LA ADMINISTRACIÓN TRIBUTARIA CENTRAL EN EL ECUADOR
5.2 FACULTAD RESOLUTIVA
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resistance to the introduction of direct taxation in the east was the Aba riot of 1929.179 Despite the resentment and strong opposition to the issue of taxation, the colonial government in Nigeria remained undaunted and by the Macpherson Constitution of 1954, Nigeria became a Federation of three regions with each region having substantial measure of self-government.
Prior to 1960, the Raisman Commission was set up to review the existing taxing powers and revenue allocation formula as this had become an issue subsequent to Nigeria becoming a Federation in 1954.180 Based on the recommendation of the commission, four tax legislations were enacted between 1959 and 1961. They are The Petroleum Profit Tax Act 1959, The Stamp Duties Act 1959, The Companies Income Tax Act 1961, and The Personal Income Tax (Lagos) Act 1961.
In the course of administering these principal Acts, each of them has undergone various amendments while new ones have equally been introduced.181 In addition to the amendments introduced to facilitate easy administration of the tax laws, various compliance measures have been introduced, the latest being the self-assessment system which was introduced in 1991. The system which has a lot of incentives was introduced to encourage voluntary tax compliance.182
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someone else. Incidence means the final resting place of a tax. The incidence is on the man who ultimately bears the money burden of the tax.
Impact and incidence is not the same. The impact of the tax is on the person who pays it in the first instance and the incidence is on who finally bears it. Again incidence is not shifting. Shifting means the process of transfer, i.e. the passing of the tax from the one who first pays it to the one who finally bears it. In other words, incidence is final resting place of the burden of a tax184 while shifting is process of transferring money burden of tax to someone else. Shifting finally ends in incidence when a person on whom tax is levied tries to shift tax on the other; he may succeed in shifting tax completely, partly, or may not succeed at all. Shifting of tax can take place in two directions, forward and backward. If tax is shifted from seller to consumer, it is a case of forwarding shifting. Backward shifting takes place when consumers do not purchase commodities at increased prices, sellers are then forced to cut down prices and bear the burden of tax themselves.185 Backward shifting is thus performed by buyers.
It is also necessary to distinguish the concept of incidence from effect. As stated earlier, incidence is direct money burden of a tax. Effect of taxation is repercussions or consequences of imposition of a tax on individuals and on community in general.186 Thus the incidence of a tax is the final resting place of a tax after which further shifting is not possible. In case of a direct tax, the impact or the initial burden and the incidence or the ultimate burden is upon the same person. Thus, direct taxes are not shift-able.
Such a tax is to be paid by the person on whom it is imposed. On the other hand, for an
184 Lennox et al ‗Administration of Local and Uses Taxes‘ (1961) Municipal Finance Officers Association of the United States and Canada, 16.
185 Economic Concept , Impact and Incidence of Taxation, www.economicsconcept.com./impacts-and-incidence-of-tax.html assessed on 4th September, 2014.
186 Ibid.
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indirect tax, impact and incidence are on different persons, thus an indirect tax is shift-able.187
An example is when a tax is levied on say, match box; the initial burden of this tax is felt by the manufacturer. Thus the impact of the tax is on the manufacturer. But he is not supposed to pay the tax. By raising the price of the match box he ultimately succeeds in shifting the burden of this tax on the buyer. Thus, the incidence of an indirect tax is borne by the buyers of the taxed item.188 However, the incidence of an indirect tax may be borne by buyer alone or seller alone or it may be divided between them depending on the elasticity of demand and the elasticity of supply for the taxed commodity.82
Again, it is noteworthy that an effect of taxation is broader in term. It studies the changes that take place in an economy because of taxation. The changes may relate to production, consumption, localization of industry, etc.189 Supposing the government imposes tax on the production of cloth. Its effect will not only be on the consumers in the form of increased prices, but also on the producers and workers. If the demand for cloth is elastic, the increase in the price of cloth due to the taxation will reduce its demand. The manufacturer will produce less cloth. Consequently, some workers may be retrenched from the factory. Fall in the demand for cloth will also affect the cotton producing farmers. Under the effects of taxation, we consider not only the economic effects, but also the political, social and other effects. As earlier stated, therefore, incidence of taxation and effect of taxation are two
187 S Mukherjee, Modern Economic Theory (Kolkata: New Age International, 2002) P. 833.
188 E D Fagun, ‗Shifting of Sales Taxes under Joint Costs‘ (1953) Public Finance, Vol. 8, 338-554.
189 T R Jain & O P Khanna, Micro Economics: Money Banking and Public Finance (New Delhi: V.K Publications, (2008) P. 419.
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different things. Incidence of taxation points to the monetary burden of taxes on the taxpayers. Contrary to it, the effects of taxation refers to their real burden.190
Again, the natures of the commodity being taxed in Nigeria have an effect on consumption. This is because decrease in consumption due to taxes may be beneficial or harmful. If on account of taxes, prices of necessities of life or conventional necessities go up, they will have bad effect. These goods are mostly consumed by the poor. An example of such products is foodstuff. Despite the imposition of taxes, demand for these goods remains inelastic. In order to maintain the consumption of these goods as before, they will either borrow or cut down the consumption of comforts, like milk, fruits etc. Demand of these goods being elastic, their consumption falls with rise in price. Taxes on luxuries are considered desirable because demand for these goods is elastic and when their prices rise due to imposition of taxes, their consumption goes down. Fall on consumption of these goods is beneficial to the society and incidence of taxes levied on these goods falls mostly on rich people who are capable of bearing this burden.191 Taxes on intoxicants and harmful goods are also beneficial to the society e.g. taxes on alcohol and cigarettes. In other words, prices of these goods rise and their consumption falls resulting in increased social efficiency.
In summary, the study of the impact and incidence of tax is very important in tax administration. The tax system is not merely aimed at raising a certain amount of revenue, but the aim is to raise it from these sections of the people who can best bear the tax. The aim is to secure a just distribution of the tax burden.192 This obviously cannot be done unless an effort is made to trace the incidence of each tax levied by the government. It is absolutely necessary to know who pays it ultimately in order to find out whether it is just to ask him to
190 Ibid P.420.
191 P Mies2kowski, ‗Tax Incidence Theory‘ (1969) JEL, 1103.
192 T Seth, Incidence of Taxation, meaning, Impact and other details, www.economicdiscussion.net/taxes/incidence-of-taxation-meaning-impact-and-other-details/1942 accessed on 5th September, 2014.
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pay it, or whether the burden imposed on him is according to the ability of the tax-payer or not.
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