Taxing system is basically structures as a tool for revenue collection. The primary objectives of any tax system are to raise revenues to finance government operations and programmes19. To this extent, tax system may attempt to achieve other objectives, which are to help stimulate and/or control the economy, encourage certain activities and business, discourage socially undesirable behaviours and promote equity and fairness in the system. It is for this reason, and in order for the public with the necessary goods and services, to require revenue through taxation.20

            This revenue is generated through direct and indirect form of taxation. Direct are paid on income. This effectively means that the more income you earn, the greater your contribution is expected to be the state. Indirect taxes are levied on expenditure. This tax is imposed on the basis of the individual consumption; the individual pays only on what he consumed. However, it must be noted that taxation is used not only to raise revenue but also to regulate consumption and may even be used to curtail various forms of business activities. For instance, alcoholic beverages many be taxed heavily on the grounds that their uses is hazardous to the health of individuals. Such revenue, often called a sin tax is in fact a penalty paid by the user of such substance.
            In order for a tax system to operate effectively, certain principles must be put in place. They are regarded as cannon of Taxation, which are the basic rules sets to build a “Good tax system”.
            They are21
a.                  Canon of Equity: A good tax system is one, which is designed on the basis of an appropriate set of principles (rules). By equality, we do not mean that people should pay equal amount by way of taxes to the government. Canon of equity is a principle aimed at providing economic and social justice to the people. According to this principle, every person should pay to the government depending upon his ability to pay. The rich class people should pay higher taxes to the government authorities; they could earn and enjoyed their income Adme argued that Smith agued that taxes should be proportional to income i.e. citizens should pay the taxes in proportion to the revenue which they repetitively enjoyed under the protection of the state.   
b.                  Canon of Certainty: This principle is of the view that, the tax which an individual has to pay should be certain and not arbitrary. The taxpayer should know in advance how much tax he has to pay, at what time he has to pay the tax, and in what form the taxis to be paid at the government. In other words, every tax should satisfy the cannon of certainty. At the same time a good tax system also entrust that the government is also certain about the amount that will be collected by way of tax.
c.                  Canon of convenience: This implies that the mode and timing to the tax payment should be as far as possible, convenient to the taxpayer. For example, land revenue is collected at the time of harvest, income tax deducted at source. Convenient tax system will encourage people to pay tax and will increase tax revenue.
d.                  Canon of Economy: This principle states that there should be economy in tax administration. The cost of tax collection should be lower than the amount of tax collected. It may not serve any purpose, if the taxes imposed are widespread but are difficult to administer. Therefore, it would make no sense to impose contains taxes, if it is difficult to administer.
As the time changed, governance expanded and became much more complex than what it was at the Adam Smith’s time. Soon, a need was felt by modern economist to Smiths principles of taxation and a response, they put forward some additional modern cannons of taxation22. They are:
e.                  Canon of Productivity: It is also known as the canon of fiscal adequacy According to this principle, the tax system should be able to yield enough revenue for the treasury, so that the government should have no need to resort to deficit financing. This is a good principle to follow on a development economy.
f.                    Canon of Elasticity: According to this canon, every tax imposes by the government should be elastic in nature. In other words, the income from tax should be capable of increasing or decreasing to the requirement of the country. For example, if the government needs more income at time crises, the tax should be capable of yielding more income through increase in its rate.
g.                  Canon of Flexibility: it should be easily possible for the authorities to revise the tax structure both with respect to its coverage and rates, to suit the changing requirements of the economy with changing time and conditions of the tax. Conclusively, a tax system is for income generation purpose.

In modern tax system, however, its objectives go beyond revenue generation. For example tax concession and inceptive are used to stimulated private enterprises; taxation is now a tool for economic and social polities that determines a country’s economic direction, wealth redistribution and use as an effective resources allocation between private and public sector of the country.
            Generation of Revenue involves so many challenges throughout this country Nigeria
1.         Introduction of local tax had already generated a very big impediment it was well known that local governments receive some 40 -50% of their revenue from government grants, it is obvious that if local government is going to have any real meaning, the authorities must be able to raise a comparable amount from their own resources. The most important item of this “home – produced” revenue is the local tax on individual income or property which is usually known as a “rate” in certain cases such as  an education or water rate, it is a payment for a specific service.
            The local rate when levied upon an individual’s income as distinct from his property is still apt to become entangled with the central income tax assessed and collected by the Inland revenue department or it’s equivalent, and it is not always easy to disentangle the two.
            It was general practice in colonial days for the native authorities to collect the tax (there being only one kind of tax) and for the proceeds to be divided between the government and the native authority, each taking a fixed percentage.
            Often this arrangement worked well for the native authorities who were allowed to keep a high proportion, and sometimes the whole, but the proportion was  inclined to very according to financial pressure on the government.
            As people became wealthier, and the assessment of a granted tax become more implicated, it was  clear that the native authorities and the local authorities which have succeeded them were not competent income tax as they had been to collect the flat tax of earlier days.  
            For this reason, income tax departments grew up in the central government for the purpose of collecting tax from people of easily ascertainable incomes or from traders and merchants who moved from commercial firms, or from others whom the simple apparatus of the local governments tax office was inappropriate. Income tax would go to the central government and local rates to the local government.
            In Eastern Nigeria, the Federal Government become the taxing authority 1956, and for some years afterwards, the local rate imposed in notation had to kept down by the government in order not to prejudice the collection of income tax.
            The following are more challenges to the federal government revenue generation thereby allowed the Local Councils to impose rates in the conditions.
1.                  A capitation Rate this is the oldest form of rating in the country, dating from early colonial days. It used to be called such names as ‘poll’ or head’ tax. It is now generally regarded as an archaic form of taxation but provision is still made for it, since there are still many people who ought to be taxed but whose income is small and not easily ascertained.
In Nigeria, it was imposed on people over sixteen years of age and in Ghana over eighteen, in western Nigeria, the assumption was that anybody who appeared to be taxable must have a minimum of income of £50 per annum and the capitalization rate was fixed at £1.17s 6d. In eastern Nigeria, it was reduced to 5s when government took over responsibility for central taxation but it later rose to £.

Another challenges
i.          Poverty: Poverty level in our rural areas in high this makes responsible men tend to run away from their responsibility. The little they have could not hardly be taken away from then in the name of taxation. If they however submit themselves for taxation, the revenue generated from this exercise are always nothing to write home about.
ii.         Nature of occupation: Most of the inhabitants of our rural communities are subsistence farmers and petty traders  make basically more than their daily bread. Taxation is only done on income. This poses a great threat to the achievement of set objectives by the board of internal revenue.
iii.       Improper/unorganized rate collection system: over 80% of the taxable adults do not pay their taxes in Nigeria unless they are civil servants. This is because an efficient and organized strategy has not, been devised. The lack of this strategy has continued to deny the local authorities the ability to meet its set objectives in the generation of revenue.
iv.        Favoritism and partiality and revenue officers
            Often favour their brothers and sister in the taxation process. They under tax them and also help to avoid payment of most special rates imposed on the society at large. In the calculation of rates on their various properties, these class of people are often flavoured at the expense of the government purpose through local taxes (or rates, these problems ranges from corruption, falsification of receipts, taking or bribes, poverty, lack of efficient collection strategy, favoritism and partiality etc.
            This is the last source of income into the purse of the local governments. The problems facing this particular source lies between the our customer bank relationship and the ability of the local authorities to provide adequate collateral.
            The money usually issue to local government as loan are always huge and because more banks fear the risk of getting distressed, they do not agree to this business arrangement in some cases.
            The interest on loans are always high. This scares away local authorities since they do not want to remain eternal debtors.
Challenges of loan taxes (or rate)
            This method of revenue generation locally. It has faced a lot of set backs which are caused by some of there factors.
a.         Challenges of illiteracy:  Most rural dwellers are illiterate and lack of comprehensive knowledge of the method
b.         Challenges of corruption: some of the revenue officers from time to time indulge in corrupt practices which range from taking of bribes from defaulters to falsification and printing of receipts. This defrauds the local government to a great tune and deserve to be checked.
c.         Challenges of lack of access road: The roads leading to most communities in our local government areas are almost in accessible. This makes it difficult for revenue officers to move into these places to collect the rates and taxes.
d.         Avoidance of payment: Most members of the society because of unpatriotic avoids the much they can payment of their taxes and different rates. This is mostly common among traders and craftsmen.
e.         Political consideration: In levying of rates on communities and individual parties on politics is often encountered. This question the minds of those not favored by the decision (which are in majority in most cases) and thereby gears them to wards revolting against the payment of such special rate.
f.          The Traditional Rulers: These people had always sought to protect the interest of their kinsmen. They tend to protect some people within their domain from exposure to proper taxation. This directly dwindles the prospect of revenue collection generations.
Challenges Of Crude Oil Theft
Corruption: The minister for petroleum Mrs. Alison Madueke had expressed worry that oil theft was assuming an alarming dimension adding that the country loss $7 billion annually to the crime and another $5 billion for repair of vandalized pipelines
            Another way theft of crude oil creates bad impact in terms of the economic loss and environmental impact to this nation these are the following breakdown of the oil subsidy payment, according to the minister, for finance Mrs. Ngozi Okoji Iwuala  N1.7 trillion paid as at last December and N451 billion paid this year.
            On the controversial crude oil sales foreign account maintained by the NNPC the chairman of the penal of enquiring, though Abe insisted that the NNPC has no power to keep and maintain a foreign account because all Federal government revenues should be paid into the federation Account. Thereby this portrays the level of challenges against revenue generation in Nigeria this was reported on the Nation Tuesday, July 3, 2012.

19 Ibid
20 Ibid
21 Adam Smith, “an inquiring into Nature and capture and causes of the wealth of Nation. (1776) First edition Edwin Cannan. (ed). 1904. London: Methuen and co. publisher ltd.

22 Percardo D (1817) Principle of Political Economy and taxation. Voll p. b in: Craffa (ed). 1951. Cambridge University Press.           
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