EFFECTS OF EFFICIENT TAX ADMINISTRATION ON REVENUE GENERATION (ACASE STUDY OF LAGOS STATE GOVERNMENT)


Content

ABSTRACT

This study investigated the effects of efficient tax administration on revenue generation (a case study of Lagos state government). To guide the research, three research questions and three hypotheses were formulated. The target population comprised all the civil servants that are connected with tax administration in Lagos state. The total number of respondents was sixty (60) comprising twenty from each L. G. A. The instrument used for data collection was a set of questionnaire. All data collected was subjected to quantitative analysis, using frequency and percentages and the hypotheses were tested using chi-square at 0.05 level of significance.  Findings from this study indicated that there is significant impact of adopting electronic means of tax administration on revenue generation in Lagos state. The study further revealed that there is significant impact of efficient tax administration on revenue generation in Lagos state. Finally, it was revealed that there is significant impact of engaging Tax Monitoring Agents on revenue generation in Lagos State. The study concluded that tax administration in Lagos state has progressed from what it used to be to being efficient in revenue administration. The electronic payment system has brought with it positive impacts; and even monitoring by tax agents has been made easier. Based on the findings, the study recommended among others that Government should ensure that the business environment and other welfare matters of micro, small, medium and large scale businesses are taken care of to encourage voluntary tax and other non-tax revenue payment compliance.


 

 

TABLE OF CONTENTS

Cover/Title Page                                                                                                                     i

Certification Page                                                                                                                   ii

Dedication Page                                                                                                                      iii

Acknowledgements Page                                                                                                       iv

Abstract Page                                                                                                                          v

Table of Contents                                                                                                                   vi

CHAPTER ONE: INTRODUCTION

1.1       Background to the Study                                                                                           1

1.2       Statement of the Problem                                                                                           2

1.3       Objectives of the Study                                                                                              3

1.4       Research Questions                                                                                                     3

1.5       Research Hypotheses                                                                                                  4

1.6       Significance of the Study                                                                                           4

1.7       Scope of the Study                                                                                                     4

1.8       Definition of Terms                                                                                                   5

            References                                                                                                                  6

CHAPTER TWO: LITERATURE REVIEW

2.0       Introduction                                                                                                                7

2.1       Conceptual Framework                                                                                               7

2.1.1    Definitions of Government Revenue                                                                          7

2.1.2    Sources of State Government Revenue                                                                      7

2.1.3    The Problems of Revenue Generation                                                                        9

2.1.4    Tax as a Primary source of Revenue: An Overview                                                   10

2.1.5    Definition of tax administration                                                                                 13

2.1.6    The Tax System in Nigeria                                                                                          14

2.1.7    Tax Policy                                                                                                                   15

2.1.8    Tax Laws                                                                                                                   16

2.1.9    Multiple Taxation                                                                                                        16

2.1.10  Tax Administration                                                                                                     17

2.1.11 Causes of Tax Evasion and Tax Avoidance in Nigeria                                              18

2.1.12 Reforms in tax administration                                                                                    20

2.1.13  Ongoing Reforms of FIRS                                                                                         25       

2.1.14  Internally Generated Revenue in Lagos Compared with State of the Federation     26

2.2       Theoretical Framework                                                                                               28

2.2.1    Theory of taxation                                                                                                      28

2.3       Empirical Review                                                                                                        29

            References                                                                                                                  31

CHAPTER THREE: RESEARCH METHODOLOGY

3.1       Introduction                                                                                                                35

3.2       Research Design                                                                                                         35

3.3       Study Population                                                                                                        35

3.4       Sample Size and Sampling Technique                                                                        35       

3.5       Instrument for Data Collection                                                                                   35

3.6       Validity of the instrument                                                                                          36

3.7       Reliability of the instrument                                                                                      36

3.8       Procedure for Data collection                                                                                     36

3.9       Data Analysis                                                                                                              36

 

 

 

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.0       Introduction                                                                                                                37

4.1       Demographic Data                                                                                                      37

4.2       Analysis of Research Questions                                                                                 38

4.3       Test of Hypotheses                                                                                                     42

4.4       Discussion of Finding                                                                                                 46

             References                                                                                                                 49

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATION

5.1 Summary of Findings                                                                                                       51

5.2 Conclusions                                                                                                                       51

5.3 Recommendations                                                                                                            52

5.4 Suggestion for Further studies                                                                                          52

      Bibliography                                                                                                                     53

      Appendix                                                                                                                          58

 

 

 

 

 

 

 

 

 

CHAPTER ONE

 INTRODUCTION

 

1.1 Background to the Study

The citizens of every country hold their government responsible for its development. For most countries, the government is saddled with the responsibilities of providing basic infrastructure such as roads, hospitals, legal protection, welfare security, environment preservation, improved standard of the education, health care, pension funds, welfare, homeland security, etc. Thus development is associated with funds and much revenue is needed to plan, execute and maintain infrastructures at the state level for her citizens (AFDB, 2013) since upgrading the infrastructure sector can in itself be a stimulus for growth, development and productive employment. To achieve this role, the government needs revenue. The primary source of revenue for the government is tax. Tax is a term used to describe the money generally collected from the citizens of the state. In other words, a tax is an imposed levy by government to individuals and companies for the various legitimate function of the state (Olaoye, 2008). It is essential for civilization and mandatory for all individuals and companies alike. Without tax, national development will be crippled by inadequacy of fund.

Thus, in developed and developing countries, there are wide range of taxes and levies that affect individuals and companies, citizens and foreigners, manufacturers and marketers, workers and pensioners. In Nigeria taxes range from petroleum profits taxation to tenement rate imposition, and taxes are imposed at different levels to enable the government provide certain essential services and facilities to the population (Kiabel & Nwokah, 2009). Every state has his own way of collecting tax from its citizen. This implies that development of the state requires a collective efforts of both the citizens and the government. While the citizens contribute money through tax, the government invests the tax money by providing infrastructure.

The present study therefore examines the effects of efficient tax administration on revenue generation with particular interest on Lagos State government. As pointed earlier, every government needs revenue for it to function properly; and tax is one of such sources of revenue for the government. Unfortunately, it has been observed that, in spites of knowing the importance of tax on national development, most Nigerians citizens, including corporate firms shy away from paying tax. As observed Afuberoh and Okoye (2014), over the year, revenue derived from taxes has been very low. This also the case of Lagos state as justified Enahoro and Olabisi (2012) who opined that tax administration in Lagos State is similar to what obtains in other parts of the country.

Paramount to the challenges of efficient tax administration in Lagos state is inadequate institutional body for tax collection. According to Naiyeju (2005) most of the tax authorities in Lagos State Local Government lack the desired institutional capacity to administer tax system effectively. The bulk of tax today is paid by only the employees and less privileged individuals in the state. Politicians, the rich, the professionals and the privileged individuals are not equitably taxed. Such discrimination in tax collection deprived the state from the revenue needed for its development. Enahoro and Olabisi (2012) also identified some other factors that impede efficient tax administration in Lagos state to include: corruption, inadequate personnel in terms of quantity and quality, poorly equipped tax collectors, among others.

There are cases of tax evasion and avoidance, stealing by tax officials, etc. Thus, Otoghile and Edigin (2011) attributed the poor attitudes of taxpayer towards taxpaying to lack of trust on the tax official who has been described as dishonest and corrupt. According to Otoghile and Edigin (2011) the little funds made available to the governments is diverted to individual pockets. Again, the machinery put in place for collection of revenue is inadequate hence, most of the government money is not collected and this is in case of the internally generated funds. All these problems affect efficient tax administration in Lagos state. The present study is rather limited in investigating the effect of efficient tax administration in Lagos state.

1.2 Statement of the Problem

There are many challenges facing the growth and development of Lagos state. In most cases, the demand exceeds the supply of basic infrastructure such as roads, hospitals, legal protection, welfare security, environment preservation, improved standard of the education, health care, pension funds, welfare, homeland security, and the finance necessary to stimulate rapid provision is simply not available. The state is challenged by high cost of materials needed for infrastructure development. There are also cases of corruption which is too high and allows incompetent hands to handle contracts and other responsibilities (Oyedele, 2012). Added to this unfortunate situation is the fact the revenue generated to cater for the developmental needs of the people are grossly inadequate. The collection and remittance of tax in Lagos State, Nigeria is very low. In spites of the fact that several strategies to improve revenue base such as Accelerated Revenue Generation Programme (ARGP), Consultants or Tax Monitoring Agents (TAMA), etc. have been adopted to raise revenue base of Lagos State, the contending problem of tax evasion, collusion of tax officer and diversion of revenue belonging to government into private pockets remain insurmountable. Perhaps, if these problems associated with efficient tax administration are alleviated, Lagos state would be more developed. Hence the problem of this study is to examine the effects of efficient tax administration on revenue generation in Lagos State.

 

1.3 Objectives of the Study

The primary objective of this study is to examine the effects of efficient tax administration on revenue generation with particular interest on Lagos state government. Specifically, this study seeks:

1.      To determine the impact of adopting electronic means of tax administration on revenue generation in Lagos state

2.      To determine the impact of efficient tax administration on revenue generation in Lagos state

3.      To ascertain the impact of engaging Tax Monitoring Agents on revenue generation in Lagos State.

1.4 Research Questions

1.      What impact does adopting electronic means of tax administration on revenue generation in Lagos state?

2.      To what extent does impact of efficient tax administration affects revenue generation in Lagos state

3.      What is the impact of engaging Tax Monitoring Agents on revenue generation in Lagos State?

 

 

1.5  Research Hypotheses

 

H01: There is no significant impact of adopting electronic means of tax administration on revenue generation in Lagos state

H02: There is no significant impact of efficient tax administration on revenue generation in Lagos state

H03: There is no significant impact of engaging Tax Monitoring Agents on revenue generation in Lagos State.

1.6 Significance of the Study

 

The significance of this study is basically to add to the general body of knowledge by enlightening the general public on the effect of efficient tax administration on revenue generation. The study will provide a research based data to be used by the managements of Lagos Inland Revenue Services. Other states of the federation will equally benefit from the study since it will expose them to methods of removing loopholes in tax administration and improving revenue generation.

The research will also be beneficial to other researchers as it would provide an empirical evaluation of the effect of efficient tax administration on revenue generation. Also, researchers can also build upon the limitation for this study to carry on further study for the purpose of knowledge enhancement.

 

1.7 Scope of the Study

The study will be carried out on the effect of efficient tax administration on revenue generation. Three local governments Surulere, Mushin and Somulu will be studied. Only the civil servants connected with tax administration will constitute the study population. The variables associated with this study include, examining the impact of adopting electronic means of tax administration; the impact of efficient tax administration; and the impact of engaging Tax Monitoring Agents on revenue generation in Lagos State

 

1.8 Definition of Terms

Tax: This can be defined as a compulsory transfer of resources and Income from the private sector in order to achieve some of the nation economic goals

Revenue Generation: This is systematic gathering / collection of income revenue.

Revenue: This could be described as an income accruable to person(s), government and organization.

Statutes: This is a legal frame work upon which actions/ inaction are based.


 

References

African Development Bank Group (2013). An Infrastructure Action Plan for Nigeria: Closing the Infrastructure Gap and Accelerating Economic Transformation. Retrieved from www.afdb.org/.../afdb/.../An_Infrastructure_Action_ Nigeria_-_Closing_the Plan_for_.   October 18, 2016.

Afuberoh, D & Okoye, E. (2014) The Impact of Taxation on Revenue Generation in Nigeria: A Study of Federal Capital Territory and Selected States. International Journal of Public Administration and Management Research (IJPAMR), 2(2):22-47

Enahoro, J. A. & Olabisi J (2012). Tax Administration and Revenue Generation of Lagos State Government, Nigeria. Research Journal of Finance and Accounting 3 (5)133-139

Kiabel.B.D and Nwokah, N.G (2009) Boosting Revenue Generation by Governments in Nigeria: The Tax Consultant Option Revisited, European Journal of Social Sciences, Vol. 8, No. IV. 536-539

Otoghile, A., Edigin, L. U. (2011), Local Government Administration and Development: A Survey of Oredo Local Government Area of Edo State. An International Multi-Disciplinary Journal, Ethiopia 5 (3), 20 (148-156)

 

 

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