The tax system was started as a measure to help Government raise funds to be able to finance basic recourses for the people.

HISTORY

It has existed since the earliest forms of recorded government in history: from ancient Egypt, when the pharaohs levied taxes in the form of shares of agricultural production and labour; to ancient Rome where farmers were required to pay a tenth of their production (decimal) to the tax administration (aquarium); and even in Medieval Europe, where a similar taxation system became one source of financing for the Church. (SOAS, n.d.)

Nowadays, governments have developed more sophisticated systems and processes for defining who is taxed, what is taxed (the ‘tax base’), how much is taxed, and which personal conditions of the taxpayers should be considered.

PRINCIPLES OF TAXATION

Adam Smith, who is known as the father of economics, argued that taxes should be proportional across all levels and sources of income.

He argued that a good tax system should be;

• FAIR: A person or entity should be taxed similarly and equitably. That is, the taxes one pays should be proportionate to their income.
• CERTAINTY: There should be laid down rules on the conditions of being taxed. Which should be uniform among all taxpayers.
• CONVENIENCE: The method of payment and timing for tax should be convenient for taxpayers. That’s why if its income, it should be paid as soon as income is earned; if its sales it should also be paid as soon as the sales have been made.

This helps both the taxpayer and the government plan their deliverables and be compliant with the laid down rules.

• ECONOMY: It should be based on an equitable amount as the tax burden shouldn’t be too much on the low-income tax taxpayers.

IMPORTANCE OF TAXATION

Taxation is important as it assists the government to afford the amenities that its people need. For example, Roads, healthcare, transportation, education and cost of governance.

We all pay our taxes in one way or another. Either by paying for a bill and additional taxes such as VAT. Most Nigerians have this issue of noncompliance which should be investigated.

Because we think we are hurting the government but in actual sense, we are hurting ourselves. So please, let us all try to do our bit.

TYPES OF TAXES

• PAYE: Pay as you earn is an example of earning tax. It is basically for employees within an organisation, and it helps keep them compliant with their civic duty (paying Tax).
• VAT: Value Added Tax is a commodities tax. It is placed on goods and services. Its percentage in Nigeria is 7.5%, (Which I’m sure we all know, as we see it on most of our purchase receipts.
• CIT: Company income taxes are enterprise taxes. These are taxes paid by legal entities in the country. That is all limited liability companies and PLCs pay a particular percentage of their profit as taxes.

There are also taxes and levies paid like TET, WHT, PPT, CGT, Stamp duty, etc.

Works Cited

SOAS. (n.d.). Understanding Public Financial Management. Retrieved from Future learn: https://www.futurelearn.com/info/courses/public-financial-management/0/steps/14705

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