ASSESSMENT OF PETROLEUM PROFIT TAX UNDER THE NIGERIAN TAX LAWS
- Project Research
- 1-5 Chapters
- Abstract : Available
- Table of Content: Available
- Reference Style: FOOTNOTE / ENDNOTE
- Recommended for : Student Researchers
- NGN 5000
Problems of the Research
There are many problems affecting the petroleum profit tax in general and the petroleum profit tax assessment in particular. These include the problems relating to the PPT administration, the complexity of PPT/MOU calculation, and the problems of PPT avoidance and evasion. There is no doubt about the significance of strong, able and effective administration in any system. It is widely agreed that one of the main aims of taxation is to raise sufficient revenue for the government to meet its needs of providing necessary services to the public. It is also agreed that tax evasion / avoidance cause government to loose a huge amount of money. Consequently, there is the opinion that the loss of revenue as the result of widespread tax evasion /avoidance in Nigeria, is due to the weak, inept and inefficient system of tax administration.23 In the oil sub-sector, the Federal Board of Inland Revenue (FBIR) is vested with the power to administer the petroleum profit tax. It is also responsible for carrying out all acts deemed necessary and expedient for – inter alia –the assessment of petroleum profits tax. The major problem existing within the tax administration of the upstream oil sub-sector lies essentially on the design of the tax administrative system and the capability of the institution. These consequently lead to low efficiency and effectiveness of not only the assessments of petroleum profit tax, but also to the collection of the tax.24This is a serious case considering the importance of the revenue that comes directly or indirectly from the sector. Furthermore, the issue of institutional capability is even more pervasive. This is because the tax officials dealing with the oil producing companies must be elite team of professionals that are able to carry out their tax assessment responsibilities at a highest standard of efficiency and integrity. Additionally, the widespread problems of work force; inadequate professional training, inadequate facilities and environment, low staff morale, lack of computerization, and lack of resources, all affect the efficiency, effectiveness and performance in the administration of petroleum profit tax. 25 Indeed, PPT assessment entails ascertaining the profits of the oil producing companies as well as the chargeable tax. Each of these can not be actually arrived at without indulging in the profit calculation which is very involving. This is because petroleum operations are very complex in nature. Oil industry is capital intensive with high man per capital ratio. It requires the services of many different professionals, which – inter alia– include geologists, seismologists, surveyors, architects, engineers, economists, accountants, lawyers, and civil servants. Moreover, the statutes governing the taxation of the oil producing companies in Nigeria is just like a final outcome of many negotiations and agreements. The chargeable profits are not the same as the company’s statutory profits for different reasons. Partly because the chargeable profits are based on the tax reference price which is known as posted price. In the past, posted price was fixed by negotiation between the government and the oil companies. Now, the government fixes it unilaterally. From the other part, certain expenditure items are treated differently.
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