AN EXAMINATION OF ADMINISTRATIVE CHALLENGES INHIBITING THE DISTRIBUTION OF PETROLEUM PRODUCTS UNDER THE PETROLEUM PROFIT TAX LAWS OF NIGERIA

TABLES OF CONTENTS

Title Page

List of Statutes

Table of Cases

List of Abbreviations

Abstract

Table of Contents

CHAPTER ONE

GENERAL INTRODUCTION

1.1       Background to the Study

1.2       Statement of Problem

1.3       Aim and Objectives of the Study

1.4       Scope of the Study

1.5       Justification of the Study

1.6       Research Methodology

1.7       Literature Review

1.8       Organizational Layout

CHAPTER TWO

LEGAL FRAMEWORKS OF THE PETROLEUM INDUSTRY IN NIGERIA

2.1       Introduction

2.2       Petroleum Act

2.3       Oil Pipeline Act

2.4       Petroleum Profit Tax Act

2.5       Nigerian Oil and Gas Industry Local Content Development Act

2.6       Companies Income Tax Act (CITA)

CHAPTER THREE

PETROLEUM PROFIT UNDER THE NIGERIA’S PETROLEUM PROFIT TAX ACT

3.1       Introduction

3.2       1999 Constitution and the Oil and Gas Sector

3.3       Administration of Petroleum Profit Tax

3.4       Oil Licenses and Fiscal Arrangements

3.5       Fiscal Arrangements

3.6       Ownership of Petroleum Resources

3.7       Assessment of Petroleum Profit Tax

CHAPTER FOUR

OFFENCES AND PENALTIES IN RELATION TO'THE PETROLEUM PROFIT TAX

4.1       Introduction

4.2       Statutory Offences against the Petroleum Profit Tax

4.3       Penalties against Petroleum Profit Tax Avoidance/Evasion

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1       Summary

5.2       Findings/Observations

5.3       Recommendations

            Bibliography

ABSTRACT

The aim of this paper is to examine the ownership, the legal framework as well as the basic components of the petroleum profits which components are revenue, adjusted profits, assessable profit, chargeable profit, assessable tax and chargeable tax.In Nigeria, the petroleum industry is the bedrock of the economy and is responsible for about 90 percent of her total revenue. Her other sources of revenue include, inter alia, agriculture, solid minerals, goods and services and most importantly taxes collected from various sources including the petroleum industry. Companies and corporations in Nigeria are taxed principally under the Companies Income Tax Act. Cap 60, Laws of the Federation of Nigeria, 1990.. While companies engaged in petroleum operations are taxed specially under the Petroleum Profit Tax Act, as amended (PPTA Cap.354, LFN, 1990). Because of the peculiar and complicated nature of the oil industry, the Federal Board of Inland Revenue (FBIR) is saddled with the onerous task of collecting taxes from the various companies including those engaged in the oil business.This project will examine the petroleum profit taxation system established under the PPTA, with a view to assessing whether or not it is effective in dealing with the myriad of problems associated with the financial areas of the oil industry particularly the problem of tax evasion on the part of some companies and deliberate fraudulent and incorrect assessment of the tax due and payable on petroleum profits by others.This paper also focuses on the assessment of the petroleum profit tax under the Petroleum Profit Tax Act. Cap P13, Laws of Federation of Nigeria 2004, as well as judicial authorities‟ regarding same. Nigeria‟s economy is totally dependent on oil.It is no doubt that proceeds from the sale of crude oil holds the mainstay of the Nigerian economy since 1970s.equally not in contention is the fact that oil explorations and exploitation requires enormous amount of money and technological know-how to execute.This paper also concludes that petroleum profit tax is one of the most important components direct taxes in Nigeria that affects the economic growth, therefore should be properly managed to reduce the level of evasion by petroleum exploration companies in Nigeria. The paper recommends among others that companies involved in petroleum operations should be properly supervised by the relevant tax authority (FIRS) to reduce the level of tax evasion, government should show more accountability in the management of tax revenue and finally, the level of corruption in Nigeria and that of government officials should be drastically reduced to win the confidence of tax payers for voluntary tax compliance. More so, government policy should create a conducive-business environment that will attract foreign investors to the country.

CHAPTER ONE

GENERAL INTRODUCTION

1.1              Background to the Study

Before  a  country  considers  how  best  to  administer  its  tax  system  it must  first

possesses a clear picture of its tax system. The quality and quantity of resources required by tax administrations are to a large extent determined by the type of tax system which it is introduced. A nation‟s tax goals are not achieved by designing a tax system which is fair. Any fair system which is not administered as planned becomes inequitable. Thus, a good tax system is capable of financing the necessary level of public spending in the most efficient and equitable way possible. It should also raise enough revenue to finance essential expenditures without recourses to excessive public sector borrowing, raise the revenue in ways that are equitable that minimized its disincentive effects on economic activities, to do so in ways that do not deviate substantially from international norms.

It is common knowledge that one of the problems plaguing taxation in Nigeria has been the widespread tax evasion and avoidance which in the view of many experts in the tax field which has led to the loss of revenue which can be blamed on our inefficient and inept tax administrative machinery¹. There‟s no doubt that the administrative machinery in Nigeria still has a long way to go in terms of delivery and efficiency but it is believed that Nigeria‟s income tax law could in spite of their low rates and generous allowances, still have yielded much more revenue, but for the inefficient and defective assessment and collection machinery.²For no matter how sophisticated and progressive a tax legislation is, it cannot be effective unless it is properly administered with competence and integrity. This is why in this paper we will be examining the problems facing the administration of petroleum taxation.....

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