Describe the importance of taxation in different Nigeria economy?


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Nicole Manion answered
Taxation is a vital element in any country's economy: It is the source of funding for the important necessities such as education, health care, security and the million other things that are necessary to the safe running of a country.

  • Nigerian taxation

In Nigeria, taxes are levied on three different Government tiers: State, Federal and Local Government.

  • VAT (Value Added Tax)

This was introduced in Nigeria in 1993 by the VAT decree Number two, and it replaces the tax that was formerly known as sales tax. VAT is a consumption tax and is collected from company sales, which is known as output tax. If the output is greater than the input in any month, the excess is forwarded to the FBIR (Federal Board of Inland Revenue).

If, however, the situation is reversed, the taxpayer is entitled to a refund, though practically this is not always likely.

  • Capital Gains Tax

This builds up on an annual basis and it is relevant to all gains accruing from the sale, lease or transfer of proprietary rights.

  • Education Tax

All businesses that are incorporated in Nigeria have an education tax of 2% imposed upon them. This is seen as a social obligation to make sure that they contribute to the overall development of Nigeria.

  • Personal Income Tax

Everybody in Nigeria has to pay tax based on the aggregate amount of their income, regardless of whether it is earned in Nigeria or from abroad.

  • Residency

Taxpayer residency determines liability for paying taxes in Nigeria; to be considered to be resident a person needs to be living in the country for 183 days in any 12 month period.

To learn more about the taxation system in Nigeria and what is liable and what is exempt, have a look at this site:; it gives detailed information of the taxation system.

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