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TAX ADMINISTRATION IN NIGERIA, PROBLEM AND PROSPECTS
This research work is set to identify the effects of tax evasion, tax avoidance on the Nigerian Economy with particular reference to the Lagos State Internal Revenue Services.
This project work is designated to find out the factors responsible for tax evasion in Nigerian Economy. The deviation effects and specifically considers different way in which it could be reduced and controlled in order to meet the present day challenges.
In addition, the study is aimed at revealing the economic and sociopolitical effects of taxation in Lagos State and highlight to all beneficiaries of this research work the effect of tax evasion in the Nigeria Economy. To proffer possible solutions to this menace, the civil servants and business organizations should religiously discuss their income.
TABLE OF CONTENTS
1.1 Historical background of the study
1.3 Statement of the problem
1.4 Research Objectives
1.5 Research Questions
1.6 Research Hypothesis
1.7 Model Specification
1.8 Significance of Study
1.9 Scope/Limitation of Study
1.10 Method of Data Collection
1.11 Organization of the Study
1.12 Contribution to Knowledge
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction (Historical Perspective)
2.2 Definition of Tax
2.3 Administration of Tax in Nigeria
2.4 Forms of Taxes
2.5 Comparison of Direct and indirect Taxes
2.6 Characteristics of a Good Tax System
2.7 Importance of Tax
2.8 Tax Evasion and Tax Avoidance
RESEARCH METHODOLOGY AND METHOD OF DATA COLLECTION
3.2 Restatement of Research Questions
3.3 Restatement of Research Hypothesis
3.4 Determination of Population
3.5 Sampling Technique
3.6 Research Instruments and Techniques
3.7 Questionnaire Design and Assumptions
3.8 The Merits of Primary Data as follow
3.9 Administration of Questionnaire
3.10 Reliability and Validity of Instrument
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.2 Analysis of Data
4.3 Classification of Respondents
4.4 Analysis of Questions
4.5 Hypothesis Testing and Data Interpretation
SUMMARY, CONCLUSION AND RECOMMENDATION
1.1 HISTORICAL BACKGROUND OF THE STUDY
This paper examined tax policy in Nigeria. It traced the history of tax in Nigeria and the implementation of tax policy in Nigeria. The paper argued that tax policy has been ineffective over the years. It found that the federal government has been working towards tax reforms. The paper highlighted the flaws in the tax reforms and made recommendations for effective tax system in Nigeria.
A tax administration represents key resource allocator between the public and private sectors in a country, it is usually imposed on individuals and entity that make up a country. The funds provided by tax are used by the states to support certain states obligations such as Education system, Health care system, Pensions .for the elderly, Unemployment benefits, Public transportation, etc. A nation tax system is often a reflection of its communal values or the values of those in power. To create the system of taxation, a nation must make choices regarding the distribution of the tax burden about who will pay taxes, how much they will pay and how the taxes collected will be spent.
In Nigeria, the taxation system dates back to 1904 when the personal income tax was introduced m northern part of Nigeria before the unification of the country by the colonial masters. It was later implemented through the native revenue ordinances to the western and eastern regions m 1917 and 1928 respectively. Among other amendments in the 1930's, it was later incorporated into, direct taxation ordinances no. 4 of 1940 since then different governments have continued to try to improve on Nigeria taxation system. The general opinion among scholars is that Nigeria's fiscal regime is characterized by unnecessary complex, distortion largely inequitable taxation laws that have limited application in the formal sector that dominates the economy.
Taxation in every sense is a tool of economic re-enforcement. Most government in the world has always found ways of imposing various taxes on their subjects. This is done with a view to raise funds for its expenditures. Therefore, taxation is a process of levying-and collection by a tax authority with proper jurisdiction of compulsory contribution from individuals, business organizations and corporate bodies, to defray expenses incurred by the government in common interest of all.
Fundamentally, its payment is usually in monetary terms, which the citizen has to pay the government to enable it perform its functions. It may be levied on income or goods or services.
Tax can be defined in various ways;
(a) As a charge or duty imposed by government on income or property. Anyanwura (1999).
(b) As transfer of resources from private public sector in order to accomplish some of a nation's economic and social goals. Agyel (1988).
(c) A contribution of wealth by citizens of a country, business Organizations and corporate bodies to the government, with the necessary money needed for the provision of social, economical and fiscal services by the government. Fagbule (1982).
(d) A compulsory contribution from a person(s) incurred in the common interest of all without reference to the special benefits provided. Adegboyega (1998).
From the various definitions of tax stated above, the main objectives of taxation include wealth or income redistribution, revenue generation, stimulation or stabilization of economic growth, discrimination against certain types of goods and services with regards to both production and consumption and correction of disequilibrium in the balance of payment etc.
1.3 STATEMENT OF THE PROBLEM
This research is set to identify the effects of tax evasion, tax avoidance on the Nigeria economy with particular reference to the Lagos State Internal Revenue Services.
Over reliance of government on the sales of crude oil for its much needed revenue has left the opportunities and potentials of taxation untapped. Unfortunately in Nigeria, only the salary earners bear the full burden of income tax, while the private businessmen most times escape such. This is defeating the social, political and economical objectives of income redistribution which is one of the cardinal aims of taxation.
The problem of this research centers on the effects of tax evasion, causes of tax evasion, tax avoidance and the various methods used by payers to carry out these acts and how those acts can be curtailed if it cannot be completely eradicated. In conclusion, a kind of taxation which is based on professionals and self employed persons, given that tax evasion is high with respect to this category of tax payers, it has been suggested that the reduction of evasion would raise considerable revenue yield from this category.
Efforts to increase revenue from this category of tax payers have been hampered by two problems.
The first one is inability to get them assessed properly and in most cases not assessed at all. The consequence is that the revenue from tax is lost while the actual and potential tax payers in this category enjoy a tax free world.
The second problem which makes assessment difficult is lack of information about this category of people, of which many of them do not register their business name and when they do, some do not give genuine information but incorrect and false information, thus, impairing any monitoring, inadequate and lack of information makes tax administration difficult.
1.4 RESEARCH OBJECTIVES
This project is designed to find out the factors responsible for tax evasion in Nigeria economy. The deviation effects and specifically the different ways in which it could be reduced and controlled in order to meet the present challenges of this nation.
Additionally, the study is aimed at revealing the economic and socio- political effects of taxation in Lagos State and highlight to all the beneficiaries of this research work the effects of tax evasion in the Nigeria economy.
To proffer possible solutions to this menace, the civil servants and business organizations should religiously disclose their income from other sources (if any) and the tax authority should carry out their statutory responsibilities diligently.
1.5 RESEACH QUESTIONS
This study aim at giving answers to the following questions;
i) What does the internal Board Revenue (Lagos State) consider as being the major causes of tax evasion?
ii) How does tax evasion affect the financial activities of the Lagos State Government?
iii) Is there any penalty imposed by the Lagos State Internal Revenue Board on tax evaders?
iv) Is there any public awareness on the importance of taxation?
1.6 RESEARCH HYPOTHESIS
According to Taiwo (2000) an hypothesis can be defined as a conjectural statement, a postulate or a proposition about an assumed relationship between two or more variables.
The hypothesis for the study is as follows;
Ho: Tax evasion and tax avoidance affect the financial activities of the Lagos State Government.
Hi: Tax evasion and tax avoidance do not affect the financial activities of the Lagos State Government.
Ho: Absence of social amenities affects tax evasion and tax avoidance.
Hi: Absence of social amenities does not affect the tax evasion and tax avoidance.
1.7 MODEL SPECIFICATION
This research work is basically carried out on the Lagos State Board of Internal Revenue Service which came into existence in 1967. The work covers its historical background, organizational structure and the activities that are being performed by the Lagos State Board of Internal Revenue Service since its inception up to this present time. The data to be used would be based on their records.
1.8 SIGNIFICANCE OF THE STUDY
The significance of the study under review is not farfetched. One needs not to be told that the degree of the tax evasion is seriously affecting the economy of our nation adversely.
This research work will be of help to the Lagos State Government Internal Revenue Service to reduce the rate at which people of the state evade tax. To enable the Lagos State Government the number of her employees and the type of work they do. This will be relevant to the government in order to check inflation and deflation, reduce inequality of income, encourage price stability in the state, promote health care delivery and most importantly to generate revenue for the Lagos State Government.
The research work is comprehensive and it will serve as a reference for the other people in case there is need to consult it.
1.9 SCOPE/ LIMITATION OF STUDY
This research work is basically carried out on the Lagos State Board of Internal Revenue Service which carne into existence in 1967. This work will cover its historical background, organizational structure and the activities that are being performed by the Lagos State Board of Internal Revenue Service since its inception up to this present time. The data to be used would be based on their records.
During the process of carrying out this research work, some problems were encountered which make the research work slow and tasking.
The time and financial constraints did not permit a large scope and a comprehensive research work such that other business organization could not be covered for additional information.
The data collection has its own constraints. The instruments used in the collection of the data had their own limitations. The natural bias tendency inherent in personal interviews is likely to have affected the quality of the data.
There must have been an inevitable shortcoming in the construction of the questionnaire because there was poor response on the part of some respondents.
1.10 METHOD OF DATA COLLECTION
The relevant data to be used involve primary data collection. The primary data collection could be sourced from the following;
(a) Personal interview from the Lagos State Internal Revenue Service.
(b) Observation from the Federal Board of Inland Revenue.
(c) Survey from the Joint Tax Board.
1.11 ORGANISATION OF THE STUDY
The research is made up of five different sections or chapters which are as follows:
Chapter one consists of the historical background. of the study, introduction, statement of the problem, research objectives, research questions, research hypothesis, models specification, significance of the study, scope and limitation of the study, method of data collection, organization of the study and contribution to knowledge.
Chapter two also consists of the literature review and historical background of the study.
Chapter three consists of the research methodology and method of data collection.
Chapter four consists of the method of data analysis and data analysis; interpretation of the results while,
Chapter five consists of the summary, conclusion, discoveries/findings, limitation and recommendations, then the bibliography.
1.12 CONTRIBUTION TO KNOWLEDGE
Government should have the will to impose penalty on any person who do not comply with tax law. To this end, revenue courts should be established to adjudicate matters on tax evasion as quickly as possible. There should be attractive conditions of services and adequate tax personnel in terms of quality and staff training should be systematic and on a continuous basis, while adequate accommodation, furniture equipment etc. should be provided.
Ilemobayo, A. S. (1997): Public finance in Nigeria
Adejuwon, J.A. (1998): Analysis of Taxation Principles for Nigerian Students
Seyi, O. (1998): Element of Tax Management and Practice in Nigeria
Ola, C. S. (1999): Income Tax Law for Corporate and Incorporate Bodies in Nigeria
Anyanwuocha, R.A.I. (1999): Fundamental of Economics for Senior Secondary Schools.
Ishola, K. A. (2001): Companies and Personal Taxation in Nigeria. Vol. 1.
Abiola, O. J. (2002): Nigerian Taxation in Focus (Theory and Practise)