A tax policy represents key resource allocator between the public and private sectors in a country. It is usually imposed on individuals and entity that make up a country. The funds provided by tax are used by the states to support certain state obligations such as education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation.
A nation’s tax system is often a reflection of its communal values or the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burden, who will pay taxes, how much they will pay and how the taxes collected will be spent. In Nigeria, the taxation system dates back to 1904 when the personal income tax was introduced in Northern Nigeria before the unification of the country by the colonial masters. It was later implemented through the Native Revenue Ordinances to the western and Eastern regions in 1917 and 1928, respectively.
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