ABSTRACT

 This research is on the problems and prospects of petroleum profit tax in Nigeria. The oil and gas industry accounts for over 90% of the country's foreign exchange earnings. It also plays a role in the GNP index. It is in the view of the importance that government attaches to oil exploration and production that the taxation of profits or gains of companies engaging in such operation are taxable under a separate tax law. The applicable law is the petroleum profit tax act (PPTA), which was first enacted in 1959 with retrospective effective dates of 1st January 1958. In carrying out this research, related literatures, journals, textbooks, internet, were reviewed for the secondary data. The data collected were analyzed using the Pearson Product Moment correlation coefficient. Further more, during the course of this research, three hypotheses were formulated and tested. The first hypothesis revealed that there is no significant relationship between Petroleum Profit Tax and Gross Domestic Product. The second hypothesis revealed that there is no significant relationship between petroleum profit tax and government expenditure and the last hypothesis revealed that there is no significant relationship between petroleum profit tax and government revenue. On the basis of the above findings, the researcher wishes to conclude that petroleum profit tax yields the highest amount of revenue to the government. But this is accompanied with certain problems such as —lack of voluntary compliance from the petroleum producing companies; pronounced tax avoidance and tax evasion; recorded poor tax administration; mismanagement of revenue collected form PPT, among others. It was for these reasons that an act (law) was enacted referred to as the PPTA to guide the administration of petroleum operations in Nigeria. Finally, the researcher hereby makes the following recommendation; that all 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 also the level of corruption in Nigeria and that of the government officials should be drastically reduced to win the confidence of tax payers for voluntary tax compliance.