The Government owes certain obligation to it's citizenry and such obligations can only be possible when the Government has sufficient revenue available. Over the years, the Government has derived 80% of it's revenue from.the sale of crude Oil.However as the price of crude oil has downturn, There is need for a reliable source of revenue for Government for effective and efficient Governance. The reliable source is Taxation.

Taxation is a reliable tool for modern Governance. Tax are imposed on income, profit on both individuals, cooperate bodies,Organization that engage in trade and business.
Initially, tax is imposed on Individuals. Individuals established companies in order to deviate their income so as not to be liable to personal tax from their income and this is a form of tax evasion. In order to disallow tax evasion through companies who has an independent identity from it's owner,the Law imposed tax on cooperate bodies too.
The governing statute for computing for Companies income tax is the Companies income tax Act(CITA).Pursuant to Section 9 of the Companies Income tax Act,companies are charged on their net income or profit.In determining the net income, it is necessary to determine the trading receipt and deduct from them the trading expenditures. It is important to note that not all receipt or expenditure are allowed to be brought into the trading account for tax purposes.
The computing of taxable income in order to determine the tax liability is crucial to both the tax payer and the tax authority. The taxpayers seek to reduce his tax liability by claiming item under his expenditure. While the tax Authority seek to reduce the deductible expenditure in order to maximize the tax yield. Thus computation of tax payable by companies is of utmost important.
In computing the chargeable profit for companies income tax under CITA, the first step is calculating to get the aggregate gross profit. This can be gotten by adding up all the income derived from trade, business, rent,royalty, interest. It is important to note that not all profits or income gotten by companies are liable for Companies income tax.Section 23 of the CITA provide for exempted profit. They include:

  • profit of any co-operative society registered under any enactment or Law relating to co-operative societies.
  • profit of any company engage in ecclesiastical charity or educational activities of a public character
  • Profit of any company formed for the purpose of promoting sporting activities.
  • Profit of any company being a statutory or registered friendly