TAX ADMINISTRATION IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Tax administration is an important part of public finance through which governments are able to earn money from the provision of public goods and services. Tax administration includes the process of assessing, collecting, enforcing, and managing tax by the relevant tax authorities. Good tax administration encourages voluntary compliance, increases revenue, decreases tax evasion, and helps in the development of the economy of the country. For developing countries like Nigeria, tax administration is very important for achieving fiscal sustainability and avoiding dependency on oil money (Hussaini et al., 2025).

The Nigerian tax system has witnessed many reform initiatives to enhance efficiency, transparency, and accountability over time. FIRS, SIRS, and Local Government Revenue Committees are some of the main organizations that have been given the mandate of administering taxes within the country. These organizations derive their authority from different tax statutes for the assessment, collection, and management of tax revenues. Despite all these structures put in place, Nigeria still faces problems like tax evasion, low compliance rates, double taxation, lack of taxpayers' education, and administrative inefficiencies (Oriaifoh & Obaretin, 2025).

As a result of this, in an attempt to address the above issues, the Federal Government launched the Nigerian tax reform package in 2025 in a bid to bring about reforms in the current tax administration system in Nigeria. This is done through the enactment of new legislations such as the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act (Amuda-Kannike et al., 2025).

Taxation in the modern day has become increasingly dependent on digital technology as it aims at making the process efficient as well as increasing tax compliance. Electronic tax filing, digital payment systems, artificial intelligence, Big Data Analytics, and taxpayer identification systems have become key players in improving tax administration. Technology helps in reducing costs, preventing fraud, making the data more accurate, and making tax administration more effective. However, implementation of digital tax administration in Nigeria is faced by problems like poor infrastructure, cybersecurity, low digital literacy, and technophobia.

Another key problem that tax administration faces in Nigeria is the existence of the large informal sector, in which a significant number of people and firms conduct their activities without adhering to the formal tax requirements. It leads to the reduction of budget revenues and puts more pressure for those who comply with tax regulations. Besides, ineffective control, corruption, lack of records, and distrust of the government prevent citizens from paying taxes. Thus, solving the problems of tax administration implies not only changes in the legislation but also capacity building.

Good tax administration plays an important role in promoting economic development by ensuring that governments have sufficient funds to undertake such activities as infrastructure development, education, provision of health care, security, etc. Good tax administration is known to foster equity, investments, and fiscal discipline. This makes tax administration a very important area for Nigeria.

In this research, an attempt will be made to investigate the practice of tax administration in Nigeria through an analysis of its current trends, the challenges facing it, reform efforts, and improvement measures.

1.2 Statement of the Problem

Despite various efforts geared towards improving tax administration, Nigeria still suffers from poor tax compliance and has a lower tax-to-GDP ratio than the average ratio for most emerging economies. Poor tax administration is characterized by factors such as tax evasion and avoidance, poor efficiency, corruption, multiple taxes, poor taxpayer education, and poor enforcement mechanisms.

Even though the current tax reforms in Nigeria are meant to ensure the simplification of tax administration and proper coordination among institutions, some problems still persist. Lack of sufficient technology, poor interagency cooperation, and existence of informal economic activity still affect the efficiency of tax administration.

In addition, there needs to be an empirical analysis of the effectiveness of the new tax administration policies adopted recently, as well as their contribution towards revenue collection in Nigeria. This study aims at examining the tax administration process in Nigeria, highlighting the problems involved, and suggesting measures that can improve the system.

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1.3 Purpose of the Study

Overall aim of this research is to study the topic of tax administration in Nigeria.

Aim to:

i)Study the concept of tax administration in Nigeria.

ii)Highlight some problems related to tax administration in Nigeria.

iii)Analyze the impact of information technology on tax administration.

iv)Study the effectiveness of recent tax reforms on tax administration.

v)Recommend some methods that can enhance tax administration in Nigeria..

1.4 Research Questions

The study seeks to answer the following questions:

Tax Administration Structure in Nigeria

What problems exist in the area of tax administration in Nigeria?

How does digital technology affect tax administration in Nigeria?

How have the recent tax reforms impacted tax administration in Nigeria?

What measures could help to improve tax administration in Nigeria?

1.5 Research Hypotheses

The following hypotheses will guide the study:

H₀₁: There is no significant correlation between digital tax administration and tax compliance in Nigeria.

H₀₂: Recent tax reforms have no significant influence on the efficiency of tax administration in Nigeria.

1.6 Importance of the Research

This research will be useful for policymakers, tax administrators, government departments, researchers, business organizations, and taxpayers. Information about the effectiveness of the tax administration system in Nigeria will be gathered.

This research will be useful for the Nigeria Revenue Service, State Internal Revenue Services, and other tax administrations in developing better tax administration techniques. It will be useful for literature on taxation, accounting, economics, and public administration as well as for future researchers.

1.7 Scope of the Study

The research centers on the tax administration system in Nigeria. This involves an examination of the tax administration system structure, tax laws, institutional frameworks, e-taxation systems, recent changes in the system, problems associated with tax administration and ways of improving tax collection in the country. The study is restricted to tax administration in Nigeria alone.

1.8 Operational Definition of Terms

Tax Administration: This is the process of valuation, collection, enforcement, and management of taxes through recognized government agencies.

Tax Compliance: This is the ability of the taxpayers to disclose their incomes, file taxes and pay taxes in accordance with legal requirements.

Tax Reform: It entails reforming of tax policies, laws, and administration to enhance efficiency, equity, and revenue creation.

Revenue Creation: This is the process by which the government raises revenues for its expenditures through tax payments and other legally acceptable means.

Digital Tax Administration: This involves the use of ICT in tax valuation, collection, payment, monitoring and enforcement.