A Lagos manufacturer pays company income tax to the federal government, a development levy, a state levy on its delivery trucks, and a local government levy on its signboard. Each demand comes from a body with some legal right to ask. Whether the total is fair, lawful and workable depends on who is allowed to tax what, which is a question of fiscal federalism and the organs of tax administration.
This topic covers the structure and taxing rights of the federal, state and local tiers, the four tax Acts of the 2025 reform and the bodies they create (the Nigeria Revenue Service, the Joint Revenue Board, the State Internal Revenue Services and the Local Government Revenue Committees), the limits of tax administration, and the causes, effects and cures of multiple taxation.
The previous topic covered tax policy. The next covers objections and appeals. The November 2020 Pathfinder (Question 6) tests the structure of the system, two organs and multiple taxation. Its answer names the Federal Inland Revenue Service and the Joint Tax Board; our answer names their successors, so the Pathfinder solution is slightly different from ours.
In 30 seconds
Nigeria is a federation of states and the Federal Capital Territory (CFRN, s. 2). Three tiers tax. The Nigeria Revenue Service (NRS) collects company income tax, withholding tax on companies and non-resident individuals, petroleum profits tax, hydrocarbon tax, VAT, development levy, company stamp duties and the personal income tax of the armed forces, police and foreign service. State (and FCT) Internal Revenue Services tax resident individuals.
Local Government Revenue Committees collect local taxes, fines and rates. The Joint Revenue Board (JRB) harmonises the system and settles disputes between authorities, including on residence. Multiple taxation arises from overlapping powers, unfair revenue sharing, weak funding, illegal collectors and private consultants. It lowers compliance and yield.
Key terms in plain English
| Term | What it means |
|---|---|
| Fiscal federalism | Revenue raising and sharing between the units of a federation |
| Nigeria Revenue Service (NRS) | The federal tax authority created by the NRS (Establishment) Act 2025 |
| Joint Revenue Board (JRB) | The body that harmonises tax administration and resolves disputes between tax authorities |
| State Internal Revenue Service | The tax authority of a state, or of the Federal Capital Territory |
| Local Government Revenue Committee | The body that assesses and collects local taxes, fines and rates |
| Multiple taxation | The same person taxed on the same liability by more than one authority |
| Tax yield | Revenue left after the cost of administering the tax |
Syllabus check
This topic is in syllabus area A (tax administration, 5% of marks). It covers:
- constitutional provisions on fiscal federalism;
- the structure and taxing rights of the different tiers of government and the roles of the three arms of government;
- the composition and functions of the tax organs;
- the concept, causes and effects of multiple taxation, and its possible solutions.
CAMA 2020 and tax administration
The Companies and Allied Matters Act 2020 (CAMA 2020) is the company law of Nigeria. The sections below apply to this topic.
| Section | What it says | Link to this topic |
|---|---|---|
| s. 305 and s. 308 | Directors must act in good faith, with the care, diligence and skill of a reasonably prudent director | Directors must register the company with the right authorities and meet each tier’s lawful demands |
| s. 377(1) and s. 378 | Directors prepare financial statements that give a true and fair view | The accounts support every return filed with a tax authority |
| s. 404 | Provides for the statutory audit committee of a public company | It can review tax compliance across tiers |
The rules in more depth
Fiscal federalism and the three tiers
Fiscal federalism is the system of revenue generation and redistribution within a federal system. Section 2(1) of the Constitution of the Federal Republic of Nigeria (CFRN) makes Nigeria one indivisible sovereign state, and s. 2(2) makes it a federation of states and a Federal Capital Territory. For tax purposes there are three tiers: federal, state and local government.
The Nigeria Tax Administration Act (NTAA) 2025 spells out the jurisdiction of each, and a tax authority may, with the approval of its government, authorise another to administer its taxes on its behalf.
| Tier and authority | Taxes it administers |
|---|---|
| Federal: Nigeria Revenue Service | Company income tax of resident and non-resident companies, including tax on chargeable gains; withholding tax on companies and non-resident individuals; petroleum profits tax; hydrocarbon tax; VAT; development levy; stamp duties on bodies corporate; personal income tax of the armed forces, police (other than civilians), foreign service officers and non-state-resident employees in Nigeria |
| State: State Internal Revenue Service (and the FCT Internal Revenue Service for FCT residents) | Taxes on income, profits or chargeable gains and stamp duties of resident individuals, and other powers given by tax law |
| Local: Local Government Revenue Committee | All taxes, fines and rates within the local government’s jurisdiction, for example shop and kiosk rates, liquor licences, slaughter slab fees, motor park levies, marriage, birth and death registration fees |
The Nigeria Tax Act 2025 introduced the development levy, which replaced the tertiary education tax, the National Information Technology Development Agency levy, the Nigeria Police Trust Fund levy and the National Agency for Science and Engineering Infrastructure levy. The Taxes and Levies (Approved List for Collection) Act, Cap. T2, has not yet been repealed or amended to match the 2025 reform.
Under the proposed States Harmonised Taxes and Levies (Approved List for Collection) Bill 2025, states would collect income tax, stamp duties, property tax, road tax, haulage levy and economic development levy, and local governments a harmonised levy, liquor licences, broadcast fees, user charges and daily ticketing.
The organs of tax administration
The 2025 reform created four Acts: the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act and the Joint Revenue Board of Nigeria (Establishment) Act. They set up these organs.
| Organ | Composition | Main functions |
|---|---|---|
| Nigeria Revenue Service (NRS) | Executive Chairman (appointed by the President, confirmed by the Senate; the chief executive and accounting officer) and six Executive Directors, one per geopolitical zone, each for four years, renewable once | Assess, collect and account for federal tax; enforce payment; audit and investigate; measure losses from fraud and evasion and trace and seize proceeds; exchange information; issue the taxpayer identification number; run taxpayer education; make rules with the Minister’s approval |
| NRS Board | Executive Chairman, representatives of the Ministers of Finance, National Planning and Petroleum and Gas Resources and of the Attorney-General, the CBN Governor, the Revenue Mobilisation, Allocation and Fiscal Commission chairman, the Customs Comptroller-General, the Registrar-General of the Corporate Affairs Commission, and the Executive Directors | Set policy guidelines; review implementation; approve strategic plans; employ staff and fix terms; make rules and issue regulations; assign directorates. A Technical Committee advises on technical tax matters |
| Joint Revenue Board (JRB) | Chairman (the NRS Executive Chairman), the chairmen of each State and FCT Internal Revenue Service, and ex-officio members including the Ministry of Finance, the National Identity Management Commission, the Immigration Service, the Federal Road Safety Corps and Customs | Keep a database of TINs; resolve disputes between authorities, including on residence; advise on double taxation and new taxes; harmonise taxes and rates; publish revenue and tax-expenditure data; guide accreditation of tax agents. It also houses the Tax Appeal Tribunal and the Tax Ombud |
| State Internal Revenue Service and State Board | Executive Chairman appointed by the Governor and confirmed by the State House of Assembly; Board of the Chairman, directors, a Finance Ministry director, three senatorial district members and the Legal Adviser as secretary. Quorum: five members | Assess individuals, estates, trusts and families; collect, enforce and remit state taxes; examine and investigate; the Board sets policy, approves plans and keeps an approved share of revenue to cover collection costs |
| Local Government Revenue Committee | Local government Supervisor for Finance as chairman, three councillors and two people experienced in revenue | Assess and collect local taxes, fines and rates and account for them; run the revenue department, autonomous of the local treasury |
| State Joint Revenue Committee | State Service Executive Chairman, the chairmen of the Local Government Revenue Committees, a local government affairs official, observers from the Revenue Mobilisation Commission and the Federal Road Safety Commission, the Legal Adviser and a secretary | Implement JRB decisions; advise on revenue matters; harmonise state tax administration; educate the public |
Limitations of tax administration
Poor public enlightenment; inadequate funding; too few qualified officials at state and local level; tax evasion; improper use of tax consultants; weak will in tax authority staff; loopholes in the laws; and poor governance.
Multiple taxation
Multiple taxation exists where a tax, fee or rate is charged on the same person for the same liability by more than one authority.
It is also taken to occur when there are unlawful demands with no legal backing, when state or local government ask for taxes similar to federal ones (for example VAT and a state sales tax), or when government imposes several taxes on one base, such as company income tax, tertiary education tax and a technology levy on the same company.
Causes. (1) The Constitution gives each tier autonomous taxing powers. (2) Revenue sharing seen as unfair to states and local governments. (3) States withholding local government revenue, so local governments chase any source. (4) Underfunding of departments and agencies, leading to aggressive internally generated revenue drives. (5) Falling oil revenue. (6) Illegal collectors and touts. (7) Private consultants paid to meet targets. (8) Many revenue agencies and manual systems.
Effects on compliance and yield. Uncertainty for investors; erosion of the tax base as firms move out of a state or the country; a disincentive to file correctly and on time; and low yield, because many small taxes cost more to administer than they raise.
Solutions. Streamline and harmonise taxes; review the Constitution to remove overlap in taxing rights; make states release local governments’ allocations; abolish unorthodox collection and use technology; limit the number of revenue agencies. The NTAA 2025 and the harmonisation of taxes among the tiers are designed to deal with the problem.
Worked examples
Example 1: who collects? A Lagos company with a resident director, a soldier’s salary and a road haulage vehicle.
- Company income tax and the development levy: NRS.
- The soldier’s personal income tax: NRS, as armed forces personnel.
- A resident individual’s personal income tax: the State Internal Revenue Service.
- Local levies such as motor park fees: the Local Government Revenue Committee.
Example 2: residence dispute. Two state services each claim an individual as resident.
- The dispute is between tax authorities.
- The Joint Revenue Board resolves disputes on residence between authorities.
Example 3: is it multiple taxation? VAT is charged federally and a state charges a sales tax on the same sale.
- Two authorities tax the same person on the same liability.
- That is multiple taxation, caused by overlapping powers.
- The cure is harmonisation under the 2025 reform.
How to score full marks
- Structure every answer by tier: federal, state, local.
- Name the Act and the organ: NRS, JRB, State Service, Revenue Committee.
- Give composition and functions separately when asked for both.
- Use examples of taxes for each tier.
- Split multiple taxation into meaning, causes, effects and solutions.
- Use current names, and say if the exam paper uses the older ones.
Common mistakes in the exam
- Using the Federal Inland Revenue Service and the Joint Tax Board, which the 2025 reform replaced with the NRS and the JRB.
- Giving state taxes to the federal government.
- Listing causes of multiple taxation but no solutions.
- Giving functions of an organ without its composition.
- Forgetting the Federal Capital Territory Internal Revenue Service.
Quick revision
- Three tiers: NRS, State/FCT Services, Local Government Revenue Committees.
- Four 2025 Acts: tax, administration, NRS establishment, JRB establishment.
- JRB: harmonise, database of TINs, resolve disputes, residence.
- NRS: six Executive Directors, four-year term, renewable once.
- Multiple taxation: overlapping powers, unfair sharing, illegal collectors, consultants.
- CAMA 2020: ss. 305, 308, 377(1), 378, 404.
Practice questions
These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer. Full model answers follow the written questions.
Recall check: multiple choice
Recent ICAN papers are written, although older papers such as May 2014 included multiple-choice questions. These questions are for quick recall. The written questions that follow are closer to the exam.
Question 1. Section 2(2) of the Constitution describes Nigeria as:
- A unitary state
- A federation of states and a Federal Capital Territory
- A confederation
- A monarchy
Show the answer
B. It provides that Nigeria is a federation consisting of states and a Federal Capital Territory.
Question 2. Value added tax is administered by the:
- Local Government Revenue Committee
- State Internal Revenue Service
- Nigeria Revenue Service
- Tax Appeal Tribunal
Show the answer
C. VAT is a federal tax collected by the NRS.
Question 3. The personal income tax of a resident individual is administered by the:
- State or FCT Internal Revenue Service
- Nigeria Revenue Service
- Customs Service
- Joint Revenue Board
Show the answer
A. State services (and the FCT service for FCT residents) tax resident individuals.
Question 4. Disputes between tax authorities on residence are resolved by the:
- Tax Appeal Tribunal
- Joint Revenue Board
- Federal High Court only
- Office of the Tax Ombud
Show the answer
B. Resolving disputes between authorities, including on residence, is a JRB function.
Question 5. The number of Executive Directors of the NRS, one per geopolitical zone, is:
- Three
- Four
- Six
- Ten
Show the answer
C. Six, each for four years, renewable once.
Question 6. The quorum of a State Board of Internal Revenue is:
- Three
- Five
- Seven
- Ten
Show the answer
B. Five members, one of whom is the Chairman or a Director.
Question 7. The chairman of a Local Government Revenue Committee is the:
- Local government Supervisor for Finance
- Governor
- Executive Chairman of the NRS
- Auditor-General
Show the answer
A. The Supervisor for Finance chairs, with three councillors and two experienced persons.
Question 8. Which is a cause of multiple taxation?
- A single revenue agency
- Autonomous taxing powers of each tier
- Harmonised taxes
- Low tax rates
Show the answer
B. Each tier has its own constitutional power to tax.
Question 9. The development levy introduced by the Nigeria Tax Act 2025 replaced:
- VAT
- The tertiary education tax and other levies
- Stamp duties
- Customs duty
Show the answer
B. It replaced the tertiary education tax and the NITDA, Police Trust Fund and NASENI levies.
Question 10. Which section of CAMA 2020 sets the director’s duty of care and skill?
- Section 308
- Section 400
- Section 405
- Section 409
Show the answer
A. Directors should test the assumptions behind a decision.
Written questions
Question 11 (10 marks). (a) Name the four tax Acts introduced by the 2025 reform. (4 marks) (b) State three taxes administered by each of the federal and state tax authorities. (6 marks)
Question 12 (20 marks). A foreign tax reviewer is visiting Nigeria. Advise her on: (a) the structure of the tax administration system. (4 marks) (b) the composition and functions of the Joint Revenue Board. (8 marks) (c) the composition and functions of the State Joint Revenue Committee. (8 marks)
Question 13 (10 marks). A manufacturer complains of multiple taxation. (a) Explain the meaning of multiple taxation. (2 marks) (b) State four causes. (4 marks) (c) State four effects on compliance and revenue yield. (2 marks) (d) State two solutions. (2 marks)
Model answers
Show the model answer to Question 11
(a) Acts (4 marks). The Nigeria Tax Act 2025; the Nigeria Tax Administration Act 2025; the Nigeria Revenue Service (Establishment) Act 2025; the Joint Revenue Board of Nigeria (Establishment) Act 2025. (1 each)
(b) Taxes (6 marks). Federal (NRS): company income tax, VAT, petroleum profits tax, hydrocarbon tax, development levy, company stamp duties, withholding tax on companies. (3, any three) State: personal income tax of resident individuals, withholding tax on individuals, stamp duties of individuals, capital gains tax of individuals. (3, any three)
Show the model answer to Question 12
(a) Structure (4 marks). Three tiers of government tax: federal, state and local. (1) The NRS administers federal taxes. (1) State and FCT Internal Revenue Services administer taxes on resident individuals. (1) Local Government Revenue Committees collect local taxes, fines and rates. (1)
(b) Joint Revenue Board (8 marks). Composition:
- the NRS Executive Chairman as chairman
- the chairmen of the State and FCT Internal Revenue Services
- ex-officio members from the Ministry of Finance, the National Identity Management Commission, the Revenue Mobilisation Commission, Immigration, the Federal Road Safety Corps, Customs and the NRS
(3) Functions: keep a TIN database; resolve disputes between authorities, including on residence; advise on double taxation and new taxes; harmonise taxes and administration; publish revenue and tax-expenditure data; guide accreditation of tax agents. (5, any five)
(c) State Joint Revenue Committee (8 marks). Composition:
- the State Service Executive Chairman (chair)
- chairmen of the Local Government Revenue Committees
- a local government affairs official not below Director
- observers from the Revenue Mobilisation Commission and the Federal Road Safety Commission
- the Legal Adviser
- a secretary from the State Service
(4) Functions: implement JRB decisions; advise the JRB, state and local governments; harmonise tax administration in the state; educate the public; other tasks given by the JRB. (4)
Show the model answer to Question 13
(a) Meaning (2 marks). The same person is taxed on the same liability by more than one authority, for example federal VAT and a state sales tax. (2)
(b) Causes (4 marks). Autonomous taxing powers of the three tiers; unfair revenue sharing; states withholding local government revenue; underfunded agencies chasing revenue; illegal collectors; private consultants. (1 each, any four)
(c) Effects (2 marks). Investment uncertainty; erosion of the tax base; disincentive to comply; low yield after collection cost. (0.5 each)
(d) Solutions (2 marks). Harmonise and streamline taxes; limit revenue agencies; review overlapping constitutional powers; use technology and stop unorthodox collection. (1 each, any two)
Pathfinder on Tax authorities, taxing rights by tier and the causes of multiple taxation
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
Parts (a) and (b) asked for the causes of multiple taxation in Nigeria and its effect on compliance and revenue, with ways to reduce it. Use our section on multiple taxation for the causes and the current approach.
Revise first: Multiple taxation
The question asked for the constraints in assessing and collecting tax from the self-employed and the ways of widening the tax net. Our sections on the limits of tax administration and on multiple taxation cover the same ground.
Revise first: Limitations of tax administration
Question 6 asked for the structure of the tax administration system (4 marks), the functions of any two organs (8 marks), and the concerns, causes and solutions of multiple taxation (8 marks). Its answer uses the older names; ours uses the NRS and the JRB.
Revise first: The organs of tax administration
Source: ICAN Pathfinder, Advanced Taxation. Diets covered: November Diet, 2024; November Diet, 2021 and November Diet, 2020.
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