CHAPTER ONE INTRODUCTION
1.1 Background of the Study
Taxation is a form of compulsory levy imposed by government on individuals, corporate bodies, goods and services in order to finance its expenditure and create condition for the economic well being of the society. Taxation is a compulsory levy imposed on a subject or upon his property by the government to provide security, social amenities and create condition for the economic well being of the people (Appah and Oyandonghan, 2011). Anyanwu (1997) stated that tax are imposed to regulate the production of certain goods and services, protection of infant industries, control business and curb inflation, reduce income inequalities etc. According to Anyanfo (1996), the principle of taxation means the appropriate criteria to be applied in the development and evaluation of the tax structure. Such principles are essentially on application of some concepts derived from welfare economists, in order to achieve the broader objectives
of social justice. The tax system of a country should be based on sound principle. Ihingan (2004), and Osiegbu et al., (2010) listed the principles of taxation as equality, certainty, convenience etc. Anyanfo (1996) convenience principle of taxation states that the time and manner should be convenience to the tax payer. Nevertheless, principle of taxation provides the rationale for pay-as-you earn (PAYE) system of tax payable system of tax collection certainty principle of taxation states that a tax which each individual is bound to pay ought to be certain, and not arbitrary (Bhartia, 2009). Jhingan (2004) equity principles of taxation states that every tax payers should pay the taxing proportion to his income. The rich should pay more and at a higher rate than the other person whose income is less. However, these sagacious and magnanimous intention of the government are dedevited by a number of draw backs ranging from unfairness of tax payments to tax payers, arbitrary importation of taxes, show tax law development, inaccurate presentation of income figure for assessment, indirect taxation, poverty, illiteracy, poor vehicle as a tool for tax collection etc indeed the above short coming engender inequality taxation in Nigeria (HalimAli2010). The term inequality according to Longman dictionary of contemporary English (2000), Third edition, is an unfair situation, in which some groups in society have less money influence or opportunity than others. In the same view inequality means "the unfair difference between groups of people in society when some have more wealth, status, or opportunities than others (Oxford Advanced Learners Dictionary 2001) sixth edition inequality with respect to taxation is the unfairness and disparity resulting from the way and manner Nigerians and inhabitants from the way also individuals pay taxes. It is not out of place to say that taxes causing inequality in Nigeria is as old as the Nigerian tax system. In so far there was a time variance between when the North, West and the eastern pan began tax payment while the Northern and Western regions began payment of taxes before 1904 through the already defined way of leadership of the Emires and Obas respectively. The eastern regions which believed in family head syndrome had no such constituted leaders and resultantly lagged behind for about 23 years later before taxation was planted in the area. But the bottom line is that while some Nigerians paid tax to them, others never paid, this increasing inequality level in Nigeria. On the same vain the evil of inequality taxation was still unleashed on those Nigerians and resident tax payers between 1904 and 1957 when taxes were collected at various times from individuals and companies without distinctions. The basic of assessment allowable deduction and tax rates were the same. The period under review was be deviled by show tax law development, arbitrary imposition of taxes and multiplicity of tax liability and protests by tax payers were examples. They were actually engendered by inequality taxation. Widening income inequality in Nigeria has triggered a debate over the extent to which taxes are to used as a means of curbing inequality.