European Journal of Scientific Research ISSN 1450-216X / 1450-202X Vol. 154 No 3 November, 2019, pp.312 -327 http://www. europeanjournalofscientificresearch.com

Historical Persepective of Tax Laws in Nigeria; from the Inception of Colonial Rule to 2019

Ademola Taiwo Senior Lecturer, Department of Jurisprudence and Public Law School of Law and Security Studies, Babcock University Ilishan-Remo, Ogun State, Nigeria E-mail: [email protected]; [email protected]; Tel: +2348130948386,

Adeyinka Ilori Research Fellow, School of Law and Security (LSS) Babcock University, Ilisan Remo, Ogun State; E-mail: [email protected] Tel: +2348164642583

Eunice Emenike Research Assistant, School of Law and Security Studies Babcock University, Ilishan-Remo, Ogun State, Nigeria E-mail: [email protected]

Abstract

Civilisation of Nigeria particularly with regards to modern taxes and its enabling statutes begun with the intrusion of the British into Nigeria. However, the evidence of various existing taxes in Nigeria long before the British set foot in Nigeria testifies that the issue of tax in Nigeria is a practice of great antiquity. It was therefore of great importance for laws to be created to govern tax and taxation in Nigeria. These laws have evolved over time to include and subtract certain matters and taxes; and today, we have laws which are suitable for the current society. Nevertheless, the main theme of this article is to trace the history of tax laws in Nigeria particularly from the inception of colonial regime to 2019. The main method of collecting data is through application of secondary means by making use of scholarly published books, online and internet materials. This paper recommends among others that, it is necessary for the current tax laws and relevant statutes be reviewed from time to time by the appropriate authorities to meet the current domestic and international challenges.

Keywords: History, Perspective, Tax, Law, Colonial Rule

Historical Persepective of Tax Laws in Nigeria; from the Inception of Colonial Rule to 2019 313

Introduction In order to understand the events of today, it is of vital important to consult and review the events of yesterday. That is the main objective of this article to delve into the historical perspective of Tax laws in Nigeria particularly from the inception of colonial regime in 1861to the present post independence day Nigeria. As a result, Marcus Garvey posited that a people without the knowledge of their past history, origin and culture is like a tree without roots. (Marcus Garvey) 1 Hence, this work seeks to copiously and extensively trace exhaustively and to great lengths the history of the laws regulating and regularising various taxes, ultimately focusing on Nigeria, from the inception of colonial rule till current regime, 2019. This work is of great importance as it encourages inter alia , learning about and from past actions, events and laws in order not to repeat the mistakes made in the past or to properly prepare and plan for subsequent years. Equally to pave for recommendations to help the current administration to boost the revenue generation particularly in the present era of instability in the prices of crude oil in the international market. Hitherto, the previous administrations have not been laid much emphasis on the alternate source of revenue apart from concentrating on the oil revenue which fetches 85% of the government annual finances.

What is Tax? Many people pay taxes today, either because they want to or because they are made to, however, quite a number of people do not. The essence of payment of taxes was corroborated by Nixon, one time United State of American President, when he directed the citizen that “Make sure you pay your taxes; otherwise you can get into a lot of trouble” (Richard M Nixon) 2. This can be attributed to the fact that, not many people understand what taxes are and basic essence of charging and payment of same. It is a task that all administrations worldwide are engaged in. Tax is also a universal concept, no living human being interacting with one another that are involved in payment of one type of tax or another. That is, either one pays direct or pay indirect. It is trite to note that, the modern baby equally pays tax while the parents are shopping for the arrival of the baby. This fact was even attested to by Albert Einstein when he asserted that, the hardest thing in the world to understand is the income tax 3. That is, tax responsibility is the business of all and sundry. Hence, for any concept to be meaningfully discussed, it is necessary to proffer a definition(s) to provide a basic idea of what the term entails. Therefore, the term “tax” is not one that is amenable to a single definition. This is especially because definitions are developed based on the definer’s emotions, environment, background, idiosyncrasies, outlooks, inclinations, orientations and prejudices. 4The statutes and laws which border or relate to tax have not provided a legislative definition of the concept of tax. In other words, there is no definition of tax in all our laws relating to tax, hence, the diverse definitions from various scholars on the concept to date.

The Oxford English Dictionary (1973) has defined tax as

‘a compulsory contribution to the support of government levied on persons property, income, commodities, transactions, etc, now at a fixed rate proportionate to the amount on which the contributions is levied’

Oxford Advanced Learner’s Dictionary (2006) defined tax as

1 Brainy Quote- History Quotes; www.brainyquote.com ; Last accessed on 2 nd August, 2019 2 ibid 3 Robert W. Wood , (September 20, 2013), 20 Inspirational Quotes...About Taxes; Forbes.. www.forbes.com . Last accessed on 1 st August, 2019. 4 Niki Tobi; (2006) Sources of Nigerian Law, Lagos, MIJ Publication, Akoka, Lagos. 314 Ademola Taiwo, Adeyinka Ilori and Eunice Emenike

‘money that you have to pay to the government so that it can pay for public services.’ It further concluded that ‘people pay tax according to their income and businesses pay tax according to their profits. Tax is also often paid on goods and services.’

The definitions provided by the Oxford dictionary on Tax has been criticised by some as being inadequate particularly because it has a limited view as to or on the purpose of tax. This was the opinion of Chris White H. in his book, Revenue Law: Principles and Practice . Chris White further posited that its description of tax base was irrelevant and that the definition placed “unnecessary emphasis” 5 on proportional taxation as opposed to progressive taxation. Abdulrazaq, M. T., a professor of tax law (1993), also tried to improve the definition by adding the fact that taxes are imposed under the authority of the legislature that they are levied for a public purpose. Aiyar’s Concise Law Dictionary (2009) provided an apt and encompassing definition in the opinion of M.M. Akanbi of the National Open University of Nigeria; School Of Law, where he defined tax thus;

“A compulsory exaction of money by a public authority for public purposes enforceable by law and is not payment for services rendered.”

The Black’s Law dictionary 6 defines tax as

“A charge usually monetary imposed by the government on persons, entities, transactions or property to yield public revenue.” 7

Martinger D.C. also describes tax as “a pecuniary burden lay upon individuals or property to support the government and is a payment exacted by the legislative authority”. The Webster Business Dictionary defines tax as a charge or burden, usually pecuniary, laid upon persons or property for public purposes without any direct benefit to the people or property on whom these taxes and levies were imposed. Olugbenga S. Obatola in his work titled, The Rudiments of Nigerian Taxation , defined the concept tax as

“a compulsory levy imposed by the government or any of the recognised authority of a state on the property, goods, services and people living in a given geographical area for the purpose of generating revenue to defray the expenses incurred by the government or authority on behalf of the people”.

The word “tax” was further judicially defined in the Australian case of Mathew v Chicory Marketing Board (1938) 60 CLR 263 as

‘a compulsory exaction of money by a public authority for public purpose or raising money for the purpose of government by means of contributions from individual persons.’ Regardless of however the concept of tax is defined, practice has revealed that the term embraces all governmental impositions on persons, property, privileges, occupations and enjoyment of

5 Law of Taxation 1; Dr M. M. Akanbi National Open University of Nigeria School of Law. 6Olugbenga Obatola,(2014), The Rudiments of Nigerian Taxation; (Reprinted ; ASCO Publisher), 7 Bryan A Garner, Black’s law Dictionary; Tenth edition, USA, WEST publication, page 1685

Historical Persepective of Tax Laws in Nigeria; from the Inception of Colonial Rule to 2019 315 the people and includes duties, imposts and excises8. Certain ingredients must be present in the definition for it to be acceptable and regarded as a proper tax. These primary principles of an ideal tax include: • Compulsoriness of the levy as is established in Section 24 of the 1999 constitution of the Federal Republic of Nigeria which vests all citizens of Nigeria with the obligation to “declare his income honestly, to appropriate and lawful agencies and pay his tax promptly” 9. To further ensure that this law is obeyed, tax offenders face sanctions in form of interest, penalties or even imprisonment 10 . Tax should however not be confused with other forms of compulsory contributions which appear to be similar to it (an instance being a charge for a government service) • Taxes have to be imposed on people, incomes, properties and transactions. Whatsoever it is imposed on constitutes the bases of the taxation. 11 • These tax bases are located in a known geographical area. 12 • Taxes are to be imposed by the government in a society. • The major purpose of taxation is the generation of revenue for the treasury of the government to enable it to perform its functions and for the development of the country. 13 • Taxes are to be based on and backed by enabling legislations particularly, the constitution, laws of states, tax related laws, levies, rates etc. • Other essential ingredients of taxes include: • It must be equitable and fair to all tax payers. In other words, the higher you earn, the higher you pay and vice versa. Otherwise called Pay As You Earn (PAYE) • It must be simple for the tax payers and easy to pay. • It must be cost effective • It must be certain • The administrative costs should not be higher than the revenue yielded. • It must be economical • It must be neutral • The tax charged on the tax payer must be determinable by the tax payer However, for simplicity and better comprehension in the course of this essay, tax can be defined as an exaction imposed on citizens, non citizens, companies, goods, incomes, transactions etc, by the government of a country or state; made compulsory especially through enabling laws; for the purposes of executing the functions of the government in a country or state.

Taxation however, as defined by Obatola in his book as aforementioned is

“the method of determining the amount of tax payable by an individual, group of individuals, or organisation on goods and properties and the methods of collecting this from the taxable person, good or property and accounting to the government for the amount so collected”.

Hence, taxation simply focuses on the best process to espouse in assessing taxpayers, goods and properties to tax, collection of the assessed tax and accounting for the assessment carried out to the government in a means stipulated by the law. 14

8 ibid. 9 See Section 24 (f) of the 1999 constitution of the Federal Republic of Nigeria (as amended). 10 Olugbenga S. Obatola ( 2013) The Rudiments of Nigerian Taxation; ASCO Publishers, Lagos,( Reprinted 2014). 11 ibid 12 ibid 13 ibid 14 ibid 316 Ademola Taiwo, Adeyinka Ilori and Eunice Emenike

What are Tax Laws? Tax laws have been defined as the legal rules and procedures governing how federal, state and local governments calculate the tax you owe 15 . Tax laws have also been described as the rules, policies and laws that oversee the tax process, which involves charges on estates, transactions, property, income, licenses and more by the government. 16 According to the Black's law dictionary, tax law is the statutory, regulatory, constitutional and common-law rules that constitute the law applicable to taxation. It is also an area of legal study dealing with taxation. 17 Tax laws just like every other law begins with tax bills 18 and have been known to regulate income, corporate, excise, luxury, estate and property taxes. Tax laws are created, tailored, modified and amended by the legislature of the country. In Nigeria, this happens to be the National Assembly of the federation in current times. Today, the Nigerian Tax Laws are drawn from the Constitution of the Federal Republic of Nigeria and they include Capital Gains Tax Act (1990) , Income Tax (Authorised Communication) Act , National Road Traffic Regulations 2004, Parts I, II, V , Personal Income Tax (PITA) , Stamp Duties Act 19

Tax Laws in Nigeria before the Colonial Rule Many believe that in Nigeria, civilisation did not begin until colonisation was introduced. However, over and over again, this has been proven to be an argument without basis, totally and fundamentally untrue especially with regards to the issue of taxation. This is because; the issue of taxation has been with man since the creation of the world- ab initio. Nevertheless, a country’s tax system for all intents and purposes emanates from its economic, political and cultural history. (M. T. Abdulrazaq)20 Records have established that the taxation or the tax system in current times can be traced back to the 18 th century particularly when the British was fighting the napoleon war. To ensure the successful execution of this war, a tax of one penny (1p) on a pound (£1) was imposed on every adult in the country by the British government. This revenue was used to acquire arms and ammunitions, cater for the sick and wounded soldiers as well as other logistics. Taxation or the tax system continued after the war as the British government saw it as a means of generating revenue for the government. 21 In Nigeria, before the incursion of the British colonial lords (particularly Lord Lugard), the formalization of taxation was to a reasonable extent non-existent. However, this does not mean that the then people of Nigeria were completely oblivious to the issue of taxes as they were exposed to various levies which were dictated y their various paramount rulers. Taxes as at the pre-colonial era were to a reasonable extent evidently an integral part of the financial system of the Nigerian communities just in a different form compared to what or how it is today. The southern part is recorded in history to have not been as organised as the north. Not all the communities in the south practiced the taxing system pre-colonially. This is owing to the fact that the formalised and organised system of governance was absent. Therefore, in the south, the only communities that had an established and functioning centralised authority, administrative machinery,

15 What Are Tax Laws? Intuit TurboTax, https://turbotax.intuit.com/tax-tools/tax-tips/Taxes-101/What-Are-Tax-Laws-/INF14470.html . Last accessed on 2nd August, 2019 16 HG.org Legal Resources, 2017 https://www.hg.org/tax.html . last accessed on 2nd August, 2019 17 Black’s law dictionary. Bryan A. Garner; Tenth edition; page 1690 18 Kaliastrong YOUBLAWG (2013), The Importance of Tax Law and Its Ramifications. 19 Joint Tax Board http://www.jtb.gov.ng/tax-laws 20 Principles and Practice of Nigerian Tax Planning and Management (1993) paraphrased in LAW OF TAXATION 1; Dr M. M. Akanbi National Open University of Nigeria, School of Law 21 The Rudiments of Nigerian Taxation by Olugbenga S. Obatola; ASCO Publishers; Published 2013, Reprinted 2014.

Historical Persepective of Tax Laws in Nigeria; from the Inception of Colonial Rule to 2019 317 and judicial institutions that had an operative taxation system. These communities include the likes of the Yoruba land, the Benin kingdom, etc. For communities where the system of governance was not clearly established, where there were no centralised constituted authorities, etc, there was clearly little or no form of organised system of governance. These communities include the likes of the Tivs, Ibos, Buras, Igbiras, Bahamas, etc. a) “ISAKOLE”: This tax was imposed for the use of land for farming in the south west. It was a form of agricultural or land tax paid to the Obas, Chiefs, Heads of Community b) “OWO ORI”: this tax was levied basically for the development of the community in the south west. It is the tax paid by individuals in return for services rendered. c) WAR TAX: this was a kind of tax paid in those days by a defeated town to the victorious town, after a war. d) Community tax: this form of tax was paid then, by all adults in a community, for the purposes of carrying out projects. e) “EGBU NKWU”: This tax is imposed in the eastern part of Nigeria, on palm crops harvested. f) “UTU AMALA”: this form of tax is a community tax which was collected (or is collected) on in the eastern part of Nigeria, on behalf of the Obis. Although, the system of taxation in the then Nigeria was not exactly formalised, it has been argued that upon comparison with the other parts of the then Nigeria, The north had a reasonably systematically established form of taxation. This was ostensibly a result of the well structured and more organised system of administration, founded on the principles of Islamic law (Shari’ah), which gave rise to the offices of the emirs as the political and religious leader. The Islamic religion significantly contributed to the systematically established form of taxation in the north as it also upheld strictly as one of its principles of forthrightness, the payment of taxes. Hence, encouraging the emirs to establish various kinds of tax systems. g) “ZAKAT ”: this was a 21/2% tax imposed on the income of the people for educational, religious, charitable, welfare and spiritual purposes in the north. It is used to cater for the needy and the less privileged in the northern areas h) “KURUNKASA ”: this was a tax levied on the people for the use of land, either for farming or for cattle rearing in the north. It is also referred to as Kudin-kasa- a form of tax on land utilization within the territory of the emir’s province. It was also referred to as agricultural tax and was paid by farmers. i) “SHUKA-SHUKA ”: this was imposed on the harvested crops of the farmers in the north. It is also believed that it was a tax also levied on cattle-rearers as well, in those days. It is also regarded as a tax paid on crops that were not liable to the zakat j) “JANGALI ”: This tax was levied on the number of livestock owned in the north; among several others. 22 it is otherwise known as cattle tax k) “JIZYAH ” – this is a form of tax imposed on and paid by the non-Muslims who lived in Muslim societies. It was collected and used to ensure the safety of their lives and properties in the course of their residence in the Muslim community. It is indeed worthy of note that the taxes or levies imposed and collected in the pre-colonial era were not all pecuniary in the strict sense of it. In other words, they were paid in kind and through obligatory services and not through money alone. These obligatory services were also regarded as tribute taxes. A noteworthy instance being the Ishakole of the Yoruba land. And when money was introduced into Nigeria, obligatory services as well as the other forms of payment apart from money did not stop, but rather they supplemented money.

22 Olugbenga S. Obatola (2013), The Rudiments of Nigerian Taxation; ASCO Publishers, Reprinted 2014. 318 Ademola Taiwo, Adeyinka Ilori and Eunice Emenike

Tax laws in the pre-colonial era were very important as they enabled the collection of taxes which pioneered the achievements of certain things without which, the certain events and activities in the pre-colonial era would never have been successful. However, they were criticised when they were unnecessarily exorbitant and because it would reduce to an extent the ration and income of the people.

Tax Laws in Nigeria during the Colonial Rule The colonialisation of Nigeria began with the advance of the British into the then communities which make up the current day Nigeria. History reveals that they came into the then communities of the pre- colonial Nigeria first through the south by sea. It was not long before the locals begun trading and entering into commercial relations with the “white men” 23 Soon after these relations, Nigeria was colonised. This colonisation of Nigeria gave rise almost immediately to the introduction of taxation formally into the corpus of the laws of the then Nigerian society. This was because the British government needed to raise funds for the state to fuel the activities of the government as they could not get funds from Britain. 24 This was because there was already so much agitation among the Britons as to the possibility of the “colonial adventurism” increasing the taxation burden already imposed on the British tax payer. Hence, the need to source for funds for the smooth running of the then Nigerian society. 25 The practice of indirect taxation was introduced and adopted particularly in the south Nigeria. This was usually in the form of customs and excise duties. This system of taxation was adopted in the stead of the direct income tax because it was considered unwise and unrealistic for a government that had not gotten the full confidence of the people as at that time. A direct tax system was then regarded and described as an undesirable expropriation of the citizens permissible only in emergency situations 26 . Also, indirect tax is upon administration, collected by the supplier of the goods or services at the point of sale or supply. 27 In the north however, the system of taxation adopted was none other the direct taxation system. This was because of quite a number of reasons. The Islamic religion which was significantly practiced in the north as a standard of living already had principles encouraging taxation. 28 . For the northerners who were not Muslims, the direct system of taxation was still conveniently adopted as the northerners were before the advent of the British already used to paying taxes to the Fulani administration. It was for these reasons and several others that the colonial masters in the north introduced a direct system of taxation. Unlike the south, the north when compared to the south also had some physical constraints which would only frustrate an indirect tax system. The north lacked sea coasts which would have been used for the transportation of goods from the south to the north, hence, intercontinental commercial relations was not encouraged. Where goods were imported, they would have to be transported by sea into the South and then transported by land into the north. This posed financial challenges to the people of the north and imposing indirect taxes seemed unreasonable. 29 Hence, taxation was introduced into Nigeria with the direct Income tax (community tax) for the northerners and the indirect custom duties for the south. The Stamp Duties Proclamation in 1903 by Lord Lugard was introduced in an attempt to harmonise all existing tax systems 30 . However, History records 1904 to be the year when the income

23 Ade Ipaye, Nigerian Tax Law and Administration; A Critical Review, SCO Prime Publishers, Lagos. 24 ibid 25 ibid 26 ibid 27 ibid 28 ibid 29 ibid 30 History of taxation in Nigeria: Understanding Nigeria ; https://www.taxprof.com.ng/history-of-taxation-in-Nigeria/ last accessed on 4 th October, 2017

Historical Persepective of Tax Laws in Nigeria; from the Inception of Colonial Rule to 2019 319 tax was first introduced into Nigeria through Lord Lugard in the northern Nigeria. This is because the northern protectorate direct taxation system was formalised through the Land Revenue Proclamation of 1904 and the Native Revenue Proclamation of 1906. Also, it was similar to the Indian tax system where Lord Lugard served as Governor before he was posted to Northern and in 1914 became the first Governor General of amalgamated Southern and Northern protectorate christened Nigeria. This income tax was in the form of community taxes which gradually replaced the taxes previously paid by Nigerians before the advent of the British, particularly those paid in kind through the rendering of free services like clearing the bushes, digging pit toilets, wells, etc, usually for the utmost development of the community. The village was the unit of assessment while the village headmen were responsible for collecting the taxes of which they were given shares of. This community tax later gave birth to the Native Revenue Ordinance of 1917 which marked second major amendment since 1904.31 After awhile, it appeared that the returns from the community taxation of the north were in adequate for the administration. Hence, there was a consideration in 1914 to merge the northern and southern protectorates so that the revenue realised from both protectorates would be used by the unified colonial administration. Following the amalgamation, in 1918, an amending ordinance was passed to extend the provisions of the 1917 ordinance to the Southern Nigeria. The first ordinance applied to Yorubas and the Benins particularly because they already had“fairly sophisticated administrative machinery” 32 which the British merely took advantage of by introducing the indirect rule. In 1928, it was extended to eastern Nigeria. This development met a cold reception in the south especially in the western and Midwestern regions even though the Tax adopted within this period was a simplified type of tax because it was imposed and levied in addition to the existing ones, therefore double taxing the people and somewhat oppressive. 33 An instance depicting this is the Adubi war which was instituted in Abeokuta on January 1st 1918 upon the introduction of formal taxation 34 . The colonial masters then sought to derogate the traditional tax system by referring to it in derogatory terms like bribery, extortion, tributes etc. However, they realised that the native rulers were needed to enable the indirect rule work. This led to introduction of the Native Court Regulations of 1902 which limited the tributes payable. In the eastern part of the then Nigeria especially in the 19 th and 20 th centuries, introducing the direct taxation was a herculean task. This was owed to the fact that the Igbos was originally not accustomed to a centralised organised system of administration. It was even more difficult understanding why taxes should be paid to an entity as remote as the colonial administration. To worsen things, warrant chiefs were imposed on them. These warrant chiefs were resented and resisted particularly because they were regarded as those who were appointed because they were the most cooperative with the imposition of the foreign rule. A good instance depicting the resentment of the warrant chiefs was the remarkable Aba women riot of 1929. History reveals this riot to be a result of the actions of one of the Warrant chiefs proceeding to count women, children and domestic animals, alongside the male adults (who were originally the only taxpayers. The women understood this action to be sign of an impending tax on them; the riot and bloody demonstrations were to dissuade the colonial government from taxing them. 35 The repeal and merge of the Native revenue ordinances of 1917, 1918 and 1928 as well as the Native Direct Taxation (colony) ordinance No.41 of 1937 (which was passed to provide for taxes for natives living within the Lagos colony)s were all incorporated and gave birth to the Direct Taxation Ordinance No. 4 of 1940 Cap. 54. This ordinance was however criticised as it applied only to natives in Nigeria elsewhere than in Lagos 36 ., (however, this was the first major tax legislation in Nigeria)

31 C.S.Ola Income Tax Law and Practice in Nigeria, Heinemann Educational Books (Nigeria) Plc. Reprinted 2001. 32 Ade Ipaye, Nigerian Tax Law and Administration; A Critical Review SCO Prime Publishers, Lagos. 33 C.S.Ola, Income Tax Law and Practice in Nigeria , Heinemann Educational Books (Nigeria) plc. Reprinted 2001. 34 Yemitan O (1998), Adubi War; A Saga of Egba and British Administrations, (New Age Publishers,; See Ade Ipaye (2001) Nigerian Tax Law and Administration; A Critical (Review 2001), SCO Prime Publishers, Lagos 35 ibid 36 See Section 1, Direct Taxation Ordinance No. 4 of 1940, Cap. 54. 320 Ademola Taiwo, Adeyinka Ilori and Eunice Emenike

According to the ordinance, the Resident was the official appointed by the governor to administer the affairs of a province. He determined the taxable income or the original Inland Revenue departments alongside any other administrative officer authorised by the Resident to perform his duties as provided for by the ordinance 37 . Taxable income was also determined by the chiefs, elders, other influential persons in each district as well as native authorities recognised under native law and customs as a tax collection authority; native authorities appointed by the governor to be a tax collection authority; village councils; district head-men or other person (s) suitable to be appointed by the governor. 38 These tax collection authorities had the duties of giving out information, supervising the collection of taxes in their carious areas, accounting for the tax collected to the Resident and /or payment of such taxes into the treasury by the district council. Failure to perform these duties attracted sanctions. Under the ordinance, the tax was levied on the community 39 . The income to be assessed included: produce from land enjoyed by the community or individual, income from employments and pensions, profits from trade or manufacture; dividends or interest and value of all livestock owned by the individual or the government. 40 To ascertain the taxable income, an individual or committee or may be set up by the Resident to make enquiries on the annual profits of the society; the Resident is not bound to the individual or committee set up 41 . The Gazette then contained the assessment made under native law, customs and traditions, as long as such assessment was approved by the Governor or the chief commissioner. This might however be dispensed with by virtue of Section 8 of the Ordinance. 42 Alongside the income tax, the people were made to pay other taxes like the cattle tax, which was based on the discretion of the Governor or the chief commissioners. The Governor or the chief commissioner who was vested with the legal capability to make regulations for carrying out the provisions of the Ordinance was also vested with the right of tax exemption whether wholly or in part. The governor or chief commissioner could provide for the form of statements, returns and claims, and for the deduction of tax at source, for the recovery of the tax by monthly deductions (an example is PAYE-As You-Earn) 43 In Lagos, as at the 1st of April, 1943, the Income Tax Ordinance No. 29 of 1943, Cap 92, came into operation to be applied only to govern the assessment of the income of non-Africans resident outside Lagos. This tax legislation had a progressive nature and “subsisted until the political climate required a change” 44 . The ordinance was administered by the commissioner as appointed by the governor general by way of notice in the gazette45 . The kind of incomes taxes introduced then includes incomes which accrued in and incomes derived from. The tax extended to profits from trade, businesses, professions or vocations, it also includes income from employment, allowances, (except allowances relating to medical or dental expenses and passage to and from Nigeria) pension, annuity, dividends, discounts, rents and any other income from property. It is worthy of note that the taxes also extended to certain “deemed” incomes 46 . Under the ordinance, employees were assessed on a current or actual basis of his emolument. Males above sixteen years of age (at the commencement of the year) preceding the year of assessment were assessed on N300. This is known as the minimum flat assessment. Exceptions to this included

37 C.S.Ola Income Tax Law and Practice in Nigeria, Heinemann Educational Books (Nigeria) plc. Reprinted 2001. 38 ibid 39 Community was defined in Section 2 of the Ordinance 40 C.S.Ola(2001), Income Tax Law and Practice in Nigeria, Heinemann Educational Books(Nigeria) plc. Reprinted 41 ibid 42 ibid 43 ibid 44 Ade Ipaye, Nigerian Tax Law and Administration; A Critical Review, SCO Prime Publishers, Lagos. 45 C.S.Ola (2001) Income Tax Law and Practice in Nigeria Heinemann Educational Books (Nigeria) plc. (Reprinted). 46 ibid

Historical Persepective of Tax Laws in Nigeria; from the Inception of Colonial Rule to 2019 321 fulltime students, the aged, those with infirmity, persons who had paid tithes under the Direct Taxation Ordinance among several others. 47 The incomes exempted from tax as provided for in the ordinance include: official emoluments of the officer administering the government of the federation and of the officer administering the government of any former region; consular fees received on behalf of a foreign state, a consular officer or employee of such state and all income of such an officer or employee within Nigeria. Where the officer or employee is engaged on behalf of Britain in Nigeria, he was also exempted from the payment of tax. Other circumstances wherein individuals were exempted however remained 48 . Section 27 of the ordinance first established the taxation of limited companies. Section 29 provided for the deduction of tax from dividends of companies as well as the deduction of and accounting for tax on mortgage and debenture interest. Section 31 to 34 of the ordinance dealt with double taxation reliefs. Penalties for offences under the Income tax ordinance were established in section 71, section 65 however provides for the penalties for the non-payment of taxes and enforcement of payment. 49 Take note that the provisions of these sections are to great extents similar to the current provisions.

Tax Laws in Nigeria: Post Independence Era The post colonial rule began with the pre independence era wherein the clamour for independence was at its peak. Nigeria was due for independence as such; the issue on ground then was what the way forward was in all sectors particularly in the administration of the country as a whole. A constitutional conference was held in august 1953 for this purpose, to which the regional leaders were called together. It was the decisions of this conference that resulted in the adoption of federalism in the administration of the divers groups within the country upon independence 50 Sir Louis chick was appointed by the decisions of the conference as a Sole commissioner to handle the assessment of the cost of services for each of the regions as well as the central services and those of the central government. He was also required to recommend a suitable revenue allocation and collection structure, one consistent with the principle of derivation under a federal constitution. His recommendations were agreed upon and reflected in the 1954 constitution and are still evident in the tax policies of Nigeria even in current times. 51 Recommendations from the commission include 52 : 1. Each region in the federation should be enabled to fix the rate of personal income tax under the direct taxation ordinance; 2. Collect taxes and share the proceeds with the local governments under its jurisdiction. 3. Federal government should fix the rate of tax under the Personal Income Tax Ordinance. However, incomes of Africans collected by the federal government under the ordinance should be returned to the regions where those who paid the tax were resident. 4. Companies income tax was however to be fixed, collected and expended exclusively by the federal government. Consequent to the recommended adopted powers conferred on the regions by virtue of the 1954 constitution, the eastern region enacted in 1956, the Finance Law No. 1 of 1956. In 1957, the west followed suit by enacting the Income Tax Law while the north enacted its Northern Nigerian Personal Tax Law in 1962. 53

47 ibid 48 ibid 49 ibid 50 Ade Ipaye, Nigerian Tax Law and Administration; A Critical Review; Lagos, SCO Prime Publishers 51 ibid 52 ibid 53 ibid 322 Ademola Taiwo, Adeyinka Ilori and Eunice Emenike

Following the recommended tax policies commission of Sir Louis Chick, was the Raisman Commission, (otherwise known as the Raisman-Trees commission). This commission was set up in 1958 and managed by Sir Jeremy Raisman. The purpose of this commission was to “review the existing system and explore the desirability of ensuring that the maximum possible proportion of the income of regional governments should be within the exclusive power of those governments to levy and collect, taking into account consideration of national and interregional policies” 54 . This commission was established owing to the complaints of incidents like double taxation, insufficient independent revenue to the regions and a lack of harmony in the tax rates of the regions. 55 It was therefore recommended that although the regions maintained exclusive control of personal income tax, the federal parliament should be empowered to make a model legislation directed at integrate the system and securing uniform principles to guide taxation of incomes among the regions. 56 Sections 70 and 76 provided for the conferment of necessary powers on the federal parliament. With the constitution as the basis, the Income Tax Management Act was enacted in 1961 (ITMA). This Act determined whether the total and assessible incomes were uniform. It created or provided a general framework within which the regions could operate and ensured that the same income was not taxed by more than one tax authority. The regions were also empowered to create their own tax laws as long as it is in tandem with the ITMA. 57 Consequent to the actions taken by effect of the Act, the challenges of double taxation were gradually solved. However, diversity arose and became a conspicuous challenge upon the creation of states in 1967, owing to the empowerment of the regions to impose different rates of income tax and different schemes of personal relief and allowances. This challenge was resolved upon the enactment of the Income Tax Management (Uniform Taxation Provisions, etc) Act No 7 of 1975. This Act ensured the uniform taxation of incomes of individuals in the country Nigeria, however, the states were still permitted to retain and vary capitation, community development, education, poll or other taxes or levies, which already existed. 58 The 1999 constitution of the Federal Republic of Nigeria as amended in Schedule 2, designates the exclusive power to impose income tax on the federal government, however, the states have long before then enacted their various income tax laws, although the legality of these laws to the very extent that they purport to impose tax, has become questionable (a good example being the Personal Income Tax Law of Lagos state which, although not in use has not been formally repealed) 59 In a bid to impose tax on the profits and income of corporate bodies, consequent to the aforementioned power of the federal government, enacted the Petroleum Profits Tax Act in 1959 as well as the Companies Income Tax Act in 1961. . The Capital Gains Tax Act No. 44 of 1967 was enacted in an attempt to engage in a systematic scheme of property taxation. This Act was enacted to impose taxes on gains accruing to any person on disposal of assets. Following this Act, was the Capital Transfer Tax Act No 12 of 1979 which laid the foundation for the imposition of taxes on property worth N100, 000.00 or more gratuitously transferred by any person in his life and on any property of a deceased person which is transferred upon the death of the decease? This Act was however repealed in 1996 by virtue of Decree No. 32 of 1996. 60 The Value added tax Decree No. 102 of 1993 (now Cap VI Laws of the Federation of Nigeria, 2004) is another noteworthy law that was created and applied in the post colonial era in Nigeria. It was promulgated in 1993, owing to the military intervention in

54 ibid 55 ibid 56 ibid 57 ibid 58 ibid 59 ibid 60 ibid

Historical Persepective of Tax Laws in Nigeria; from the Inception of Colonial Rule to 2019 323 government, suspension of the constitution and a strong policy preference for indirect taxes. 61 This law was established to “impose a general charge on the supply of goods and services” 62 It is noteworthy that not all the aspects of taxation are designated to eh exclusive list. The sales tax which was by the recommendations of Louis Chick commission reserved for the Regional Governments, was enlarged in scope by the 1979 constitution and eventually became a residual legislative item for the state governments. This power has been evidently utilised by the legislatures of certain states through the passing of various respective sales tax laws during the second republic i.e., 1979 to 1983. 63 In current times, the Nigerian tax laws have been modified, amended, reviewed, repealed and reformed severally to enhance one’s tax collection and administration with minimal enforcement cost and ultimately suit the needs of the society. From the aforementioned historical events, it is not farfetched to opine that tax laws in Nigeria stemmed from the sources like Customs and traditions, Statutes, case laws, among several others. In current times, certain independent enabling statutes (like: the Companies income tax Act, Education tax Act, Value added tax, Petroleum profit tax, Personal income tax, Capital gains tax, Stamp duties Act of the tax laws); have created 3 major tax authorities with the power to levy taxes: 1. Federal Internal Revenue Service : This has the sole duty to collect taxes due to the federal government. The taxes collected by this body include; Companies income tax , Withholding tax , Value added tax , Education tax , Capital gain tax on companies, non-resident individuals and residents of FCT, Stamp duties tax on residents of FCT and Personal Income tax on Residents of the FCT, non resident individuals, members of the Nigerian Police Force and Armed forces of the Federal Republic of Nigeria 2. Various states boards of internal revenue service : This category of tax authority is for those responsible for evaluating and collecting taxes for States. The taxes they deal with include: Withholding tax on Individuals, Capital Gains tax on Individual, Pay as you earn (PAYE), Stamp duties on Investments by individual, Road taxes and Business premises registration fees, Development levy and so on 3. Various Local Government Revenue Service: this category of tax authority is responsible for evaluating and collecting taxes due to various Local governments. They charge taxes and levies such as Tenement rates, motor park fees, Signage and advertisement fees, Illegal parking fees, marriages, and birth and death registration fees and so on.

The Necessity of Tax LAWS Tax laws were of immense importance in Nigeria owing to the fact that: 1. It provided an avenue for the regulation of tax and taxation activities: The issue of the necessity of taxes in a society is one which is known to be quite controversial in nature. This is because it has been expressly criticised by some; Instances being Bill Vaughan who believes taxes are techniques developed by the government or the society to make people poorer “the tax collector must love poor people, he’s creating so many of them.” 64 . As well as Barry Gold water who opined that Taxes is a technique which was created either intentionally or unintentionally to increase crimes; “the income tax created more criminals than any other single act of government” 65 . Others on the other hand regard the concept as one which brings more of positive consequences to the society. This includes the likes of Oliver Wendell Holmes Jr. who regards taxes as a means of ensuring civilisation in a society as well as an opportunity to express their patriotism and to give back to the

61 ibid 62 ibid 63 ibid 64 Brainy Quote- Tax Quotes; www.brainyquote.com last accessed on 1 st of October, 2017 65 ibid 324 Ademola Taiwo, Adeyinka Ilori and Eunice Emenike society; “I like to pay taxes. With them, I buy civilization” 66 . As well as Joyce Marcel; “For patriots like me, paying taxes gives a feeling of responsibility, of being Part of the fabric of our country, of contributing to the common good.” 67 - Regardless of whatsoever opinion anyone has one has on the positivity or negativity of taxes, it is quite obvious that taxes are of great importance to the Nigerian society. This is because: i. It provides a major source of revenue to the Nigerian government. It is one source of revenue usually adopted in both the federal and the state budgets. ii. Taxes have been adopted by the government as a means of enforcing government policies either geared towards encouraging and discouraging certain activities of companies in the private sector. Most times, locally producing industries are encouraged and may enjoy tax holidays wherein dividends from such companies are not taxed. Such companies include: Omimi Shoe Co. Ltd, Eastern enamelware factory Ltd, hotel residential ltd and Kaduna textiles ltd; iii. Taxes have been known to reduce the net return on investments and also decrease the balance available for private savings. iv. Through taxes, benefits like water supply, electricity, and land allocation are being enjoyed by people who engage in various types and forms of businesses. v. With regards to the social structure of the country, income taxes have encouraged the provision of means of various reliefs especially to the people. These reliefs include; reliefs in the aspects of children and tuition like scholarships and grants, relief on insurance policy premiums e.g. gratuities of a dead civil servant, personal reliefs like aids and assistance, reliefs from or of dependent relatives, inter alia 68 . vi. Income tax has also been observed to affect the population of states within the country Nigeria. States with low income rate have been observed to have more people moving into such states while traders have been observed to leave states with high income tax rates or states engaged in various schemes of tax avoidance and tax evasion. vii. Taxes contribute significantly in the redistribution of wealth in the society. This is in a bid to bridge the gap between the rich and poor. viii. Taxes are necessary in a society as they facilitate the provision of social amenities like good roads, modern good health facilities, inter alia. ix. Taxes facilitate the payment of public and civil servants salaries, wages and other emoluments. x. Taxes provide an avenue for citizens to fulfil their own part of the social contract as it enables citizens to contribute to the growth and development of the country’s economy. xi. It is used to reduce the purchase, and ultimately the utilisation and/or consumption of certain harmful goods. xii. When used wisely, taxes can be used to protect infant industries. xiii. It is also used to reduce the importation of some goods (not necessarily harmful) but with the aim of protecting the products produced within the country. xiv. Conversely, taxes are also used to encourage the exportation of goods. xv. It has also proven to provide an avenue to attract investors to Nigeria. Especially to invest in the green acres i.e. places without social amenities through tax incentives. Amidst all of these factors that establish the need to levy taxes, the primary objective of tax still remains To Finance Government projects. In the celebrated words of the Philosopher and great statesman, Benjamin Franklin, “in this world, nothing is certain but death and taxes” . This establishes the obvious truth that there is no aspect

66 Quotes About taxes; Good reads www.goodreads.com last accessed on 1 st of October, 2017 67 Joyce Marcel; www.inc.co last accessed on 2 nd of October, 2017 68 Dr M. M. Akanbi, Law of Taxation I; (School of Law, National Open University of Nigeria, NOUN), 2008

Historical Persepective of Tax Laws in Nigeria; from the Inception of Colonial Rule to 2019 325 of life which may give rise to problem (especially in relation to accountancy and law) that will not consider the tax or taxation aspects involved. 2. It is protects the tax payer particularly, becuae it ensures that taxes are levied in accordance to the already stipulated tax laws. Thereby reducing the level of favouritism in Nigeria. 3. With tax laws in place, errors are reduced significantly. This is because the what, how, where, when and to whom taxies are levied are answered in the tax laws available and applicable.

Challenges Bedeviling Tax Laws in Nigeria 1. This is one of the major challenges faced by tax laws in Nigeria as tax payers are made to pay similar taxes on the same or substantially similar tax base. Examples include: Examples of multiple taxes include Companies Income Tax, Information Technology Tax, Education Tax, and Nigerian Content Development Levy, all of which are based on income or profits. Also, Value Added Tax, Sales Tax, inter alia . These taxes are usually administered by all the three tiers of government 2. The issue of what tax authority is appropriate to administer taxes in Nigeria has also posed a problem in Nigeria. A practical instance is the crisis between Lagos state and the federal government on the tax jurisdiction of VAT in the state which is still a matter of contention in the courts today. 3. The issue of paucity of a database, which contributes to tax avoidance, also poses a major threat to the tax laws in place in Nigeria. 4. Corruption is challenge that cannot be ignored especially as it has been known by many to have been in existence over the years, thereby resulting in the loss of confidence of the people (tax payers in particular) in the government. This alone can go a long way in discouraging them from performing their civic duties especially those tax related. 5. Lack of evidence of the use of taxes paid in the past: the country appears to be in a deplorable state especially with regards to amenities and infrastructural facilities. This makes tax payers wonder what the taxes they pay are used for, where they do not seem to get the right, evident answers, they get discouraged and refuse to follow tax laws particularly by evading tax collection 6. It has been opined by some that the language used in the drafting of tax laws are quite difficult for an average Nigerian to comprehend.

Conclusion History cannot give us a program for the future, but it can give us a fuller understanding of ourselves, and of our common humanity, so that we can better face the futu re - ROBERT PENN WARREN 69 The history of tax laws in Nigeria have been examined thoroughly from the inception of the colonial rule till modern times. Suggestions have been made to ensure that the mistakes made in the previous times are not repeated again and that the laws of taxation continue to meet the needs of the ever dynamic society.

Recommendations 1. To solve the problem of multiplicity of taxes, an approved list of taxes should be identified and adhered to strict senso by all the tiers of government. Taxes should be harmonised to reduce or prevent multiple taxation on taxpayers individually.

69 Age-of-the-sage.org ‘Famous quotations and quotes about Learning from History’.; Age-of-the-sage.org www.age-of-the-sage.org/philosophy/history/learning_from_history.html last accessed on 1 st of October, 2017 326 Ademola Taiwo, Adeyinka Ilori and Eunice Emenike

2. Government agencies on tax and tax laws cooperate mutually. Information should be well disclosed and shared among the different government agencies and parastatals. This could contribute in the wars against tax evasion and fraudulent tax practices. 3. A more responsive government to the welfare of the people would go a long way in ensuring the implementation of tax laws in Nigeria. Beneficial or welfare schemes should be introduced to elicit voluntary compliance; as more revenue would be generated in a country, if the people trust and have confidence in their government. A practical example depicting this is the activities in Lagos state- the city of excellence. The people can see and feel the development impact of their taxes and this is encouraging the generation of huge revenues. 4. It is also suggested that the religiousness of the people of Nigeria is one that is taken with laxity. Hence, tax laws and taxes should be incorporated in the various religions and religious education. This could give more backing especially morally to the tax laws laid down by the country or state. A good instance being, “Give unto Caesar what is for Caesar and to God, what is for God” for the Holy Bible and for the Muslims, the Qur’an says, “O you who believe, fulfil all obligations”. 5. The re-introduction and improvement of the civic education can contribute in instilling the spirit of patriotism and commitment to the country’s ideals and interests. Payment of taxes and its importance should be inculcated in this study. 6. Quick or easy access. Tax authorities can set up contact lines or addresses through which people especially tax payers can voice out their feelings, discuss issues, observations, make complaints, etc conveniently. This is necessary as it can contribute in reducing tax fraud or avoidance. 7. Another recommendation is the improvement and update of the record or database of taxpayers, in order to enable them to trace potential taxpayers in Nigeria. This would go a long way in reducing and preventing tax avoidance. 8. For the purposes of the masses and lay or common men, tax laws should be codified in simple, less technical, easy-to-comprehend language. 9. Above all, if a tax law is to perform ultimately its task, there is need to establish an effective and efficient judicial process to adjudicate on the tax matters brought before it. 70 10. Government should enter into treaties on tax with foreign countries and reinforce the ones the Nigerian government had signed before.

Bibliography Book Sources [1] Ade Ipaye; Nigerian Tax Law and Administration; A Critical Review, [2] C.S.Ola Reprinted (2001), Income Tax Law and Practice in Nigeria; [3] Olugbenga S. Obatola; The Rudiments of Nigerian Taxation; 2013, Reprinted 2014. [4] Bryan A. Garner; Black’s law dictionary, Tenth edition; [5] 1999 constitution (as amended) of the Federal Republic of Nigeria

Internet Sources [6] Asuquo Richard Gregory ‘Tax System in Nigeria: Issues and Challenges’; (Vanguard Online) 2014 http://www.vanguadngr.com/ [7] Brainy Quote- Tax Quoteswww.brainyquote.com [8] Quotes About taxes; Good reads www.goodreads.com

70 Asuquo Richard Gregory ‘Tax System in Nigeria: Issues and Challenges’; (Vanguard ) 2014 http://www.vanguadngr.com/ last accessed on 4th of October, 2017

Historical Persepective of Tax Laws in Nigeria; from the Inception of Colonial Rule to 2019 327

[9] Joyce Marcel; www.inc.co [10] 20 Inspirational Quotes...About Taxes; by Robert W. Wood; Forbes. September 20, 2013. www.forbes.com [11] What Are Tax Laws? Intuit Turbotax2016 https://turbotax.intuit.com/tax-tools/tax-tips/Taxes- 101/What-Are-Tax-Laws-/INF14470.html [12] HG.org Legal Resources, 2017 https://www.hg.org/tax.html