The introduction highlights Nigeria’s heavy reliance on crude oil revenue and the need for diversification. It discusses the concept of taxes, distinguishing between direct and indirect taxes. Indirect taxes are further explored, including their collection process and types in Nigeria.
The main types of indirect taxes in Nigeria are:
1. Value Added Tax (VAT): A consumption tax imposed on goods and services purchased within Nigeria. It is added at each stage of value addition and was introduced in 1993, replacing the Sales Tax. The VAT rate was originally 5% but was increased to 7.5% in 2020.
2. Custom Duties: Categorized as import and export duties, collected by the Nigeria Customs Service. Import duties are paid on products imported into Nigeria, while export duties are paid on products exported from Nigeria.
3. Excise Duty: Levied on certain manufactured products to discourage their sale and use. It was introduced in 1962 and applies to goods such as tobacco, alcohol, bleaching creams, and gambling. Telecommunication services were included in 2022.The positive implications of indirect taxes on the Nigerian economy include diversification and a steady source of revenue.
Indirect taxes also discourage the sale and consumption of harmful products, promote domestic production, and support the economy. However, there are negative impacts as well, such as the regressive nature of indirect taxes, discouragement of local businesses and foreign investment, and a lack of civic responsibility associated with direct taxes.In conclusion, while indirect taxes contribute to Nigeria’s revenue diversification, they are not sufficient to cover the deficit caused by the decline in crude oil prices. Further economic diversification is needed to support infrastructure and development projects.
Source: thenigerialawyer.com
