the other country for the purpose of teaching is exempt for Nigerian tax. Shipping and aircraft profits are exempt[94].  Government pensions are not taxable unless the recipient is ordinarily in Nigeria[95] . Dividend [96] paid by a United Kingdom Company to a Nigerian resident who has no permanent establishment in the United Kingdom is exempt from United Kingdom tax. The same applies when a Nigeria company pays dividends to a United Kingdom resident.

Payments to a student or apprentice during his fulltime education or training in Nigeria are exempt under Article 9, the income of a resident in the United Kingdom is exempt: (a) if he is not in Nigeria for 183 days; (b) the services are rendered for a U.K employer. The exemption does not extend to entertainer such as Pop star. Similar agreements with Ghana, Gambia, Sierra Leone, USA, New Zealand, Denmark, Sweden and other countries have been concluded. These agreements should be consulted whenever difficulties are encountered. For example, incomes earned in the United State of America by Nigerian visiting lecturers or professors are exempt from USA tax Articles XIX of the first Schedule to the income tax (Double Taxation Relief) order 1958[97]

3.4           INCENTIVES AVAILABLE UNDER MULTIPLE TAXATION

The Nigeria Investment Promotion Commission Decree 1995[98] is to encourage, promote and co-ordinate investment by non-Nigerians in the Nigeria sick economy It thus encourages non-Nigerians to invest and participate in the operations of any Nigerian enterprise with the exception of petroleum, crude oil and gas enterprises. Such an enterprise may buy shares in any Nigerian enterprise in any convertible foreign currency through the Nigerian stock exchange and through private placements.

3.4.1                TAX INCENTIVES
Given the limited financial resources available to Government at any given time to execute its economic and tend to jostle for prior implementation, it is common and even indeed inevitable practice even among the rich and developed nations to seek the cooperation of and assistance from the private sector to complement the Government’s effort in social development.

3.4.2             WHY TAX INCENTIVES SHOULD BE GRANTED

There is no census among scholars on the issue of the incentives, therefore it is necessary to acknowledge various pros and cons of granting the tax incentives. The supports of tax incentives point out to the following advantages:
(a) Tax incentives minimize obstacles which prospective investors may encounter and this could encourage investments that would not have been made otherwise;
(b) They increase the profits available for distribution and the rate of return thereby reducing the pay-back periods;
(c) Tax incentives encourage re-investment by making available to the taxpayer funds that would otherwise have been paid to the governments;
(d) They act as stimulant to investment as they enhance the country’s climate;
(e) They help to improve the country’s investment climate by indicating the country’s favorable disposition towards private investment; and
(e) Since similar incentives are granted in almost all developing countries, failure to grant them will only weaken the country’s competitive position in the international market for scarce capital[99]

The opponents of the tax incentives, on the other hand, doubt the capability of tax incentives to alter economic behavior and investment pattern sufficiently to justify the loss in revenue, tax fairness and neutrality, administrative etc.
They also argue that tax incentives are subject to abuses with the result that instead of inducing investment, they merely made similar investments without the added impetus of the inceptive. They are always quick to cite the popular experience in the Philippines where grants and other tax incentives were obtained for many unqualified companies through bribery[100].

All arguments duly considered, it is opined that there is need for these incentives if only to mitigate the difficulties experienced by business organization within Nigeria economy. It could be emphasized again that failure to grant such incentive will only weaken Nigeria’s position in the competitive market for scarce foreign capital.
              On the multiple tax regimes, it has been said that in line with positive records of the      government’s economic reforms agenda. Further incentive enhance investments must be put in place. We therefore re-new the call for a  reduction on withholding tax from 10 percent to five percent, as well as abolition of multiple and double tax regime[101]
It was further maintained that the recent report interest of the Federal Inland Revenue Service (FIRS) to inject VAT in market based transactions was in bad faith and an instrument to kill the growing interest of Nigerians in the Nigerian Capital Market[102].

3.4.3           TAX INCENTIVES AVAILABLE TO INCORPORATED COMPANIES
The tax incentives available to incorporated companies in Nigeria are as follows:
(a) Pioneer companies relief
(b) Capital/ investment allowances
(c) Concessionary rates of import duties on raw materials
(d) Dividends receivable by non-residents
(e) Interest on long term foreign loans and agricultural loans.
(f) Relief for foreign taxes and others.

It has been analyzed above the role of foreign investment in the development, process, the factors, which determine the volume of foreign investment, the reason why tax incentives should be granted by government, the arguments against tax incentives, various forms and weaknesses, however, without getting into the controversy the Nigeria economy.

The time has come for Nigeria to have its own investment law. The few tax incentives that are now are inadequate to attract sufficient foreign investment in Nigeria particularly in the preferred sectors. The investment law should be directed to encourage investments in areas deemed of national priority-areas which can be regional or specific industry or trade. The given myriads of Nigeria’s problems, it is opined that the priority area at least are:
(i) Agriculture;
(ii) Export promotion
(iii)Import substitution
(iv)Employment and
(v) Regional development

Priority areas should be periodically revised, for what is priority today may not be in ten years time. The incentive given varies from country but is invariably a mixture of some or all of the following;
(a) Cash grant
(b) Subsidies
(c) Tax deductions
(d) Accelerated depreciation allowances
(e) Complete exemption from income tax for a specified number of years etc.

3.5               DIFFICULTY IN TAXING ADMINISTRATION
Normally all the states have legislated sales tax law in one form or the other have made provisions for collection and or recovery in case of an unwilling taxpayer. Whilst responsibility both for state sales taxation and government expenditure rests with their different Ministries of Finance, day-to-day administration of the tax system generally, and sales tax in particular in this case, devolves upon the department of internal Revenue which is answerable to the Ministry of Finance.

The imposition of sales tax might lead to multiple or double taxation. The problem of multiplicity taxes makes contribution, perhaps, more to the problems of assessment and collection in Nigeria. The effect this has on the board is that it might not be able to know, even with adequate keeping of records, the extent of the tax evasion. But where there are specific, certain and defined taxation, it makes the board easily bring such a defaulter to book. However, if proper care is not taken, where there is multiple taxation, the same taxpayer might be under the surveillance of the law for a particular tax while he actually pays another tax faithfully. This will be devoid of equity and fairness to such taxpayer. More so, it has been suggested that the Lagos State local councils should harmonize into one whole tax, so that the corporate organization can know before their budget year what taxes they are expected to pay[103].In effect, this is also expected to enhance reduction in the cost of assessment and collection

3.5.1              PROBLEMS ENCOUNTERED IN TAX COLLECTION
According to Lawal (1982), he posited that the following are the problems of tax collection in Nigeria.
1.  INADEQUATE STAFF: lack of adequate staff or manpower to carry out the assignment efficiently and this has contributed to the low revenue for the country.
2 BRIBERY AND CORRUPTION: In this day, tax collected                                personal interest has over rides their official interest in the performance of their duties, consequently affect revenue for the nation.
3. MISMANAGEMENT OF TAX COLLECTED: Where tax collected were not bee utilized for the purpose for which it was collected. This makes taxpayers not to give out their wealth for the nation.
4. POOR ACCOUNTING RECORCD: Most businessmen, traders, professionals do not keep proper records of their income and expenditure, because of this, they were unable to access and pay their tax regularly.
5. INADEQUATE FACILITIES: The facilities like vehicles and motorcycles to carry out the assignment effectively are inadequate.
6. LACK OF VOLUNTARY COMPLIANCE FROM THE TAXPAYERS: The attitude of taxpayers causes tax avoidance, evasion and delinquency. This is because no citizen of the world enjoys or like the idea of paying tax.

3.5.2                PROSPECTS OF TAX COLLECTION
According to Adam smith (1968), he identified the following prospects of tax collection as follows;
1. The administration of tax collection will be strengthened to ensure more efficient tax collection, through training of staff, awareness, campaigns and computerization.
2. Government should continue to ensure that the tariff policy enables our local industries to be competitive
3. Specifically, aggressive action should be taken to block revenue leakage on high duty goods and bulk items.
4. VAT has become a veritable source of revenue earnings for the government and therefore needs to be strengthened and expanded. To broaden the tax base and to bring the VAT administration closer to the taxpayers, new local VAT offices should be established all over the country.
5. Government should also ensure fair tax administration based on the principle of deviation of tax proceeds: it is recommended that the tax law should be enacted.










CHAPTER FOUR:            DOUBLE TAXATION AGREEMENT/ RELIEF
4.1                                    DOUBLE TAXATION AGREEMENTS
Double taxation agreement is a difficult subject; it will already be apparent to the reader that the system of income taxation in the United Kingdom has a number of applications; the systems of other countries are different but are frequently equally complicated. Hence any attempt to reconcile two, or more, different systems are bound to raise considerable problems. Before now, we have seen  that the United Kingdom seeks, in general, to tax the world income of persons residents there and to tax the income arising there of persons not so resident. Other countries adopt similar policies so that a person who is resident in two or more, different tax jurisdictions may find tax claimed on the whole of his income by two, or more different countries.

It should be noticed that in many cases, that order is not followed in its entirety in double tax treaties to which the United Kingdom is a party. The first article, which defines the personal scope of the treaty, is not used in any of the treaties to which the U.K. is a party. The second article of the treaty defines these taxes in each of the two territories for which reliefs is granted; in this project, we are only concerned with the treaties which affect income taxes in Nigeria and corresponding taxes on income in other countries[104]. The third, fourth and fifth articles of the treaty include a number of definitions of the terms used in the treaty. In particular, special definitions are normally given to a person “resident” in either territory, of an “enterprise” of either territory and of a “permanent establishment” of such an enterprise. An interesting case in this context is Lord Strathalmond V. I.V.C[105] . There an American citizen resident in the United Kingdom was held not to be “resident of the United Kingdom” for the purpose of the double tax treaty between the United Kingdom and United States as the treaty defined this phrase as “any person (other than a United States citizen or corporation) who is resident in the United Kingdom. “Accordingly the income in question which was income derived from sources in the United States was exempt from tax under the treaty.

4.1.1              INDIA AND NIGERIA AGREED TO TURN THEIR BILATERAL TIES INTO A STRATEGIC PARTNERSHIP
India and Nigeria agreed to enhance their bilateral ties to a strategic partnership and signed four bilateral agreements ranging from defense cooperation to cooperation between Foreign Service institutes of both countries[106]. Launching the strategic partnership in the fiftieth year of establishing of diplomatic relations, both countries agreed to enhance cooperation in energy sector, defense and against international terrorism. Both sides, led by Prime Minister Manmohan Singh and former Nigeria President Late Umaru Musa Yar’ Adua, agreed to sign nine more agreements in a couple of months that would include, a double taxation avoidance agreement, mutual legal assistance treaty, extradition treaty, trade agreement and bilateral investment protection and promotion agreement amongst others.

4.1.2 DOUBLE TAXATION AGREEMENT (BETWEEN THE FEDERAL REPUBLIC OF NIGERIA AND THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND) ORDER.
Commencement: 5th July 1988.
Whereas it is provided by section 34(1) of the Companies Income Tax Act, section 56(1) of the petroleum profits Tax Act that if the Minister of Finance by order declares that arrangements specified in the order have been made with the Government of any country outside Nigeria with a view to affording relief from double taxation in relation to taxes imposed under the provisions of the companies Income Tax Act, the Income Tax Management Act 1961 and the Petroleum Profit Tax Act, and any tax of a similar character imposed by the laws of that country and that is expedient that those arrangement shall have effect notwithstanding anything in those enactments:

AND WHEREAS by an agreement dated 9th June, 1987 between the Government of the Federal Republic of Nigeria and the Government of the United Kingdom of Great Britain and Northern Ireland arrangements were made among other things for the avoidance of double taxation:

NOW THEREFORE, The following order is hereby made-
1. It is hereby declared-
(a) That the arrangements specified in the agreements set out in the schedule to this order shall apply between the Government of the Federal Republic of Nigeria and the Government of the United Kingdom of Great Britain and Northern Ireland, and those arrangements have been made with a view to affording relief from double taxation in relation to Income Tax, Corporation Tax, Petroleum Revenue Tax or Capital gains tax and taxes of a similar character imposed by the laws of the United Kingdom of Great Britain and Northern Ireland and the Federal Republic of Nigeria;
(b) That those arrangement include provisions with respect to the exchange of information necessary for carrying out the domestic laws of Nigeria and the laws of the United Kingdom concerning taxes covered by the arrangements including in particular provisions about the prevention of fiscal evasion with respect to those taxes; and
(c) That is expedient that those arrangements should have effects.
2. This order may be cited as the Double Taxation Relief (Between the Federal Republic of Nigeria and the United Kingdom of Great Britain and Northern Ireland) Order.
4.1.3            THE MAKING OF DOUBLE TAXATION AGREEMENT AND COUNTRIES IN DOUBLE TAXATION AGRREMENT WITH NIGERIA
A double taxation agreement calls for wide-ranging policy decisions. The more is usually initiated through the Ministry of External Affairs, which will then bring the Federal Ministry of Finance into the picture. The Federal Ministry of Finance will in turn, consult with the Federal Inland Revenue and other Ministries whose interest are likely to be affected. The process of consultation continues until a final decision is reached by the Federal Executive Council as to the desirability of such an agreement.

The double agreement in force in Nigeria, together with the orders in council bringing them into force, are set out in the fourth schedule to the Companies Income Tax Management Act [107].

The countries with which Nigeria has double taxation agreements are the United Kingdom, Ghana, Sierra Leone, Gambia, New Zealand, Sweden, Denmark, Norway and the United States of America[108]. Though there was an agreement with Canada but this was abrogated in 1966. More so, the provisions of all these agreements are virtually identified.

It will be observed that the agreements now in force were before independence [109] by the British Government on behalf of Nigeria, and their binding effects were merely affirmed by the Federal Government of Nigeria after independence[110] .
It is therefore not surprising that the agreements served more the interest of the colonial power than that of colony. Such agreements tend to favor the industrialized countries to the disadvantage of a developing country like Nigeria. Perhaps even more objectionable is the definition of the term permanent establishment. The double taxation agreement between Nigeria and the United Kingdom is fully defined[111]. The definition provides a very wide loophole for some companies which, to all intents and purposes, are actively engaged in business in this country, to have their income exempt from tax and Nigeria is thereby deprived of a sizeable source of revenue.
Even if these agreements were perfect at the time they were entered into, it is quite reasonable that after twenty to twenty five years they should be reviewed to bring them in line with current developments in, and the aspirations of, the country. It is pertinent in this regard to mention that, following the introduction of the United Kingdom Finance Act[112], many of the treaties she had with other countries were renegotiated. Steps are being taken to review Nigeria’s treaties with other countries and it is hoped that before long a definite policy will be formulated there on.

4.2                  RELIEF FROM INCOME TAX
As residence determines the taxability of a person, it may well happen that a person is resident in the income tax sense in two or more countries in the same year of assessment. Consequently, one source of income or each source of income may be taxed in Nigeria and in some other country. In some other countries, such as the United Kingdom, all incomes arising from or outside those countries if residence in accordance with the laws of those countries is established. In order to ensure alleviation of payment of tax in two or more countries on one income. Double taxation relief is granted provided there is a double taxation agreement between Nigeria and other country.

The Act empowers the Minister of Finance (now Commissioner) to the extent the third schedule[113], which is an exemption schedule, following agreement with another country, international body, or Nigerian State Government. The Nigerian Federal Government can add to the list of exemptions, and thus it has done by , for example, exempting interest accruing to the Common wealth Development Corporation and salaries of technical assistants, so that even if there is no right under the Double Taxation Agreement, it may be wise to ensure that the income is specifically exempted under either section 16 or the third schedule.

4.2.1 RELIEF BY CREDIT OR DEDUCTION.
When tax is paid on certain income in one territory, relief by credit operates to reduce or extinguished the tax charged on that income in the other territory. Where there is no limitation on the amount of relief, the result of giving relief by credit is to charge tax on the income, relieved at the higher of the rates of the two different territories which can apply to it. In the case of relief available against United Kingdom tax, the method applied is that the foreign tax is charged first on the income, and then the amount of United Kingdom tax payable is reduced by the amount of foreign tax so charged. Relief by credit may be given under the terms of treaty, or unilateral in the absence of a treaty[114]. There is now no difference between the computation of treaty relief and unilateral relief. If no credit relief at all is given for foreign tax paid, then relief is generally given by deduction that is by reducing the amount of income chargeable t United Kingdom tax by the amount of the foreign tax[115].

4.2.2 RELIEF BY EXEMPTION
Many, if not most, of the provision of the OECD[116] model treaty are of far more relevance to companies (and therefore to corporation tax) than to individuals. However, it is convenient to consider all the basic provisions of the model treaty, for even those which are more relevant in a corporation tax context, may sometimes be of great importance to individuals chargeable to income tax. What follows therefore is a consideration of all the articles which appear in the OECD model treaty. It should be noticed that in many cases, that order is not followed in its entirety is double taxation treaties to which the U.K. is a party.

4.3 COMPUTATION OF TAXABLE INCOME
Having shown that the income is subject to Nigeria tax, the next step is to compute the amount of the income liable to such tax.
1. Trading income is arrived at on the normal basis previously discussed.
2. A dividend paid by a Nigerian company[117] is deemed to be derived from Nigeria, and the net dividend paid should be grossed up and included in the total statutory income.
3. The portion or whole of the dividend[118] paid by a company other than a Nigerian company or from a foreign company remitted, or brought into or received in Nigeria is part of the statutory total income that is taxable here.
4. Where an individual outside Nigeria deals with a person in Nigeria (person includes a limited liability company), and the transaction produces less than normal commercial profit[119]. Where the profits of the individuals cannot be ascertained, he will be charged on a fair and reasonable percentage of the turnover of business with that person.
5. The profits of a foreign business controlled in Nigeria are taxable here.
6. The profits of a company[120] other than a Nigerian company from any trade or business shall be deemed to be derived from Nigeria to the extent to which such profits are not attributable to any part of the operations of the company carried on outside Nigeria. This will apply in cases where a foreign company has branches in Nigeria.
7. The method of computing the profits of insurance companies has been explained.
8. Where a company other than a Nigeria company carries on a shipping or air transport business, the profit on passengers or freight –loading in Nigeria is taxable here[121].
9. Where a United Kingdom enterprise has a permanent establishment in Nigeria, thereby making its profits taxable in this country, its profits shall be computed as if it were an independent business dealing at arm’s length, so that in the case of a United Kingdom company having a branch in Nigeria, its profits cannot be reduced by inflating branch purchases, etc[122].

4.3.1 COMPUTATION POSITION
Part VI and VII of the Companies Income Tax Act govern the computation position[123]. Double taxation can be computed where:
1. The income is subject to Nigerian tax;
2. The income is also subject to tax in another country;
3. The other country has concluded a double taxation agreement with this country.
Where the relief is by reason of a similar enactment in a common wealth country, the relief is determined thus:
1. If the rate in the foreign country does not exceed one-half of the Nigerian rates, the rate in the other country applies;
2. Otherwise, half of the Nigerian rate applies.
The Nigerian rate is the individual’s total income from all sources divided by the Nigerian tax payable[124]. The commonwealth or foreign rate of taxes is determined in the same way. By total income[125] is meant all incomes from all sources after allowing for capital allowances, loss and balancing charges.
4.4 UNILATERAL DOUBLE TAXATION RELIEF
Where there is intercourse between two countries to warrant the granting of some double taxation reliefs but not warranting the entering into a comprehensive double taxation arrangement between the two countries, what is normally done is to make “unilateral double taxation provision in the tax code. Such a unilateral relief was introduced by section 36 of the United Kingdom Finance Act 1960[126].Under this legislation, relief is given by the United Kingdom by way of credit against the United Kingdom on overseas income for taxes charged on the income in an overseas country even though there is no double taxation agreement between the United Kingdom and that country.
The overseas taxes which this unilateral relief may be given are taxes which are charged on income or profits and which correspond to taxes levied in the United Kingdom. The relief extends to taxes levied in commonwealth countries but not elsewhere. The relief is essentially the same as the relief by way of credit granted under comprehensive double taxation agreements.
The effect of a unilateral relief of this nature is that one country gives relief by
way of credit in respect of income which remains taxable in that country and in   
another commonwealth country, where the taxpayer is resident in the first country or in both countries, even though a reciprocal relief is not granted in that other country.
Similar provisions to those of section 348 of the United Kingdom Income Tax Act 1952 are made in section 23 of the 1961 Act, and just as in the United Kingdom, the unilateral reliefs are granted only in respect of commonwealth income tax. It has not been considered fit to extent the unilateral reliefs to territories outside the commonwealth.
Difficulties have occurred in respect of individuals who live in Nigeria and travel to the Cameroon in pursuit of their occupations. These problems are similar to those of the Nigerian “Itinerant workers” which have been dealt with satisfactorily by     the special provisions of the Act[127]. So as to deal with such cases, it may be desirable, in view of absence of any double taxation agreement with that country. Without amendment to section 23, it is possible for a state in Nigeria to provide in its law for the granting of such unilateral relief, with the consent of the Joint Tax Board.

   







  CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION.
 5.1      SUMMARY
In this project work, so far, mention has been made of scope and definition, the taxing system adopted in Nigeria, Double and Multiple Taxation, their causes and effects in the economy. Also, mention was made under chapter four that is to say, the double taxation agreements entered between Nigeria and other countries and including the Nigerian perspective over these agreements.

Series of arguments for and against emerged as a result of divergent opinions ranging from double and multiplicity of taxes both in local and international level. A school of thought sees the equity individual as being cheated or punished twice (Double Taxed). After all the corporate profit belongs to the investors. The reason is that it is this investment, which he ceded lonely to the company in the case as investment. Thus if the investments were lost he would also lose everything, since the tax collectors (Government) would not come to their rescue, this serve as a punishment to the taxpayers.

Another school of thought equally has a very strong, interesting and convincing position and this has been summarized below;
(a) That the company is a separate legal entity distinct from the investors that receive dividends and therefore liable to pay tax.
(b) That a company can and do shield itself from taxes through alternatives deductions such as executives perks and deductible allowances.
(c) That a company other than one’s outside Nigeria cannot be taxed in another country.
(d) That countries that have double taxation agreement will exempt persons, companies and even goods from being taxed on the same issue or income that has been taxed by other country.
(e) That at large, double and multiplicity of taxes destroys economy and therefore legislation will be made to arrest these ugly situations.



5.2 CONCLUSION
Double Taxation as has been seen is economically counterproductive. For Nigerian’s goods to be competitive there has to be a treaty that will set it aside especially under international level.

Given the ugly situation, there is also the need to review Nigerian’s tax laws to streamline compliance and also make it more efficient to attract both foreign and local investment, especially, in the face of the count nullifying the imposition some unconstitutional multiple taxes.

It is the ability of the firms to generate employment and make additional investments that in the long run boosts state and inter-state revenues, not short-term and different taxes that stifle their ability to expand or which drive them out of business.

Having said this, however, it is not to be forgotten that loss of revenue to the government arising from granting these inducements, particularly, in a situation of declining foreign reserve, may result in short term problem. Notwithstanding, it is opined that the double and multiple effects of the induced investments overtime are likely to be far in excess of the immediate revenue loss.

5.3 RECOMMENDATIONS
The growth of economic development has been accepted by all nations of the world as worthy of being pursued. Consequently, governments and individuals devote a considerable proportion of their resources to plan, promote and induce economic development in its various dimensions. Economic thought on development has also shifted away from regarding observable increases in real national income as the only indicator of development to using a set of indicators which includes structural transformation of the economy, improvement in domestic technology and increase in real income, more even distribution of income and a general improvement in living standards.

It is wrong to expect Nigerian citizens to develop the culture of paying taxes. This is because no citizen of the world enjoys or likes the idea of paying tax. The word taxation is still very new to many Nigerians, and as such, the governments need a full and proper orientation of the citizens. Go to schools, cities, villages, the four or many corners of Nigeria and make citizens aware of the needs, how, where and why taxation is there for all Nigerians.

Nigerian government should also enter into many double taxation agreements with other countries of the world, by this, the incidence of double taxing a particular products, companies, individual on the same subject matter, in the same taxing period will be put to an end and this will go a long way to enable bilateral or even more trades which will enhance speedy development of poor countries like Nigeria.

Finally, let us learn to understand and implement the current tax system in Nigeria before we can even think of changing the tax system. The governments need to improve on tax administration, by this, I mean, collection of tax, tax assessment, tax management, tax enquiries. Without abusive of power, a special task force should be set up to deal with serious tax crime and that government must as a matter of fact, service and expedient direct taxpayers or the generated revenue to the development of nation building as this will encourage individuals or even corporation to always pay their tax as at when due. Double and Multiple taxation of any sort should be discouraged as it is economically counterproductive, destroys investor’s confidence, raises the cost of doing business and in the long run compounds the woes of our already distressed econom


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[1] Cheaper or free utilities, infrastructures, etc.
[2] Most especially from the rich and the rich should pay more than the poor.
[3] For example, the property of such a defaulter could be confiscated which would only be reclaimed, depending on the good pleasure of the relevant authority, upon satisfaction of the required tax burden.
[4] .Such protectorates like the Obas and Emires in the Western and Northern part of the country respectively are good examples in this regard.
[5] Benjamin Franklin, a statesman and philosopher.
[6] The easily noticeable area of the economy is the favorable tax treatment for investments in the agricultural sector to stimulate increase in food production .
[7] Akanle O. (ed), The Government, the constitution and the taxpayer, NIALS. Pg. 8.
[8] Previously Nigerians cheerfully paid their taxes in kind by rendering free services such as clearing the bush, digging pit toilets, well etc. for the benefit of the community as a whole. Failure to render such services usually resulted in seizure of property, which might be reclaim on payment of money. In Britain, income tax was first introduced in 1799 by Pitt as a temporary tax to finance the Napoleonic pipe for taxing individuals, grew from a proportionate system. This was largely the work of Lioyd George.
[9] This was stated by John F. Due in ‘’income taxation in Tropical Africa,’’ British Tax Review, July- August 1962, P.226.
[10] S.I, Direct Taxation Ordinance No.4 of 1940, Cap,54.
[11] (1973) U .S. 509
[12] CITN Nigeria Tax Guide and Statute, 1st ed. (Lagos: 2002) P.H quoting Blacks Law Dictionary 5th ed. Idest publishing (1996) P.3
[13] The international encyclopedia of social science.
[14] Mathews V. Marketing Board (vict), (1938) 60 C.L.R. 263 at 276
[15] United States V. Butter, 297 U.S. 1 (1936) at 61
[16] By virtue of section 4 of the1999 constitution
[17] M.T Okorodudu, Analysis of federal and state taxing powers. Tax Law and Tax Administration in Nigeria at 49.
[18] A third element may be identified and that is that such tax is imposed for the support of the government while this is still through of some taxes.
[19] (1925) A.C 561 at 566.
[20] Holtman V. Johnson (1975) K.C. 195.
[21] The republic of Nigeria, formerly composed of four region-Wests, North, East, Mid-west, and the federal territory of Lagos- achieved its independence on 1 October 1960. The then Western and Eastern Regions achieved internal self-government in August 1957, the Northern region in March 1959, and in 1963 the Mid-western region was created out of the Eastern portion of western Nigeria. See constitution of the federation 1963, S.3.
[22]  Pioneering industries which produces goods locally are encouraged and generally enjoy tax holiday for five years. Dividend received such companies are not taxed. (e.g.) Tyrex robber co. ltd, Omini shoe co. ltd, Nigerian bicycle co ltd, Hotel residential ltd, Kaduna textile ltd etc.
[23] The report contained suggestions (almost entirely adopted, as shown in the constitution) which covered the entire field of taxation.
[24] See pl, C.S. Ola “Income Tax Law for Corporate and Unincorporated Bodies in Nigeria,” Heinemann, Ibadan, First Published in 1974, New Edition in 1981 and reprinted in 1984.
[25]  Such as that of 1963,1979 and 1989
[26] Usually within a particular state.
[28] I.e. Companies registered under CAMA.
[29] Op- site
[30] S.1 (3) of the constitution of the F.R.N, 1999 proclaim the supremacy of the constitution.
[31] Schedule to the taxes and levies (Approved list of collection) Decree No.102, 1993.
[32] The second schedule, CFRN, 1999.
[33] Decree 104, 1993 as amended
[34] Cap. 60, LFN, 1990.
[35] Cap.354 LFN, 1990.
[37]  As in Nicols V. Ames (1973) U.S. 509.
[38]  (1984) S.C. 20.
[39] S.4 (7) of the 1999 constitution of F.R.N.
[40] M.T. Okorodudu, Constitutional Demarcation of Federal and State Taxing Powers.
[41] Decree No. 21 1998.
[42] Cap. 3 Laws of Lagos state, 1994.
[43] Cap. 125  Ibid.
[44] Cap. 20 Ibid 
[45] Cap. 43 Ibid
[46] Cap. 141 Ibid
[47] Cap. 175 Ibid
[48] Cap. 142 Ibid
[49] Cap 186 Ibid
[50] O. Oyewo, “ The metamorphosis of L,G system of Administration in Nigeria” current  themes in Nigeria Law, ed. U. Akinseye. Pg. 90.
[51] Section 7 and the fourth schedule CFRN 1999
[52] Knight ,Frank and Rutley (Nig) Ltd V. AG. Of Kano State (1990) 4 NWLR (pt.143) 210.
[53] A.O. Popoola, “The Taxing Powers of the Local Government under the Nigerian Constitution,” Emerging Trends in the Nigeria Local Government, ed. AA. Adedeji, 1994.

[54] (1989) 9 NWLR (pt. 165) 318 C.A.
[55] (Unreported) The Guardian Newspaper, 13th May, 2000 at page 31.
[56] Holtman V Johnson (1795) K.C. 195
[57] Municipal Council of Sydney V Bull (1909) I,K.B. 7
[58] King of Hellenes V. Beetron (1923)
[59] James V.Catherwood (1823) 3 DOWL, a Ryn K.B. 190
[60] Government of India V.Tayior (Supra)
[61] Salvage Ltd V. Owner of S.T “Howle” 1962 S.I.T. 114. 
[62] India and General Investment Trust Co. Ltd V. Borax Consolidated Ltd. (1920) 1 KB.539
[63] I.O. Agbede L.L.M. PHD, DEPT Of Jurisprudence University of Lagos.
[64] Section 12, P.I.T.A
[65] Cap. C 21, C.I.T.A, Subsidiary Legislation,2004.
[66] Opp-sit
[67] Ibid
[68] Ibid
[69][69] Holtman V. Johnson (Supra)
[70] Cotton V. R (1914) K.C. 195
[71] Municipal Council of Sydney V. Bull (Supra)
[72] King of Hellenes V. Bestrom (1923) 16 Lloyd L.Rep. 167.
[73] James V. Cather wood (1823) 3 DOWL, a Ry. K.B. 190.
[74] Government of India V. Taylor  (Supra)
[75] Mental Industries Salvage Ltd V. Owners of O.T “Harle” (1962) S.L.T. 114.
[76] India and General investment trust Co. Ltd.V. Borax Consolidated Ltd (1920) 1 K.B. 539
[77] Buchanam Ltd V. Money (1955) A.C 516
[78] See 10(2) Foreign Judgment  (Reciprocal Enforcement ) Act 1933.
[79] Taylor V. Government of India.
[80] Double Taxation Agreement  with U.K
[81] Ibid
[82] Emphasis mine.
[83] Prof. Famous Izeoonmi; Eliminating Multiple Taxation in the Capital Market (University of Benin, Benin City), The Sun News Online, Thursday, April 19th, 2007.

[84] Daily Independent, 23rd March 2010.
[85] From Maiduguri High Court on Oct 19th 2009.
[86] Including the Police, Customs, Produce Inspectors, NAFDAC, NDLEA, FRSC, IGR Consultants and LGA Officials.
[87] Vanguard Newspaper, 28 March 2010.
[88] See Revenue Leaflet “Double Taxation Relief” (IR.6) 
[89] An exemption to this rule was the exemption of teachers.
[90] See section 5-58 et seq.
[91] See Section 12-51 Ibid.
[92] Article 1 (K) of the double taxation agreement.
[93] Article 11
[94] Article  5
[95] Article 8
[96] Article 6
[97] Published as legal note 207 of 1958 in the supplement of the Federal Republic of Nigeria Gazette No. 84, 24 December1985.
[98] J.Miller and K.M. Kanfman: Tax incentives for industry in Less Developed Countries, Havard Law School 1963.
[99] Ibid at page 221.
[100] The Out gone National Coordination of Independence Shareholders Association (ISAN) , Mr. Sunny Nwosu, has criticized introduction of Value Added Tax (VAT) in the market based transactions, Nigeria Tribune, Wednesday, 21st March 2007.
[101] Ibid at page 16.
[102] The Governor of Lagos State, Babatunde Fashola (SAN), The Punch, Wednesday, 22nd August, Page 26, 2009.
[103] Published on January16, 2008 in This day Newspaper by Hadaycolar in Accountin.
[104] There are other treaties affecting estate duty and corresponding death duties in other countries which are outside the scope of this project.
[105] (1972) 48 T,C. 537. It is to be noticed that U.K.-U.S. Treaty is now in the course of –negotiation. See [1975] S.T.I 250.
[106] Tuesday, November 13, 2007.
[107] No.21 of 1961.
[108] And host of other agreements currently reached in the recent time
[109] Before 1960
[110] From 1960 and above.
[111] Article 2(1) of the double taxation agreement.
[112] U,K. Finance Act 1965.
[113] Section 16 of the Act.
[114] The Income and Corporation Taxes Act (ICTA) 1970, SS, 497 and 498.
[115] Ibid S 122 (1) (b) which applies to income charged under case IV or V of schedule D ( see S. 12-06) and S. 516.
[116] Draft Double Taxation Convention on Income and Capital : Report of the organization for Economic  Co-operation and Development  Fiscal Committee, 1963, See S.12-36
[117] S.9, 1961 Act
[118] S. 10, 1961 Act and S. 22, CITA
[119][119] S.5 (2), 1961 Act
[120] CITA, S. 18 (2)
[121] Ibid S. 19
[122] Art 3 (3), Double Taxation Agreement with the U.K.
[123] Companies Income Tax, 1961.
[124][124] S. 23(3).
[125] S. 2.
[126] Now S.348 of the U.K .countries Income Tax Act 1952.
[127] Section 3(3) of the 1961 Act.

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