The paper examined the effects of electronic taxation on tax productivity in Nigeria. Specifically the study evaluated the challenges of using electronic taxation system on tax productivity in Nigeria. Data collection was questionnaire. The study targeted a sample of 120 respondents who are tax payers. Data from the field were analyzed using simple percentage and analysis of variance (ANOVA) as statistical tools. Findings revealed that a large proportion of the respondents (68.3%) indicate that Nigerian Tax Authorities had good electronic tax payment system. It was also revealed that there were challenges of computer illiteracy (76.7%), inadequate computer system(81.7%) and poor power supply(73.3%) challenges respectively. Result from the analysis of variance confirmed that electronic taxation has significant impact on tax productivity in Nigeria. Based on the findings, it was recommended that Nigeria Tax Authorities should come up with an easy application that can make tax registration, filing and payment easy for the taxpayers. Furthermore, government should boost power or electricity supply for easy and prompt internet accessibility so as to enhance tax productivity and to raise more revenue for the government.