TAX POLICY AND REVENUE GENERATION IN NIGERIA

This study examined the impact of tax policy on revenue generation in Nigeria, using taxpayers within the State Internal Revenue Services in South-West Nigeria, with a focus on the Ondo State Internal Revenue Service (ODIRS). The research was motivated by Nigeria’s low tax-to-GDP ratio compared to the sub-Saharan African average, highlighting the urgent need for fiscal diversification beyond oil revenues.. A descriptive survey design was adopted, and data were collected through structured questionnaires administered to 240 ODIRS staff, selected using Taro Yamane’s formula. The study was anchored on Fiscal Exchange Theory, and the data were analyzed using SPSS and Partial Least Square Structural Equation Modeling (PLS-SEM). The findings revealed that tax policy instruments significantly influence revenue generation in South-West Nigeria, though with varying degrees of effectiveness. Tax reforms demonstrated positive effects by improving tax administration and simplifying filing processes, though gaps remained in staff training and communication. Tax exemptions, while causing short-term revenue reduction, proved effective in supporting small and medium-sized enterprises (SMEs) and encouraging long-term compliance. Tax incentives promoted voluntary compliance when applied fairly and consistently. The study concludes that strategically designed tax reforms, exemptions, and incentives can enhance sustainable revenue generation if supported by digital filing systems, taxpayer education, staff training, and sector-specific policies. The research contributes to fiscal policy discourse in developing economies and provides evidence-based recommendations for strengthening Nigeria’s tax system.