The Importance of Taxation in Nigeria

Filed in Governance, Government by on April 10, 2019 0 Comments

The Importance of Taxation in Nigeria will be explicated in this article. This is to remind Nigerians of the need to pay their taxes.

Taxation is a key fiscal policy instrument in any economy. It has to do with a requisite levy which the government expects individuals and corporate bodies to pay.

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The Importance of Taxation in Nigeria

The Importance of Taxation in Nigeria – Photo Source: https://dailytimes.ng

This levy is usually called tax and it is deducted from the salaries of workers by employers on a monthly basis. There is a widespread unwillingness on the part of workers and salary earners to pay their taxes.

The Federal Inland Revenue Service (FIRS) is the body responsible for tax organization in Nigeria and they have their offices in all the states of the Federation.

In case you are wondering why taxation is important, then this article is for you. Reasons why taxation is important in Nigeria will be explicated here.

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The Importance of Taxation in Nigeria

Here are the Importance of Taxation in Nigeria:

1. To generate government revenue

Government revenue is the money that comes to the government monthly and that is used to pay civil servants, political leaders and fund public projects like road construction, power generation, etc.

The taxes paid by individuals and corporate bodies, is one of the key ways through which the Federal Government of Nigeria is able to generate revenue to run the affairs of the country.

2. Stabilization of the economy

Unemployment and under employment are things which causes economic instability and this what the government is fighting tooth and nail to curb or completely eradicate in the shortest time possible and one way to do this to adjust taxation policy towards socially acceptable rates.

Granting tax holidays and reduction of tax rates for firms and cooperate bodies will make employers consider to employ more people and this would reduce unemployment and under employment.

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3. Taxation is a subtle way to influence the sectors in which investments are made

The government has been clamoring on the need to invest in agriculture and agribusinesses, both for the attainment of food security and economy diversification.

For this reason, the tax on importations of agricultural machinery and equipment is greatly reduced or a duty-free importation is allowed. By this, the Federal government is using the low taxes on the agricultural sector as a bait to bring in more people.

4. Taxation is also a way to promote cottage goods

Placing very high tariffs on the imported substitute goods with home-made and indigenous variants is one potent way the government protects local businesses and increase patronage of locally made products.

For instance, the tariff on imported flour can be so raised to favor local flour producers in Nigeria. This is very good move to make the economy vibrant and increase the income of individuals and the country as a whole.

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5. Taxation can be used to reduce poverty among the low-income groups in the country

This is done by taxing the high income earners and then channeling the revenue from these taxes into subsidizing the goods most consumed by the low income earners. This is referred to as tax transfer scheme and it goes a long way to reduce poverty in the country.

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