This Paper examines the problems associated with the Assessment and Administration of Personal Income Tax on Motorcycle riders in (UMUGUMA) Owerri West LGA Metropolis. The study uses Primary data involving face-to-face interviews and observations, while descriptive survey was used to analyze the data. The paper utilizes the stratified random sampling technique in selecting 28 units out of the 294 units in the Metropolis. One hundred and fifty (150) Umuguma were randomly selected, observed and interviewed using the interview and uncontrolled/unstructured observation method. The main findings of the research are that, tax officials lack adequate training and experience in carrying out their assignment. Similarly, shortage of staff, payment default on Direct Assessment Tax System (DATS), insufficient financial resources available to the tax authority and lack of Political will on the part of Government in enforcing the tax laws were also found to affect the revenue generation drive of the State. The paper also finds that Motor cycle (Umuguma) riders do not pay any form of tax or levy to the State Government, but have very high expectations from it, in the provision of infrastructural facilities like Roads, Bridges, Hospitals, Motor cycle Loans etc. The paper recommends that the State Government in conjunction with the tax authority should embark on proper recruitment, training and development of staff, provide good remuneration packages to tax officials, provision of adequate working facilities, and embark on massive enlightenment of the taxpayers on the importance of tax payment. This, it is believed, will enhance the revenue generation of the State, by bringing in hitherto none tax payers into the tax-paying circle. Finally, the paper strongly recommends a form of Personal Income Tax on Motor cycle (Umuguma) riders, as it is a promising Industry that could assist the State in terms of revenue generation.




Title page………………………………………………………………………………….i




Table of Content……………………………………………………………………….v


Chapter one


Background of the Study …………………………………………………….,..……….1

Statement Of Problem ………………………………………………………….………….1

Research Question / Hypothesis …………………………………………..………….5










 Tax is an important factor in economic planning and development of a nation and I is an important agent of social change, (Ola 1985:109). Tax according to Agysi (1983:174) the transfer of resources from private sector to the public sector in order to accomplish some of the nations economic and social goals. Furthermore, tax is a compulsory levy imposed on the payer by a legal authority or recipient public authority. Throughout the history of mankind, the right to raise tax has been one of the principal features of political authority. Tax is an instrument of fiscal policy, which plays a leading role in every organized society irrespective of the political or constitutional structure. Once a society becomes stabilized, civilized or law abiding the function of government becomes enormous resulting in heavy expenditure and necessitating tax payment by its subjects. For a developing country like Nigeria, the primary economic goal is to increase the rate of economic growth and hence the per capital income which will lead to higher standard of living Three main method of financing economic expenditure in most developing economics include taxes and other current receipts such as the profit of public enterprises, loans and grants. Of these sources, tax is perhaps the most important since the level of government expenditure is to a great extent dependent on the ability of the tax system to place the required revenue at the disposal of government. Hence, Samuelson (1980:92) wrote that “in deciding to tax people, the people are really deciding how resources needed for social wants shall be taken from all various families and from the enterprises they own and made available for the provision of social goals and services”. Again since market system proves inadequate for ensuring stable price and steady growth, tax has to be used to bring about employment, stable price and steady growth. In addition, tax is meant to ensure, at times, a transfer of resources from the hand of the private to public or government for investment, modification of patterns of investment and mitigating economic inequalities. Allas, these aims are far from being achieved in Nigerian society. The tax system is failing in almost all the above respect. Therefore, there must be crucial problems militating against efficient and effective tax administration in Nigeria. There have been discussions on the problems posed by the dwindling fortune in the oil economy. This problem is acute because of the undue reliance on federal government for the bulk of the operating revenue in the state. All the states of the federation are now required to intensify effort toward the internally generated revenue to make up allocation from the federation account. Unfortunately the problem engendered in the internally generated revenue is more acute in newly created states. Before being carved out, these states were doing fairly well with what they collected within their confines. In Imo State, the problem of inefficient tax collection is highly pronounced. Due to lack of fund the state been unable to fulfill its obligations to the citizenry. The present emphasis on rural development has subdued the state with the problems of socio-economic development of the rural communities. Beside political duties, it is expected to provide good roads, health services, primary and secondary education, good environmental sanitation among others, to her people. As a result of the government inability to meet with its obligations the people have resorted to self help projects in most communities. Observation has shown that the number of self help projects in most communities outnumbers the government projects therein. These failures are attributed to the numerous problems militating against efficient tax collection in the state as shown by this project. Inspite of the broad nature of taxes, the tax payers are usually on the look out for loopholes which they could exploit and less tax to the government. Besides the corrupt tax officials, evidence abound that there is high incidence of tax avoidance (refusing to pay tax entirely) and evasion (act by which the amount of tax payable is dishonestly reduced) in Imo State. As a result of the role and importance of tax as an instrument of fiscal policy, the vital sources of government revenue, taxation becomes an important area of study. But because of the failure of taxation to effectively collate resources, secure equitable income distribution and properly regulate the econo-colateral function of a good tax system and above all provide the government with the much needed revenue to meet its various obligations, it is strongly convinced that there must be some crucial problems militating against effective and efficient tax administration in Imo State and Nigeria as a whole. Hence a study of problems of tax administration and collection with particular reference to Imo State is hereby being undertaken to x-ray with a view of finding these problems, their degree of impediment, the likely prospect and proffering recommendations of actions that will ensure effective and efficient tax administration and collection mechanism in Imo State in particular and Nigeria in general.


 There have been a heart provoking outcry by various state government in Nigeria over their poor financial base. The situation is becoming even more compounded by the obvious dwindling feature of our oil economy. Moreover, inspite of the broadness and the comprehensive nature of our tax system, tax avoidance and evasion are on the increase. This ugly development has placed most state government in a situation where they can not cope with their civic responsibilities to their citizen, hence a compelling need to put an end to this unwholesome circumstances through proper problem identification;

(1) It has been a problem to understand the extent to which resources, human / material are adequate for the management of Imo State Board of Internal Revenue. (ISBIR).

(2) The extent to which the objectives of the organizations are being achieved.

(3) Also, it is a problem to determine the relationship between the ignorance of tax benefits and the unwillingness of tax payers to pay their taxes and so fulfill their civic obligation.

(4) It is difficult to ascertain the extent to which ISBIR has realized its targets on priority areas of personal income tax administration.


 Below are research questions to which the study would be based.

 (1) To what extent is the resources (human / material) adequate for the management of ISBIR (Imo State board of internal revenue)?

(2) To what extent have the objectives of the organization been achieved in recent past?

(3) What is the relationship between the ignorance of tax benefits and the unwillingness of tax payers to fulfill their tax obligation?

(4) To what extent has the board realized its targets on priority areas of personal income tax administration.


 There will be no significant difference at 0.05 between the perception of senior and junior staff with regard to assure adequacy There is no significant relationship between proper staff training scheme and objective assessment and collection of personal Income tax. There is no significant relationship between adequate public enlightenment campaign on tax policies and tax payer’s benefit or knowledge on tax benefit There is no significant difference at 0.05 between the perception of junior and senior staff regarding the attainment of target in priority areas of tax revenue administration.


(1) To ascertain the extent to which the resources (human / material) are adequate for the management of the organization (ISBIR).

(2) To find out the extent to which the objectives of the organization (ISBIR) are being achieved in recent years.

(3) To determine the relationship between Ignorance of tax benefits and the unwillingness of tax payers to fulfill their tax obligation.

(4) To evaluate the ethical validity and the basis of personal Income tax assessment and collection in Imo State


This research work is being undertaken to identify the problems hindering personal income tax administration and collection in Imo State. It is my hope that this study will help to correct the deficiency in the personal income tax generation machinery in Imo State. Again, there is practically no detailed study devoted to the problems of personal income tax collection in recent years. Therefore, the study will adequately fill up the gap. Thus, a research work that focuses on this topic is timely and very necessary in providing lasting solution to the incessant and unhealthy problem of waste of revenue through ineffective personal income tax administration and collection in Imo State.



The topic of this thesis is “The problems of personal Income Tax Administration and collection in Nigeria with particular reference to Imo State Board of Internal Revenue”. The main objectives of the study are

• To find out the extent to which the resources of the organization are adequate for its management

• To ascertain the extent to which the objectives of the organization are being achieved.

• To determine the relationship between Ignorance of tax payers and the unwillingness to fulfill their tax obligation Finally, to evaluate the ethical validity and basis of assessment of collection of personal Income tax in Imo State.





Title page                                                                 i

Certification                                                             ii

Dedication                                                               iii

Acknowledgment                                                     iv

Table of Content                                                      vi



1.0   Introduction                                                     1

1.1      Background of the Study                                 1

1.2      Statement of the problems                               7

1.3      Objective of the study                                      7

1.4      Scope and Limitation of t he study                  8

1.5      Significance of the problem                             8

1.6      Research Question                                           9

1.7      Plan of the study                                              9



Literature Review                                                    

2.1      Introduction                                                     11

2.2      Objective of Tax                                               12

2.3      Quality of A Good Tax System                          12

2.4      Problem of Tax                                                 15

2.4.1Composition of the Federal Board of

        Inland Revenue                                                16

2.4.2Duties and Power of the Board                        16

2.5      Budget and Tax                                               18

2.6      Taxation as an Agent of Social Change            20



3.0   Research Methodology

3.1      Description of the Population                          24

3.2      Sampling Methods                                           24

3.3      Sample Size                                                     26



4.0   Data collection and Analysis                            27

4.1      Data Collection                                                27

4.2      Data Analysis                                                   27

4.3      Analysis of Responses to Questions

4.4      Response on Solutions Highlighted by Respondents



5.0   Summary of Findings, Conclusion and Recommendations

5.1   Summary of Findings                                      38

5.2      Recommendations                                           38

5.3      Conclusion                                                      40   

5.4      Suggestions for Further Research                    41

REFERENCES                                                 42

        QUESTIONNAIRES                                         44





This chapter aims at discussing the brief history of taxation and various sources of tax law and types of tax Acts promulgated by the Federal Government of Nigeria.  Taxation can be defined as a compulsory levy by the government imposed on the incomes of individuals firms and corporate bodies.  Emphasis will also be regained towards examining the different versions of tax authorities responsible for the tax laws and other relevant problem that confront its smooth operation and growth.  Moreover the various tax  laws or  involved  in the collection of taxes  and to  know their impact  in the implement of taxes how they have  contributed either negatively  or positively in the course of their operation.  These Regulatory bodies include the Federal Board of Inland Revenue (F.B.I.R) and the state Board of Inland Revenue (S.B.I.R) Tax objective and it classification principles concepts incidence e.t.c.



        Taxation system had been in operation from time immemorial dated back to the time  of our forefather during which communities taxed each other as a result of the failure  of their member  to  carry  out  their communal  assignment such assignment such as bush clearing pit  digging well e.t.c. all for the  benefit of the community  concerned.   Failure to render, such service usually resulted in Seizure of property which might be reclaimed on payment of money.  This practice continues until 1904 when late Lord Lugard introduced the first income tax into the system.   With the emergence  of the Native Revenue ordinance of 1917  and subsequent amendment, the income tax became operative in the southern  Nigeria in 1918  precisely  Abeokuta in the Western Nigeria and Benin city in Mid-Western  Nigeria and by 1928, it has extended  to the Eastern Nigeria.  With the passages of time the Native Revenue ordinance of 1917, 1918 and 1928 were transform into Direct Taxation Ordinance in 1940 and this automatically replaced the Nature Revenue Ordinance and the Native Direct Taxation (Colony) of 1937 which of course was regarded as been discriminatory in nature for the fact that it only applies to native in Nigeria other than Lagos Colony or township.  In 1943, the Federal Board  of Inland Revenue (F.B.I.R)  was  born as the sole tax  authority  to asses  employees to tax  on a  current on Actual basis  in respect of his emolument.


        It must be emphasized here that the Government accounting gear then was between 1/4/19 - to 31/3/19 – e.g. An employees assessed to tax between 1/4/1943 and 31/3/1944 would be taxed based on 1993/44  year of assessment.



        The following entities represent the various tax authorities during the colonial Era.

(i)          The Resident appointed by the Government to administer a particular province.

(ii)        Any other officer authorized by the Resident to perform such duties.

(iii)      The chiefs, Elders and other persons of influence in each district.

(iv)       Any native authority appointed by the Governor to be a tax collection authority.

(v)         Any village council, district headman or other suitable person on group of person appointed by the Governor.



The duties of the colonial Tax Authorities were to supply  information,  supervise tax collection  render  tax  collection account e.t.c. penalty for non – accountability  of tax collected  attracted  a five  of four hundred naira (400.00)  or imprisonment for  two (2) years.




(i)          Income from land

(ii)        Rent derived  from land

(iii)      Annual profit of the produce from land which were enjoyed by the community or individual.

(iv)       Profit from trade  and manufacturing

(v)         Dividend or Interest 

(vi)       The value of all livestock owned by individual or the community.



        Where any native was assessed to tax within the area of the authority of a District council and to the Resident if need be.  In the light of seeking tax exemption, than Governor otherwise called the chief commissioner reserved  the right to exempt individual  from tax and as  well make regulation far carrying out the provisions of ordinance i.e. he provides statements on the tax returns, claims for remedy, deduction of tax at source  or monthly deduction  known as  pay As – You Earn System.





        Tax  laws or Acts in Nigeria came into being as a result of lack of uniformity in the tax collection system  as observed  between the Africans and non – Africans living in some part of the regions of Nigeria most especially Lagos Territory.  Informed sources revealed that income of a larger population of Europeans were not taxed.  This recommendation was embodies in the Nigeria  order in council (Constitution), 1960 and formed the basis of the income  Tax  management Act (I.T.M.A) 1961  thereafter  -  referred to at the ACT.  With the emergence of the Act,  the unfair  treatment of some African  resident and the unjust exception given to the non-African (e.g. Europeans) were faced out.



        The following are the various tax laws which have been promulgated by the Federal Government of Nigeria.

(i)          INCOME TAX MANAGEMENT ACT (I.T.M.A): This gives rise to law relating to individual partnership, trustees and executors (in settlement and family).  It was promulgated by the Federal Government in 1961 with further amendment and modifications full date.

(ii)        PERSONAL INCOME TAX ACT (P.I.T.A): This give rise to law relating to personal income.  It was promulgated in 1961 by the Federal Government with further amendment.

(iii)      COMPANY INCOME TAX ACT (C.I.T.A): This is administered on companies by the Federal Board of Inland Revenue (F. B.I.R) it was promulgated by the Federal Government in 1968 and further amended in 1979.

(iv)       PETROLEUM PROFIT TAX ACT (P.P.T.A): The Federal Board of Inland Revenue is the only tax authority that is responsible for assessing and collecting petroleum profit tax from all companies engaged in petroleum operation in Nigeria.  The tax payable relates to profit made by companies dealing controlling and sales.

(v)         CAPITAL GAIN TAX ACT (C.G.T.A):- This Act  was enacted in 1967 and deemed to  introduce  taxation  of capital gains on assets into the Nigeria tax  system.  Initially, when this act was introduced, stocks and share were specifically exempted from the provision of the Act.

(vi)       CAPITAL TRANSFER TAX ACT (C.T.T.A): This tax the total value of a person property at graduated rates starting from a minimum of one hundred thousand  naira  (100,000.00) either at death  or  on gift made interview during his life time.  This Act was enacted by the Federal Government in 1979 gazette No. 18 Vol. 66 of 12th April 1979.



        The statements of the study are as follows:

(i)          What are the constraints put against the smooth tax generation in Nigeria with particular reference to Lagos State.

(ii)        Has location in Nigeria effective in it various functions with particular reference to Lagos State.

(iii)      Another Statement is what are the problem confronting the collection of tax in Nigeria.

(iv)       Moreover, how does an external body influence the poor collection of tax in Nigeria with reference to Lagos State.



        The mains and objectives of the study are as follows:-

(i)          To look into the introduction of taxes in Nigeria its meaning and its operational process.

(ii)        To find out and evaluate the problem confronting the effective tax collection in Nigeria and its solutions.

(iii)      One other objective of the study is to know the function and activities of the various tax authorities in Nigeria and their operational process.

(iv)       Furthermore, the study will also try to find out the impact of taxation in Nigeria and the economy at large.



In view of the constraints regarding time and money.  The scope of this study has been restricted to selected offices of state of internal Revenue and the Federal Inland Revenue Department in Lagos metropolis.  Another reason was the uniformity in tax law applicable throughout the country and the fact that the Lagos State is the centre spread of all commercial activities.  In this regard therefore, the population on which the sample have been draw with from the basis of analysis.  While limitation can be the scope of study constrained by time, money and reluctancy of the tax authority staff of divulge information to a third party for fear that such information may not be used for the purpose other than intended.



It is relevant to conduct this research in order to find out the problem confronting the generation of taxes in Nigeria with particular reference to Lagos State.


Furthermore, the study will also reveal the function of taxes and roles and active of various tax authority.

The research work will also be of immense help in under standing the fact that administrate and ensure the fair redistribution of wealth and income among the low medium and higher income earners.



(i)     What are the problem confronting the smooth and effective generation of taxes in Nigeria with particular reference to Lagos State .

(ii)    Has taxation in its responsibilities of regulating and administering fair redistribution of wealth and income among the low, medium and higher income earners contribute to the problem confronting its smooth and effective operation.

(iii)      What are the other regulatory bodies that constraints the smooth and effective generation of taxes in Nigeria, the regulatory bodies like the Joint Tax Board (J.T.B.) Federal Board of Inland Revenue (S.B.I.R) how have they imitate the smooth and effective tax general in Nigeria.



The study as a whole is divided into five chapters while the individual chapters deal with various districts but related topics.


Chapter one introduce the topic spells o8ut the background of the study, the statement of the study, the objective, scope, significance and research question of the study and references.


Chapter two comprises various related literature review and bring out the meaning of taxation its objective, classifications, principles, concepts and the incidence of taxation.  It also stress the composition and duties of Nigeria Tax authorities, Taxation and its effect in Nigeria Economy, Budget and Taxation, Taxation as an agent of social change.  Relief’s And Allowance and references.


        Furthermore chapter three examine the research design and methodology – scope and method of the study, description of population sample sizes hypothesis of the study and the limitation of the study.


        Chapter four focuses on data collection and analysis and the frequency table analysis.


        Finally, chapter five is concerned with the summary of the findings, recommendation, conclusion, suggestion, bibliography and appendices of the project.

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