www.ijird.com February, 2018 Vol 7 Issue 2 INTERNATIONAL JOURNAL OF INNOVATIVE RESEARCH & DEVELOPMENT DOI No. : 10.24940/ ijird/ 2018/ v7/ i2/ FEB18014 Page 10 Tax Incentive as a Tool for Marginal Field Development in Nigeria 1. Introduction Tax is a compulsory levy imposed by the government on the citizenry through specific enactments to facilitate economic development. It is one of the sources of income for government. i It can also be defined as “a charge imposed by governmental authority upon property, individuals or transactions to raise money for public purposes. ii Blacks Law Dictionary describes tax as “a monetary charge imposed by the government on people, entities, transactions or property to yield public revenue. It includes duties, imports and excises.” iii Tax incentives are the various tax standards, rates and regulatory modes created by law to encourage and motivate investment in a sector. Tax systems the world over are geared towards achieving specific economic objectives of government and encouraging persons in taxable activities. Thus an important factor in deciding to invest in a country is the structure of the tax system and its favorableness to the business. Tax incentives are therefore, flexible instruments in laws, policies and contracts that lessen tax burdens for categories of persons or businesses. These incentives are usually provided in the laws in the form of tax reliefs and holidays, allowances and deductions for the benefit of the particular taxpayers targeted by them. To achieve the noble objective of encouraging persons in taxable activities through tax incentives, a tax system must be made compatible with what Adam Smith in the Wealth of Nations iv called the “maxims of a good tax system” These maxims ar e:  Equity: According to Adam Smith, while subjects of a state ought to contribute to the support of their government through tax, such contributions should as nearly as possible be proportionate to their respective abilities. v  Certainty: The certainty principle demands that the amount of tax expected to be paid as well as the time and manner of payment should be exact and clear so that businesses can plan properly. This is to prevent arbitrariness and uncertainty, which encourages the corruption of men.  Convenience: By the principle of convenience, every tax ought to be levied at the time or manner in which it is most likely to be convenient for the contributor to pay. For example, a tax system is convenient if taxes are collected at the time revenues or payments are received by taxpayers.  Administrative Efficiency: This principle states that the cost of administering a tax -assessment and collection etc. should be as far as possible, very minimal so that returns on tax will be commensurate with the reason for imposition. In the military era in Nigeria, tax incentives were usually created through decrees, budget speeches, government notices and directives, and executed agreements. Under democracy, the strongest guarantee of a tax incentive is through statutory law. ISSN 2278 – 0211 (Online) Jerome Okoro Research Fellow, Center for Petroleum, Department of Energy Economics and Law, University of Ibadan, Nigeria P. C. Obutte Senior Lecturer, Department of Jurisprudence, Faculty of Law, University of Ibadan, Nigeria Deputy Director, University of Ibadan, Nigeria Abstract: This paper examines the role of tax incentives in marginal field development in Nigeria. With a doctrinal research methodology consisting of analyses of laws, policies, principles and practices, and a slight comparative study of Nigeria with Malaysia and Angola, the research discovers that marginal field operations, because of its peculiar circumstances, require special tax incentives, which are currently inexistent or ineffective in Nigeria. Taking useful lessons from Malaysia and Angola, the paper proposes a special tax regime for marginal field operations comprising exclusive tax and royalty rates, and other incentives to be backed up by statutory law. Keywords: marginal fields, tax incentives, petroleum industry, development