tax administration on revenue generation chapter one

CHAPTER ONE

INTRODUCTION

 

  • BACKGROUND OF STUDY

In all generation, the problems of personal income tax generation and administration continues to surface in one form or another in virtually every society, especially in this part of the world. It is important to point out that the federal government has taken adequate steps in effective tax administration.

This failure on the part of the federal government is responsible for poor financial positions both the state and local government. Besides, this inadequate planning and absolute laws governing taxation, evaluation and collection is characterized by chaos.

This chaotic nature of the system can be appreciated by political influence or interferences in the process of taxation during the civilian administration in the country which gave rise to untrained and inexperienced personal being entrusted with the work of collection and administration of personal income tax.

The important of these issues of tax administration in the developing countries like Nigeria can be seen from the following extract from tax administration in under developed countries. The tax administration finds himself working with a staff which is inefficient in experienced, and poorly paid.

DEFINITION OF TAX

Tax is a compulsory levy imposed by the government of a country on individuals and corporate entities in respective of return of service expected from that government.

ADMINISTRATION OF TAXES
the administration of tax is vested in various tax authorities depending on the type of tax under consideration.
In Nigeria, there are two authorities namely;

  1. Federal Board of Inland Revenue, and
  2. State Inland Revenue Board. The Local Government authorities in states also have specific tax functions

There are various Act in respect of each type of tax under consideration which are;

  1. Companies Income Tax Act,Cap. C21, LFN 2004: This imposes tax on the incomes of companies other than corporation soles and companies engaged in petroleum operations (upstream operation).
  2. Education Tax Act, Cap. E4, LFN 2004 which levies education tax on the assessable profits of companies registered in Nigeria.
  • Capital Gains Tax, Cap. C1, LFN 2004: this act imposes tax on capital gains arising from disposal of chargeable assets.
  1. Petroleum Profit Tax Act, Cap. P13, LFN 2004 levies tax on the profits of companies engaged in oil exploration.
  2. Personal Income Tax Act, Cap. P8, LFN 2004: it imposes tax on the incomes of productive individuals and corporation soles.
  3. Value Added Tax Act, Cap. V1, LFN 2004 imposes tax on the supply of goods and services made by incorporated companies and other business organizations.
  • Stamp Duties Act, Cap. S8, LFN 2004 charges duties on specified instruments listed in the Acts.

ORGANS OF TAX ADMINISTRATION IN NIGERIA

Joint Tax Board (JTB): section 86 of the Personal Income Tax Act establishes the Joint Tax Board Composition;

  1. Executive Chairman of the Federal Inland Revenue Service as Chairman.
  2. A representative from states of the federation experience in tax.
  • The secretary, who shall be ex-officio appointed by the Federal civil service Commission; and

The Legal Adviser of FIRS acts as the legal Adviser to the JTB.

FUNCTIONS
The JTB is charges with the responsibilities of:

  1. To promote uniformity both in application of personal income Act and in the incidence of tax.
  2. Imposes its decision on matters of procedures and interpretation of Personal Income Tax on any State for the purpose of conforming to agreed procedures or interpretation.
  • To advice Federal Government in respect of double taxation arrangement.
  1. To exercise the powers or duties conferred on it by the PITA and other Acts.
  2. To advise Government on request, in respect of double taxation arrangement with other countries.

STATE BOARD OF INTERNAL REVENUE (SBIR)
section 87 of Personal Income Tax Act creates the SBIR. Its operational arm is SIRS.

COMPOSITION

The each state of the Federation Inland Revenue Board comprises of:

  1. the chairman, who is the executive head of the SIRS
  2. the Directors and HOD within the SIRS
  • a Director from Ministry of Finance
  1. the Legal Advice
  2. three other persons nominated by the commissioner for finance on their personal merit
    the Secretary

FUNCTIONS

  1. To ensures effective and optimum collection of all taxes and penalties due to the govt. under relevant laws.
  2. Accounting for all amount collected in a manner prescribed by the state commissioner of finance.
  • Making recommendation on tax policy, tax reform, tax registration, tax treaties and exemptions to JTB as may be required from time to time.
  1. Appointing, promoting, transferring and discipline of employees of the SIRS.

LOCAL GOVERNMENT REVENUE COMMITTEE
section 90 creates Local Government Revenue Committee (LGRC) for each Local Govt. Area of a state.

COMPOSITION
its comprises of:

  1. The supervisor for finance as Chairman
  2. Three Local Government Councilors
  • Two other persons experience in revenue matters to be nominated by the chairman of the Local Governments.

    FUNCTIONS
    the committee shall be responsible for the assessment and collection of all taxes, fines and rates under its jurisdiction.

REGISTRATION OF TAXPAYERS

all incorporated companies shall register with FBIR while unincorporated entities, individuals and body of individuals shall register with SBIR.

  1. Incorporated companies are expected to register within eighteen months of incorporation or six month after the end of its first accounting period.
  2. Unincorporated companies and body of individuals are expected to register with the relevant tax authority within 3 months of the year.

ADMINISTRATIVE FRAMEWORK

The structural administration of personal income tax is rested in the joint tax board (JTB) under the income tax management Act 1961.

The board is made up the Chairman who is appointed by the federal board of internal revenue (FBIR) which is the federal body. The personnel must be experienced in tax matters. Also, a secretary and legal advisor are appointed, some of their functions are:

To exercise the powers or duties conferred upon them by any express provision of the Act, any other power and duties arising under the Act which may be agreed by the board.

To exercise the powers and duties conferred on them by an enactment of the federal government imposing tax on the income or properties of companies or which may be agreed by the federal board of internal revenue.

STATE INTERNAL REVENUE BOARD

The administration of the income tax in each states its collection and administration is rested on the state board of internal revenue.

It is headed by a chairman with the Director of revenue as his Deputy Chairman and the chief executive of the board. Other members of the board include representative of specified ministries and from field of Economics, Accountancy and legal professions.

Their major function includes, to see the retrieval of the revenue collected by various tax officers in all local government headquarters and forward it to state government for disbursement.

INSPECTORS OF TAXES

Inspector of taxes are collected by the board. They have variety of duties covering all aspects of taxation some of their duties are:

  1. Receipt and examination of tax returns and other information from tax payers.
  2. Preparing and issuance of assessment based on the returns on which tax is payable
  • They also employ the best of judgment guesses, if returns were not received or there is evidence of false information.

TAX COLLECTORS

They are concerned with service of

  1. Returns of income forms
  2. Notice of assessment
  • Summonses and affidavits and other

1.2 STATEMENT OF THE PROBLEMS

It is true the problem of tax collection and administration is universal but the third world countries of which Nigeria is one, seem to be more plagued and inflicted both in weight and magnitude than the developed nations of the world.

The research work primarily involves identifying the problems of the personal income tax generation and administration in Nigeria taking a case study of Board of Internal Revenue, Edo State. The specific problems of this research are as follows:

  1. Improper system of keeping accounts and records in the internal revenue office, which was seen to be quite mechanical and outdated
  2. Lack of staff and inadequate training of the availability of tax collectors.
  • No enlightenment on the part of tax payers as regards the importance of taxation is another problem of tax generation and administration in Edo State.
  1. Tax collection and administration in Edo state is not efficient and efficiently managed.
  2. Also corrupt alliance of tax collectors with tax payers to avoid tax for them (tax collectors) to make fast money.

Thus, lack of enforcement power on the board makes tax laws useless and not serious to tax offenders/defaulters.

  • OBJECTIVES OF STUDY

The general objective of the study is to ascertain the effect of tax administration on revenue generation in Edo state, using the state board of internal revenue as case study.

The specific objective of the research work is to;

  1. To examine if the use of mechanical and outdated system in recording and keeping account affect tax administration on revenue generation in Edo state.
  2. To ascertain whether lack of adequate staff in SBIR affect tax administration on revenue generation in Edo state.
  • To examine if enlightening tax payers on the importance of tax affect tax administration in Edo state.
  1. To determine if the efficiency and effectiveness of personal income tax collection and administration is properly managed.
  2. To ascertain whether they are corrupt alliance of tax collectors with tax payers to avoid tax for them.
  • RESEARCH QUESTION
  1. To what extent has the mechanical and outdated system of keeping and recording accounts affect tax administration on revenue generation in Edo state?
  2. To what extent did lack sufficient staff and inadequate training of the available tax collector affect tax administration on revenue generation in Edo state.
  • To what extent as lack of improper enlightenment of tax payers has affected the tax administration on revenue generation
  1. To what has tax administration in Edo state effective and efficiently managed
  • RESEARCH HYPOTHESIS

HYPOTHESIS ONE

Ho:        the use of mechanical and outdated system does not affect tax administration and collection in Edo State

Hi:         the use of mechanical and outdated system affect tax administration and collection in Edo State

HYPOTHESIS TWO

Ho:        inadequate staff and training of the available tax collector does not affect tax administration and collection

Hi:         inadequate staff and training of the available tax collector affects tax administration and collector

HYPOTHESIS THREE

Hi:         enlightening the tax payers on the important of tax payment does not affect tax administration in Edo State

Ho:        enlightening the tax payers on the important tax payment affects tax administration in Edo State

HYPOTHESIS FOUR

Ho:        tax collection and administration in Edo state is effective and efficiently managed.

Hi:         tax collection and administration in Edo State is not effective and efficiently managed.

  • SIGNIFICANT OF STUDY

The researcher is motivated to study the ways through which internally generated revenue in Edo State could be enhanced.

The information contained here will benefit the society at large as it will expose the society to the need to pay tax and consequence failure to pay tax.

The study will no doubt charge the aggressive attitude of an average Edo man towards the payment of tax and collectors of tax who are regarded as enemies.

Owing to the present steps of the federal government to rebrand the economic activities, the research work will recommend measures that will be taken by the State Inland Board of Revenue, Federal Inland Revenue service, budget and planning department and other government decision making bodies that will enhance effective administration for her service especially in area of tax administration on revenue generation.

The study will unleash problems affecting tax effectiveness, which if appropriate corrective measures taken will go a long way in improving the state internal generated revenue machineries of the government.

  • SCOPE OF STUDY

The research will focus on;

  • reason why tax payers avoid or evade tax
  • how tax evasion and avoidance are carried out
  • the rate of revenue generation
  • manner and source of tax in Edo state for the past few years
  • what are responsible for poor tax collection in the state
    • LIMITATION OF STUDY

The following are the limitation of study:

  1. inadequate time due to class schedule and project work
  2. uncooperative of some employees that were approached
  • restriction to go out and source for materials
  1. insecurity as a result of insurgence
  2. financial constraint
    • DEFINITION OF TERMS

Tax:   a compulsory transfer of resources and income from the private sector in order to achieve some the nation’s economic goal. Okpe (1998).

Tax evasion: unlawful refusal to pay tax

Taxable income: proportion of income that is liable to tax

P.A.Y.E: it is one of the system of personal income tax based on proportion of income

Reference

Adam smith (1976). An inquiry into nature and cause of the wealth of the nation. New York, the modern library

Nweke (2000). Anatomy of Nigerian taxation. Elton, Nigeria Limited 100 Awka Road Onitsha

Ojo (1999).issues on tax management and administration in Nigeria; Nigeria financial reviewvol.8 1st march

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