It is often said that “no one pays tax with a smile”. This applies to individuals and businesses alike, much less paying it twice. While there is no universally acceptable definition of the word taxation, it can be said to be ‘money that one has to pay to the government so that it can in turn, pay for public services. The National Tax Policy for Nigeria also sheds light on this concept and defines tax as “a monetary charge on a person’s entity or income, property, or transaction, and is usually collected by a defined authority at the federal and state level”. Taxes are generally levied on personal incomes (consisting of salaries, business profits, interest income, dividends, royalties, etc.). company profits, petroleum profits, capital gains, and capital transfers.
Unlike a levy whose payment may be voluntary, the payment of taxes is very much compulsory and such obligation is imposed by the government on the people residing in the country. Since it is a compulsory levy, any person who refuses to pay a tax is liable to such punishment which could include payment of fines or imprisonment, or both, as specified in the Tax Establishing Act.
The incidence of Double taxation has been a subject of controversy globally in recent times. Double taxation arises when an individual or business is assessed to be taxed on the same income by more than one tax authority in Nigeria. While multiple taxation is when individuals and businesses are taxed by two or more jurisdictions on the same income. More specifically to differentiate; multiple taxation occurs “where the tax, fee or rate is levied on the same person in respect of the same liability by more than one State or Local Government Council.” while Double Taxation deals with tax levied by one or more tax authorities.
The incidence of Double taxation can arise in of these 2(two) ways;
Juridical double taxation is a situation where similar taxes are imposed by two or more states on the same taxpayer in respect of the same income. This can occur where a resident of one state derives income from another state and the income is taxable in both states under their domestic tax levies. It is also called the ‘RESIDENCY PRINCIPLE’. A clear explanation of how individuals are taxed under the residency principle is when a resident of Lagos state whose source of income is in Abuja gets taxed by both states. A more complicated scenario is presented if a man is from Imo state and is resident in Anambra but derives his income in Delta state. The question as to where is he expected to pay his tax becomes a tricky one to answer. Juridical double taxation can also arise, where a taxpayer has a dual residence, that is, the taxpayer is deemed to be resident in two states under the domestic tax levies of the two states, and to that effect, both states will therefore, impose a tax on the taxpayer as their resident.
Economic Double Taxation is a situation where the same income is taxed twice in the hands of two different tax authorities. For example, taxing profit on a business and also taxing dividends distributed out of the profits in the hands of the owners.
Dr. Abiola Sanni, Ph.D.,” explained that the multiplicity of taxes by the Government can be said to manifest in at least four ways:
- the various unlawful compulsory payments being collected by the local and state governments without appropriate legal backing through intimidation and harassment of the payers.
- The various situations where a taxpayer is faced with demands from two or more different levels of government either for the same or similar taxes.
- where the same level of government imposes two or more taxes on the same tax base.
- refers to cases whereby various government agencies “impose taxes” in the form of fees or charges.
In practical terms, one may argue that the incident of multiple taxes cannot be avoided in a federal structure like Nigeria. This position was explained in the National Tax Policy Document:
“A certain level of multiplicity is unavoidable in a federal structure as each tier of government may want to charge certain taxes, fees, and charges as may be applicable. The only aspect of multiplicity that is avoidable and for which the Constitution itself abhors is that where the tax, fee or rate is levied on the same person in respect of the same liability by more than one State or Local Government Council.”
Dr. Abiola Sanni further submitted that the idea of taxing an individual or business twice goes against the very definition and idea of a tax. A good feature of tax law or system is for it to be simple in order to aid comity. This obedience must work both ways as the tax authority and taxpayers are obligated to comply with the provisions of the law.
In the late 1980s in Nigeria, when Multiplicity of taxation began to look like an issue, the Joint Tax Boards came up with a list of taxes collectible by each tier of government, the Decree was meant to resolve the confusion created by the multiplicity of taxes imposed by the three tiers of Government. it authorized by decree the tiers to collect as follows; the Federal government to collect 8 taxes, The State Government was allocated 11 taxes and Local Governments 20 taxes.
Sadly, it appears this allocation list by the Decree has been long ignored by State and their taxing authorities, in a plight to try to improve their revenue. In Lagos state, for example, a law was passed in 2011 that permits the state rather than the federal government, to collect VAT generated within the state. The Federal High Court also passed a judgment in the year 2021 that reaffirmed the law and empowered states to collect VAT. However, the Federal Government (which is with an exclusive right to collect VAT by virtue of the Decree) opposed the ruling and continued to collect VAT while it projected that it will collect N2.2tn in 2022 through the Federal Inland Revenue Service. It (The Federal Government) however incurred a setback early this year 2022, as the National Assembly rejected a proposal seeking to move the collection of VAT to the exclusive legislative list. This judgment received a lot of criticism .
CONCLUSION / RECOMMENDATION
For individuals and businesses their loans, incomes, and investments can be subjected to taxes of different types. No doubt the effect of double taxation and multiple taxation on businesses leaves much to be desired. Many entrepreneurs have expressed their unwillingness to venture into new market openings or expand the existing ones for fear of multiple taxation that continues to take a significant portion of their earnings. It is no news that many companies have even ceased operations in Nigeria and moved to other tax favorable countries.
It is advised that there should be uniformity in all state laws and national acts so that the issue of multiplicity of taxes and double taxation will be curbed once and for all. Furthermore, considerable exemptions should be given to certain individuals and businesses who meet specific requirements to aid economic growth in Nigeria.
 Oxford Advanced Learner’s Dictionary (2006, 2nd Edition Revised)
 the National Tax Policy Document, p.78 para 6.0
 a Senior Lecturer of the Department of Commercial and Industrial Law at the University of Lagos, in his paper “Multiplicity of Taxes in Nigeria: Issues, Problems, and Solutions accessed from Microsoft Word – 26.docx (abiolasanniandco.com)
 National Tax Policy, Federal Ministry of Finance, 2012, pg 42 accessed from https://admin.theiguides.org/Media/Documents/NATIONAL%20TAX%20POLICY.pdf
 Taxes and Levies (Approved List for Collection) Decree No 21 of 1998
 AG Rivers State v. FIRS & AG Federation (FHC/PH/CS/149/2020)
Email us: [email protected]