Published by The Tax Club, University of Lagos. on

By Fayinka Abisola Tiwalade

The problem of multiplicity of taxes is prevalent in the world today. It creates a situation where a tax payer bears the burden of more than one tax from the level of government or tax administration agency. This is sad story of companies in Nigeria today. They are riddled with too many taxes including Companies Income Tax, Capital Gains Tax, Tertiary Education Tax, Petroleum Profit Tax and Technology Tax from the federal government through the FIRS. Despite these multiple taxes, the National Assembly recently passed the Nigerian Police Trust Fund Establishment Act which provides that companies should pay 0.005% of their earnings as tax for the development of the Nigerian police force which another tax to add to the tax burdens that these companies already bear. This article seeks to examine the impact of these taxes on the earnings of the companies and the ease of doing business in Nigeria.

Taxation in Nigeria is riddled with many problems and one of them is the multiplicity of taxes. This can be defined to mean different things such as the various unlawful compulsory payments being collected by the state and local governments without legal backing, situations where a tax payer is faced with demands from two or more different levels of government either for the same or similar taxes or where the same level of government imposes two or more taxes on the same tax base. However, for the purpose of this article, the writer will like to adopt the last meaning, that is, where a particular level of government demands multiple taxes from the same tax base. This should be distinguished from numerous taxes which occurs in a situation where many taxes are levied by various levels of government on different tax bases.
This is the situation of registered companies in Nigeria. They are subjected to various taxes by the Federal government through the Federal Inland Revenue Services (FIRS). This taxes include the companies income tax, capital gains tax, tertiary education tax, technology tax, and petroleum profit tax. Despite the large amount of taxes already levied on the income of companies, on the 24th of June, 2019, the National Assembly passed the Nigerian Police Trust Fund Act, 2019, which provides that companies are to pay 0.005% of their earnings to FIRS.
This article seeks to examine the impact in which the problem of multiplicity of taxes which is now compounded by the new Nigerian Police Force tax will have on various companies in Nigeria. The first part which is the abstract focuses of the event leading to the problem and the general overview of what the article is about. The second part is the introduction which more detailed overview of the article and what the writer seeks to achieve with it. The third part is a proper examination of the Nigerian Police Tax by examining the Act and the few literatures which exists on the tax. The fourth part will be focused on examining the effects of multiple taxes on the growth and development of the Nigerian economy. The fifth part of the article will be the recommendations which will contain recommendations on what can be done to solve the problem. The last part will be the conclusion wrapping up the article.

In April 2019, the National Assembly passed into law the Nigerian Police Trust Fund Act (NPFTA) which was given presidential assent on the 24th of June, 2019. The Act establishes a fund to improve the state of the Nigerian Police Force and to procure machinery and equipment for them and for the enhancement of the skills of the police personnel to handle state of the art machinery.
The Act imposes a 0.005% levy on the net profit of all companies in Nigeria and also intends to make revenue from other sources such as the federation account, any grant provided by the government, moneys appropriated for the objective of the act in the National budget, aids, grants or assistance by agencies, NGO’s or private sector, grants and donations from any source, monies derived from investment by the trust fund.
There shall be a trust fund created for the money which shall be a body corporate which may sue and be sued. The trust fund shall be managed by a board and it shall span for a 6-year tenure. The Act exempts the trust fund from paying any income tax on any income accruing from investments made by the trust fund.

The effect of multiplicity of taxes on the Nigerian economy can be seen in the 2014 World Bank report on the ease of doing business. This report shows that the ease of doing business in Nigeria is very poor and one of the factors leading to this problem is the multiple taxes which this businesses have to pay.
Multiple taxes creates a very difficult environment for businesses to survive in Nigeria and this has led to a lot of businesses leaving Nigeria for other business enabling environments. This is because most investors are not certain as to the amount of taxes which their businesses will be subjected to.
Multiplicity of taxes is against one of the canons of taxation which is certainty. It provides that tax payers are supposed to know the amount of taxes that will be levied on their income and where this is not so, the canon of certainty as propounded Adam Smith is omitted.
Also, multiplicity of taxes leads to low level of tax compliance in the economy. This means that due to the multiplicity of taxes, Nigeria will make less than the amount of finance it is supposed to make from taxes. This is because based on the report by the 2003 Tax Study Group, a multiple tax system is always tedious to the tax payer.
Hence, it can be seen that the effect of the multiple taxation on the Nigerian economy is not a favourable one. It leads to low level of tax compliance, it also causes lack of certainty and a poor business enabling environment in Nigeria.

According to the 2003 Tax Study Group, recommendations were made that there should only be two taxes in Nigeria which are income tax and the expenditure tax at the rate of 10%. This is predicated on the argument that broad based tax on income and expenditure will be easier to evade and also ensure there is certainty in taxation in Nigeria.
Furthermore, although this writer acknowledges the fact that funding the police and improving security is a very important issue, the writer suggests that funding can be gotten from the already existing revenue streams rather than burden the income of companies some more by asking them to pay the tax.

In conclusion, there is an existing huge amount of taxes which is levied on the income of companies in Nigeria. However, the Federal Government has added a new tax of 0.005% of their income to be paid as the Nigerian Police tax. These multiple taxes on one tax base have a ripple effect on the Nigerian economy seeing as it leads to uncertainty for the tax payer and low level of tax compliance. Hence, the writer recommends that the funds for improving the Police Force should be gotten from more allocation from the already existing streams of revenue for the government.


Fayinka Abisola Tiwalade is a final year law student. She has interest in international law, taxation, energy law and corporate finance. She is particularly passionate about refugee laws and laws regarding stateless persons. You can reach her via

LinkedIn: http://Abisola Fayinka

Twitter Handle: @tiwa_bisola


Categories: National Tax

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