TAX FARMING AS PANACEA FOR INCREASED REVENUE GENERATION IN NIGERIA

TAX FARMING AS PANACEA
FOR INCREASED REVENUE
GENERATION IN NIGERIA
Fineboy Ikechi Joseph 6 , Jane Chinyere
Akujor 2 , Izundu Onwuka C C 2 Emea
Ukairo Kalu 3
Department of Financial Management
Technology, School of Management
Technology , Federal University of
Technology, Owerri, Imo State.
janeakujor@gmail.com
.
ABSTRACT
This study examines tax farming as panacea
for increased revenue generation in Nigeria.
Ineffective tax administration appears to be
an unending setback in Nigeria as a result of
myriad of challenges resulting in poor tax
6,2&3
Department of Accounting, Faculty
of Social and Management Sciences,
Clifford University, Owerrinta, Ihie, Abia
State.
fayooxyz2009@yahoo.com,emeaukalu@
yahoo.com
&
Accounting and Finance Research Association
revenue generation. The study reviewed
many previous studies on tax farming. The
reviews revealed that tax farming leads to
excessive exploitation of taxpayers in their
bid to overzealously recover the
advance payment to the government and
running expense and then make profit. It was
uncovered that the unpredictability and
volatility of tenure of tax farmers results in
lack of investment in the system because tax-
farmers investments were not secured as
their contract could be terminated by the
state at any time thereby discouraging
investment in the long-run. However, the
advantages far outweigh the demerits. The
study revealed that tax farming is in line with
privatization, the current economic drive
where the management of hitherto public
enterprises has been transferred to
competent private individuals to ensure
efficiency and effectiveness of such
organizations. Again, it ensured a highly
coherent and efficient system of resource
allocation. The system similarly provided
guidance for resource allocation not only to
the tax-farmers but also to the state. The tax-
farming system was a very efficient revenue
collection tactic for the state. It played a
substantial role behind the decision of the
state to invest directly in the various
industries where it generated enormous tax
revenue.
The tax-farming system contributed
significantly to the increase in capital in
the private sector both by the massive
profits it helped create and by compelling
the entrepreneurs to form partnerships.
Based on the findings via review of
relevant
literatures,
the
study
recommends that tax farming should be
introduced by the government and given
legal backing in Nigeria as a veritable
strategy for taxes and levies collection.Book of Abstract
Accounting and Finance Research Association
Government should concentrate on tax
administration
which
involves
interpretation of the law and issuing
guidelines, assessment, and auditing to
ensure fairness and the rule of law which
will entrench significant degree of
monitoring of the government's agents
while tax collection should be contracted
out to tax farmers in the collection of
determined tax arrears in order to stop
over-collection. They should be engaged
verification of value of goods declared by
importers at customs to ensure that it
corresponds to international price data.
This would guarantee efficient revenue
collection and accountability since the
amount to be collected is already
determined. The bidding and auctioning
off process of tax farming to determine
the right of private sector collectors to
collect certain taxes and levies should be
competitive and transparent to ensure
that maximum revenue is derived from
the system and to avoid corrupt leaders
ceding the right to collect taxes and levies
to their cronies, a practice which negates
the primary objectives of tax farming. The
bidding process should be done at arm’s
length.
Keywords:
Tax
Farming,Tax Administration, Tax Farmers, Collection
Mechanism

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