SOURCE:

Faculty: Law
Department: Law

CONTRIBUTORS:

Richards, N. U.
Ibe, C. E.

ABSTRACT:

Taxation is a veritable tool, for social economic development, and has been used by several countries in the world, to achieve their economic objectives. One of the major factors that could determine whether a nation’s economy will grow consistently is the ability of the nation to stimulate indigenous investment, and attract foreign investment in her economy. This is done through fiscal policy measures which include taxation. The objective of this research is to show the relationship between taxation and investment and to evaluate the effect of Nigeria tax laws and policies on trade and investment in Nigeria. The researcher adopted the doctrinal method of research and undertook a descriptive and comparative analysis of Nigerian tax laws and policies, with that of other countries. Also, related textbooks, journal and articles on the subject matter were examined and reviewed. In the course of the research it was discovered that the Nigerian tax system is comfronted with several challenges. For instance, Government at all levels seems to see revenue generation as the main purpose of taxation, without considering its overall impact on the economy. Also, the corporate tax rate in Nigeria is relatively high, and the Nigerian tax system is characterised by the multiplicity of tax payments and double taxation. This is further compounded by the abuse of taxing powers by State Governments, which has led to the proliferation and duplication of taxes in Nigeria. Consequently, Nigerian tax laws and policies have not been able to stimulate the growth and development of local trade and investment nor propel the attraction of considerable foreign direct investment. Research has shown that there is a high correlation between high tax rates, abuse of taxing powers, multiplicity of taxes, double taxation and lack of economic growth and development. There is an urgent need to position the Nigeria tax system to play a catalystic role in the development of trade and investment. It is therefore, recommended that the Constitution of the Federal Republic of Nigeria, 1999 should be amended to address the inadequacy of fiscal federalism provisions under the constitution, by expanding the taxing powers of State Governments. Also, the Companies Income Tax Act should be amended to reduce corporate tax rates to 20%; while the Value Added Tax Act should be amended to provide for different rates for different categories of goods and services. In this direction value added tax should be increased for imported goods and services that local alternatives are available. Furthermore, the number of tax payments in Nigeria should be reduced by abolishing the following taxes: stamp duties tax, capital gains tax and Tertiary Education Trust Fund Act, among others.