Department of Business Education,
College of Education, Katsina-Ala.
E-mail:  [email protected]


The main objective of this study is to theoretically investigate how taxation and other sources of revenues can be used to sustain Nigeria’s economic recession recovery. The paper, made use of primary source of information to review the followings; the concept of taxation, types of taxes, tax administration, problems of tax administration, problems associated with an economy under recession and how taxation and other sources of revenues can be a panacea to sustenance of Nigeria’s recovery from recession among other issues. The paper concluded that, aggressive enlightenment of citizens on why they should pay tax, encouraging and promotion of agriculture, investment in the solid mineral industries among others can be used to sustain the Nation economic recovery from recession. The paper recommends that, Jingles, fliers and posters should be made in the major Nigerian languages encouraging them to pay tax, Government should set up cottage industries to process perishable agricultural products like oranges, mangoes, tomatoes for exports amongst others.

Keywords: Taxation, Sustenance, Economy, Recession, Recovery


As the Nigerian economy is slowly recovering from the recession period, there are inconsistencies in our tax laws which have made it difficult for the tax body to administer and even for the tax payer to follow. The federal government had the intention to maintain a uniform tax system but the economic conditions in each state have given room for divergent tax systems. The most important thing one should have in mind is that taxation is supposed to be an instrument for social change however, this role is not observed presently in Nigeria. The impact of tax payment is not felt by payee and some do not understand some tax laws and this indeed has put them into doubt and confusion and has definitely made others to want to avoid and evade tax.

Every modern state or nation requires a lot of revenue to be able to provide and maintain essential services for its citizen. One ready means of revenue for the government is through the imposition of tax. The imposition of tax by the government is not a new phenomenon. There is hardly any government today that does not rely on taxation. However, apart from the complications that have crept into the taxation system in modern times, the reason for the imposition of tax in fact ceased to be only for the generation of revenue for the state. It has also become the avenue for the redistribution of wealth and re-adjustment of the economy (Abiola 2016).

The tax system is one of the most powerful levies available to any government to stimulate and guide its economic and social development. The FBIR (Federal Board of Inland Revenue) the agency vested with the power to administer the act and carry out all the act which may be deemed necessary and expedient for the assessment and collection of tax in a manner to be prescribed by the Federal Minister of Finance. The Board has certain reserved power which shall not be delegated to other persons to perform, e.g. power to acquire, hold and dispose properties of any company in satisfaction to tax or any judgment debt, and to specify the forms of return claim and notices .Having realized that taxation is one of the most important sources of revenue for the various tiers of the government and a major way of sourcing financial support to the Nigeria government at large, it is of paramount importance that tax evasion and avoidance is discouraged.

Apart from taxation, Ojo (2017), identified agriculture, solid minerals, petroleum as other sources of revenues to the Nigerian government that could be aggressively diversified into.. 

The purpose of this study therefore is to examine how taxation and other revenue moblisation sources can be used as tools for the sustenance of Nigeria’s economic recession recovery. 


Concept of Taxation

Taxation is not a new word in Nigeria or the world as a whole. In Nigeria, taxation has been in existence even before the coming of the colonialists or the British. Taxation can be defined as the system of imposing a compulsory levy on all income, goods, services and properties of individuals, partnership, trustees, executorships and companies by the government (Adedotun 2017). Adejowun (2018) defined taxation as a compulsory payment made by individuals and organization to relevant Inland Revenue authorities at the federal, state or local government level. Adeola (2019) sees taxation as a levy imposed by the government against the income, profit or wealth of the individual, partnership, corporate organization. Aguda (2017) defined taxation as compulsory levy imposed on a subject or upon his property by the government to provide security, social amenities and create conditions for the economic well-being of the society. A precise definition of taxation by Bariyima and Gladson (2017) is that taxation is one of the sources of income for government, such income as used to finance or run public utilities and perform other social responsibilities. According to Adeola (2019) taxation is the most important source of revenue for modern governments, typically accounting for ninety percent or more of their income.

Taxes are classified into direct and indirect. Abiola (2016) defined direct taxes as taxes levied on the income of individual, group of individuals, and business firms and are paid directly by the person or persons on which it is legally imposed by the tax authority. Direct taxes can be classified into Personal Income tax, Company Income tax, Capital Gain tax, Petroleum Profit tax, and Capital Transfer tax. Indirect taxes are taxes levied on expenditure that is, goods and services. These taxes are paid as part of payment for goods and services purchased by the ultimate users or consumers. The incidences of this type of taxes are usually borne by the third party. Indirect taxes can be classified into the following: Import duties, Export duties and Value Added tax (Aguda 2017).

 The Principles of Taxation

Adam (1910) in his famous book “The Wealth of Nations” in Abiola (2016), stated the most important set of principles, which are also known as the “cannon of taxation” which are still accepted generally by tax administrators all over the world. The principles of taxation are outlined below:

i.          Equity/Equality of Sacrifices: Adam Smith maintained in these principles that each tax payer should contribute to the support of government also referred to as “state” as nearly as possible in proportion to his ability to pay. For example 10 to 20 percent of all income above a certain figure, since there are some citizens whose incomes were so low that they were obviously to pay any taxes. Similarly, Adejuwon (2018) conceived the principles of equity as equal proportion of taxation on every income that is; in principle everyone should pay the same proportion of his income as tax. This means proportional taxation or some percentage on all incomes and therefore rejected progressive taxation (higher tax rates on higher incomes). It also means equal taxation of earned and investment incomes, existing private wealth and capital are exempted, taxation is limited to income only. In the same view, Berger (2016) said, equal amount per head should be levied. It is obviously much easier to run a system under which everybody pays say ten pounds per head than one which the amount due varies according to economic circumstance.

ii.         The Principle of Certainty: This principle asserts that the taxpayer should know how much tax he has to pay, and when it is to be paid. Such information should be adequately accurate and clearly stated by the tax regulations. Thus, neither the amount nor the time of payment should be the subject of arbitrary decisions by the tax officials.

iii.        The Principle of Convenience: Taxes should be collected at a time convenient for the taxpayers. For example, the Pay as You Earn income tax on salaries and wages deducted weekly or monthly as the case may be as income is received, is a good example of the principle of convenience. Convenience as a principle of taxation has to do with the enforcement of tax and its administration. Adeola (2019) has said that a good tax system should not impose taxes that are impossible to enforce even when people comply to tax laws voluntary, the government should verify the tax payments, if not the tax becomes an invitation to break the law. Adedotun (2017) has pointed out that every tax ought to be levied at the time or in the manner in which it is likely to be convenient for the contributor to pay it. Using this principle as an example, one can argue that the convenient time for payment of tax for West African farmers is during the harvest time.

iv.         The Principle of Economy: The principle emphasizes that the cost of assessing and collecting a tax should be small in relation to the revenue so collected i.e. economy should be the yardstick so that the cost of collecting tax should not be excessive. For example, if the expenses incurred in the course of collecting a tax exceed even 50 percent of the yield, then such taxes do not conform to the principle of economy.

Objectives of Taxation

Although the tax structures in the various developing countries differ widely, the objectives of taxation in these countries are virtually the same. Unfortunately however, most tax administrators and payers do not know what the tax objectives are. This does not only makes tax administration difficult but also give room for tax manipulation, avoidance and evasion with the attendant effects on economic development (Aguda 2017).

According to him, the followings are the main objectives of taxation.

  1. Raising of Revenue: The classical function of a tax system is the raising of the revenue required to meet government expenditure. This income is required to meet the expenditure which is either the provision of goods and services which members of the public cannot provide such as defence, law and order or the provision of goods and services which the federal and state governments feel are better provided by itself such as health services and education.
  1.  Wealth Redistribution: In modern times, great emphasis has come to be placed on the objective of redistribution of wealth. This has two distinct forms. The first is the doctrine that taxation should be based on ability to pay and is summarized by the saying that “the greatest burdens should be borne by the broadest backs.” The second form presupposes that the present distribution is unjust and concludes that this should therefore be undone that the distribution should be equal irrespective of financial muscle. This second principle sees confiscation as a legitimate objective of taxation.
  1. Economic Price Stability: It has been said that the most fundamental reason a government has for taxing its citizens is to provide a reasonable degree of price stability within the nation . Most spending by the public and private sectors without taxes generates high demand, which is inflationary. In such a situation, the basic function of taxation is to reduce private expenditure in order to allow government to spend without causing inflation. Thus, taxation is basically a deflationary measure. On the other hand, when aggregate demand is lower than the deserved level, government has two options which are to increase government spending with increasing taxes or to reduce taxes while leaving government spending stable.

iv.       Economic Growth and Development: The overall control or management of the economy rests on the central government and taxation plays an important role in this direction. In addition to maintaining reasonable price stability, governments are determined to promote the near-full employment of all the resources of the country (including human resources ) and ensure a satisfactory rate of economic growth. Economic growth and development programmes are geared towards raising the standard of living of the masses of a country through the improvement of their economic and social conditions. Taxation in one way discourages, postpones or reduces consumption and encourages saving for private investments.

This is only possible when the basic necessities of life including security, law and order, education and communication are provided by government, hence, the national development plans of developing countries are considered to be important. This objective will be of great assistance to Nigeria where there is mass unemployment of labour force and economic resources.


According to Berger (2016), Revenue Mobilization is the process of marshaling, assembling and arranging financial contributions from all incomes accruing from identifiable sources in an economic setting.

Objectives of Revenue Mobilization

Berger (2016), identified the followings as the objectives of Revenue Mobilization

  1. Identification of revenue sources,
  2. Assembling and arranging contributions of incomes, and
  3. Provision of legal framework for collectionof incomes


According to Ojo (2017) problems of tax administration in Nigeria are as follows:

(1) Tax Evasion: Tax evasion is a deliberate and wilful practice of not disclosing full taxable income so as to pay less tax. In other words, it is a contravention of tax laws whereby a taxable person neglects to pay the tax due or reduces tax liability by making fraudulent or untrue claims on the income tax form. Tax is evaded through different methods some of which include the following: refusing to register with the relevant tax authority; failure to furnish a return, statement or information or keep records required; making an incorrect return by omitting or understating an income which is liable to tax refusing or neglecting to pay tax; overstating of expenses so as to reduce taxable profit or income, which will also lead to payment of less tax than otherwise have been paid; a taxpayer hides away totally without making any tax return at all and entering into artificial transactions.

(2) Tax Avoidance: Tax avoidance has been defined as the arrangement of tax payers’ affairs using the tax shelters in the tax law, and avoiding tax traps in the tax laws, so as to pay less tax than he or she would otherwise pay. That is, a person pays less tax than he ought to pay by taking advantage of loopholes in a tax levy. Tax can be avoided in various ways: Incorporating the tax payer’s sole proprietor or partnership into a limited liability company; the ability to claim allowances and reliefs that are available in tax laws in other to reduce the amount of income or profit to be charged to tax. Minimizing the incidence of high taxation by the acquisition of a business concern which has sustained heavy loss so as to set off the loss against future profits; minimizing tax liability by investing in capital asset (for instance through the new form of corporate financing by equipment leasing), and thus sheltering some of the tax payers income from taxation through capital allowance claims; sheltering part of the company’s taxable income from income tax by capitalizing the profit through the issue of bonus shares to the existing members at the (deductible) expenses to the company; creation of a trust settlement for the benefit of children or other relation in order to manipulate the martinet tax rate such that a high income bracket tax payer reduces his tax liability; Converting what would ordinarily accrue to the tax payer (employee) as income into capital gain (Compensation for loss of office) the advantage of the employer and employee; manipulation of charitable organizations whose affairs are controlled and dominated by its founders thus taking advantage of income tax exemption; Buying an article manufactured in Nigeria thereby avoiding import duty on imported articles; Avoiding the consumption of the articles with indirect taxes incorporated in their prices e.g. tobacco.


Chukwu (2017) defined recession as a temporary economic decline during which trade and industrial activities are reduced generally identified by a fall in Gross Domestic Product in two successive quarters. 

Causes of Recession

Aguda (2017), identified the followings as the causes of recession

  1. Fallen standards of education
  2. Lack of industrial development
  3. Corruption
  4. Unpatriotism
  5. Lack of visionary leaders.


According to Aguda(2017), the followings are some of the issues inherent in a recessing economy 

(a) low domestic growth rate. Recession causes high cost of production this leads to low domestic growth rate.

(b) High unemployment rate. Organizations downsize due to effects of recession.

(c) High inflation rate. Recession causes increase in cost of production this affects the prices of goods and services.

(d) High interest rate. Inflation occasioned by recession leads to high interest rates.

(e)Low per capital income. High cost of goods and services erodes the purchasing power of citizens leading to low per capital income. 

Taxation and Revenue Mobilization as tools for Sustenance of Nigeria’s Recession Recovery Process

Taxation and Revenue Mobilization as a panacea for Sustenance of Nigeria’s Recession Recovery Process can be considered from two perspectives.


Ojo (2017) stated that taxation is recognized as a very important tool for National Development and growth in most societies. One of the major indices by which development and growth can be measured in any society is the amount of wealth, which is created by economic activities undertaken in that society. Furthermore, he stressed that one of the means of creation of wealth for citizens is through meaningful employment, so that citizens are able to earn income to cater for their needs and also contribute taxes to the Government as part of their contribution to National Development in this economic recession.

According to him, taxation can play a vital and pivotal role in the creation of wealth and employment in the Nigerian economy in recession in the following ways:-

(i) Stimulating growth in the economy, by increased trade and economic activities:In this regard, tax revenues should be used to provide basic infrastructure such as power, roads, transportation and other infrastructure which would facilitate trade and other economic activities.

(ii) Stimulating domestic and foreign investment: It is necessary to mention that where the tax system creates a competitive edge for investments in the economy, local investments would be retained in the country while also attracting foreign investments. Increased investment would generate employment and provide wealth in the hands of individuals.

(iii) Revenue generated from taxes can also be applied directly to identified sectors of the Nigerian economy to stimulate such sectors:Ojo (2017) emphasized that for this statement to apply, the sectors must be those which have potential for creating employment, developing the economy and creating wealth for the greater benefit of citizens and government of this country.

(iv) Revenue earned from taxes can be used to develop effective regulatory systems, strengthen financial and economic structures and address market imperfections and other distortions in the economic sector:Taxes realized from specific sectors of the economy can be channeled back to those sectors to encourage their continued growth and development.

(iv) Redistribution of income, whereby tax revenue realized from high income earners is used to provide public infrastructure and utilities to the lowest income earners.


Taofiki (2017) stated that in achieving sustainable development in the social and economic sectors of a country in recession,, the government must consider the trade-off involved in attracting foreign direct investment (FDI) in terms of giving incentives and the impact of these on the country’s sustainable development.

Tax is a fiscal instrument used to encourage or discourage specific production or consumption behaviors that affect the economic, environmental or social sustainability. Taxation has the following impacts on the sustainability of economic development:

(i) Tax system provides a fiscal platform that encourages foreign direct investment (FDI) and also fosters bilateral, regional and international trade relations among countries:

(ii) Taxation fosters a fair relationship between development and developing countries so as to ensure that developing countries get a fair allocation of tax base and tax room in emerging trade relations: Consequently, the developed countries would not take undue advantage of the development needs in developing countries as a reason not to work out the international tax regime and mechanism against the third world countries.

Taofiki (2017) submitted that, if there is no adequate tax structure or tax collection system in place, it limits the ability of implementing any policy meant to enhance sustainable development goals and this may make developing countries in recession to keep relying on foreign support which are usually attached with strings.

To Ojo (2017) an effective incentive of encouraging voluntary compliance in a recession would be a system of advance payment of tax as estimated by the tax-payer himself, based on the tax payable for the previous year or on 80% of tax payable for the preceding year. The balance of tax is payable when the final assessment has been paid within one month of issue of the notice of assessment. Also, In order to ease collection of tax, it is recommended that the state should set up its own revenue courts. The Federal Government has set that ball rolling by setting up a federal revenue court to look into cases of tax avoidance and evasion but its jurisdiction has not been presently extended to states.

Sani (2017) observed that for tax to be a tool for economic recovery in a recession, the following recommendations should be adhered to: 

(a) There is an urgent need for all state governments to clearly state the basic objectives of its tax system and the relationship between these objectives. This will assist to give the tax administrators a sense of direction and make the tax payer see clearly the reasons he/she should pay his/her tax as at when due.

(b) The tax collection mechanism used by tax officials must be free from corruption and embezzlement. If this is not done the revenue collected many not reach the desired point.

(c)       Judicious use of tax payers money should be made and be seen to have been properly utilized. This will encourage tax payers to continue to pay taxes.

To Aguda (2017), for Nigeria to sustain her recession recovery using other sources, effort should be made by the Federal State and Local Government to diversify the main revenue source from oil to other sectors of the economy such as agriculture, extractive industries in order to attract direct and indirect taxes. Chukwu (2017), stated that for Nigeria to fully recover from recession, cottage industries should be set up to process perishable Agricultural products like pepper, tomatoes mangoes into a form that could be exported. 

Abiola (2016), opined that Nigeria should revamp the Jos steel rolling Mills, Ajaokuta steel rolling Mills and Enugu coal Mine as a means to fast track the recovery process.

Commenting on the same issue, Musa ( 2017) observe that , the solution to Nigeria’ full recovery from recession lies with Nigeria bringing back the era of the Kano groundnuts pyramids, Cocoa forests of the west and Palm trees orchards of the east.


This paper concludes that, aggressive enlightenment of citizens on why they should pay tax, lowering of tax rates, broadening tax base, judicious usage of tax revenues, encouragement and promotion of agriculture , investment in the solid industries , resuscitation of the ailing industries among others can sustain Nigeria recession recovery process. 


The paper suggests that:

  1. Jingles, fliers and posters should be made in the major Nigerian languages encouraging them to pay tax.
  2. Items not taxable should be taxed,
  3. Government should provide infrastructure to encourage citizens to continue to pay tax.
  4.  Government should set up cottage industries to process perishable agricultural products like oranges, mangoes, tomatoes etc for exports .
  5. Government should revamp Ajaokuta and Jos steel rolling mills among s other ailing industries. 


Abiola, S. (2016). Nigeria Taxation in Focus: Theory and Practical, Lagos: Rakson Nigeria Limited.

Adedotun, A. A. (2017). Local Government Tax Mobilization and Utilization in Nigeria: Problems and Prospects. Polycom Ltd Lagos, Nigeria

Adejuwon, J. A. (2018) Analysis of Taxation Principles for Nigerian Students, Lagos: Not by Power Nig. Ltd.

Adeola, I. K. (2019). Principles of Public Finance, Lagos: Rakson Nigeria Limited.

Aguda (2017). Resource Mobilization for Economics Development; Retrieved from WWW. Academia. Com. on May 28, 2017.

 Bariyima, O. K. & Gladson, N. N. (2017). Booting Revenue Generation by State Government in Nigeria: The Tax Consultants Option. European Journal and Social Sciences, 8 (4).

Berger, O. (2016). Revenue Mobilization: Retrieved from http. www. Economics .org. on June 7, 2019.

Chukwu, T. (2017). Revenue Mobilization in Nigeria: Retrieved from www. on may 27, 2017.

Musa, W.E. (2017). Tax Planning and Economics Development: International Research Journal on Economics 4(4), 30-40.

Ojo, O. (2017). Taxation and Revenue: Retrieved from hht. on June 7, 2019.

Sanni, A. U. (2017). Tax Reform in the Capital Market. Ogun Journal of Economics, 3(3). 20-30.

Taofik, A. (2017). Testing the Revenue Mobilization drive in Nigeria. Retrieved from on June 6, 2019.