TELEPHONE HOTLINE: +234 90 25 557 297, +234 80 64 182 657, EMAIL:




This research presents the results of the impact of personal income tax. The population for the study consists of 100 people which were randomly selected, Data were gathered using a self -constructed questionnaire and the result gotten was analyzed using the simple percentage method.  The validity and reliability of instrument were ascertained. The result of the study revealed that people hardly pay their income tax and also personal income tax affects the economic development in Nigeria. Results showed that there is a positive relationship between the contribution of taxes and economic development and that tax revenue has a great impact on the GDP of Nigeria. However it is recommended that Notice of tax returns at the beginning of very financial year should be supported with handbills and poster written in local languages such as Yoruba, Hausa, Igbo and others to also enable illiterates remained to civil responsibilities




Tax is defined as money that has to be paid to the government by the people according to their profits on goods and services provided. Chris and Elizabeth (2001) also defined taxes as a forced proportional contribution from persons and property levied by the state by virtue of its sovereignty for the support of government and for all public needs.

Generally, taxation can be described as a form of levy imposed on all residents living and non-residents doing business within a tax jurisdiction. It is a civic and patriotic responsibility of citizens to pay taxes imposed which also come to the government as income or revenue yielding device to finance the provisions of socio-economic and infrastructural amenities and also to enhance industrial efficiency.

The history of taxation in Nigeria dates back to the pre-colonial period. According to Lekan and Sunday (2006) before the colonization of the different entities which were later amalgamated under the name Nigeria, there were different systems of taxation existing in the form of compulsory services, contribution of goods, money, labour and so on amongst the various kingdoms, groups and tribes controlled by the Obas, Emirs, Ezes, Attah of Igala, Tor of Tiv, Ohinoyi of Ebira and so on in order to sustain the monarchs.

The various taxes levied by the different ethnic groups by the kings according to Ola (2004) took several forms such as ‘Zakkat’ levied on Moslems for educational, charitable and religious purposes, ‘kudin-kasa’, a form of an agricultural tax levied on utilization of land, ‘shuka-shuka’ levied on the ownership of cattle based on the member of cattle, ‘Ishakole’- contribution of farm products as a form of land tax in exchange for the use of land for agricultural purposes payable to Obas, chiefs and family community heads, community tax payable by all adults in order to execute projects beneficial to the community; ‘Oko-ane’ payable to Attah Igala for hunting in a particular forest, ‘Osusu Imachi-Nkwu’ payable to Ezes in Igbo land by those who harvest palm fruits and are expected to contribute proportion of the harvested palm oil. In Tivland in Benue state certain taxes are paid by couples during marriage ceremonies which are used for various community development projects.

The present form of taxation in Nigeria could be traced to the establishment of a British colony in Lagos on August 6, 1861 and subsequent amalgamation of the Southern and Northern protectorates of Nigeria in 1914.

During the colonial era according to Yerokun (1997), the imposition of any type of tax on citizens (individuals and corporate) took the form of promulgation of laws by the colonial authority. Examples of such law include Native Law ordinance cap 74 of 1917 applicable to Western Nigeria. The re-enactment of the same law in 1929 according to Ola (2004) which for the first time imposed taxes on women resulted in the Aba women riot of 1929. Another law was that of non-natives protectorates tax ordinance of 1931. The ordinance was later repealed and incorporated into the taxation ordinance No. 4 of 1940 and subsequently re-enacted as the Income Tax Ordinance (ITO) 1943.

The above tax laws according to Yerokun (1997) were administered on individuals and corporate entities by various tax and revenue officers in the different provinces and regions. In order to promote uniformity in the incidence of taxation throughout the geographical entity called Nigeria according to Lekan and Sunday (2006), the colonial government in 1958 set up the Raisman Commission. The commission at the end of its work recommended the introduction of uniform basic income tax principles for application in all regions of Nigeria. This recommendation was accepted by the government which incorporated the same into the 1960 constitution of the Federal Republic of Nigeria. This led to the promulgation of the Income Tax Management Act (ITMA) 1961 and Companies Income Tax Act (CITA) 1961.

The above legislation (ITMA and CITA) 1961 were later repealed and re-enacted as the Personal Income Tax Act (PITA) 1993, and the Companies Income Tax Act CAP 60 LFN, 1990 respectively. As a result of the work of the Tax Laws Review Commission, these laws have been reviewed and updated and are included in the laws of the Federal Republic of Nigeria 2004. The current law that governs the administering of Personal Income Tax (PIT) is the Personal Income Tax Act Cap. P8 LFN 204 which imposes tax on incomes of individuals and corporations.

Tax according to Nightingale (2000) under any jurisdiction is discriminatory in the sense that it is assessed on persons or property based on profits/incomes or gain, the benefit derived by citizens from tax payment is without reference to the contribution of individual tax payers. In line with this, according to Ariwodola (2000) it is accurate to say that the primary objective and purpose of taxation in most nations of the world is essentially to generate revenue for government expenditure on social welfare such as provision of defense, law and order, health services and education. Revenue from taxation can also be spent on capital projects otherwise called consumer expenditure, creating social and economic infrastructure which will improve the social life of the people.

In Nigeria today, tax administration has been a challenge Naiyeju, J.K. (2010) highlight the various Challenges of the Tax collection and Administration in Nigeria Today as Administrative Challenge, Compliance Challenges, Lack of Equality, Challenge of Multiple taxes, Poor Taxation Drive by tiers of Government, Challenge of Bad Governance, Challenge of Corruption and Challenges of Human Capacity Building and Training.

The aim of this research project is to look into various constraints faced in the administration of Personal Income Tax and examine its economic benefits to the development of Lagos State. Also, proffering solutions as regards strategies to be adopted by revenue authorities for expanding the Nigerian tax net to improve tax collection drive.


Personal Income Tax is a global and wide topic that undisputedly requires investigation and provision of possible solution to the problems associated with effective administration of tax. Most of the Tax authorities (especially the States and Local Government) lack the desired institutional capacity to administer effectively the taxes under their purview (capacity in terms of staffing, skills, salary pay, other funding, computer and IT infrastructure etc).

Non-compliance of employers to register their employees and remit such taxes to relevant tax authorities. Many evade the tax in the cities and rural areas. SMEs, informal sectors and even big companies carry out evasive practices.

The bulk of PIT today are paid by only the employees. Politicians, the rich, professionals and the privileged, few are not equitably taxed. Multiple taxes is still a major problem besetting our tax collection and administration.

Poor Taxation Drive by tiers of Government: The political economy of revenue allocation discourages a proactive revenue drive, especially by the states and LGs. They heavily rely on their share of the oil revenue.

Challenge of Bad Governance: Taxpayer are not encouraged to pay more taxes because there is no visible evidence of good governance.

Challenge of Corruption: The tax collection and administration is often prone to corruption. The corruption risk erodes the tax yield and confidence in the system. Challenges of Human Capacity Building and Training: At the States and Local Governments, there is dearth of capable hands to administer the relevant taxes efficiently.

The identified problems can be summarized as follows;

1.     Poor tax administration

2.     Tax evasion

3.     Corruption of tax collectors

4.     Noncompliance with tax laws by tax payers


The main objective of this study is to evaluate the impact of Personal Income Tax on economic development of Lagos State.



error: Premium content