Appraisal Of Tax System In Abakaliki Ebonyi State

Project and Seminar material for Accountancy

Abstract

This research project is based on the appraisal of Nigeria tax system ( a case study of board of internal revenue Abakaliki, Ebonyi State). It does not serve as literature on Nigeria tax system in the institution but grew out my interest and curiosity in the modern tax system. The are five chapter in all, chapter one introduces the study, chapter two reviews the related literature on the topic under study, chapter three deals on the research methodology. Chapter four focuses on the presentation, analysis and interpretation of data.

The objective of this work is to appraise the Nigeria. In doing this, the researcher went through textbooks and journals to establish why Nigeria tax system is essential and its development within the context of the Nigeria tax system. equally questionnaire were issued to the management and staff of the institution of the researcher to provide as concise would be of immense benefit to the people. Finding from the study on “appraisal of Nigeria tax system” has made it clear that tax system have contributed effectively to Nigeria economy as customers, contractors, beneficence etc. don’t need to present or on long waiting line before they can pay tax.

But need to create awareness and ensure its security and accessibility for the benefit of tax payers and as such will help Nigeria and the country as a whole to serve in this millennium. Recommendation were finally made that adequate workshop and training should be made to staff and to the users of Nigeria tax system in order to appreciate the essential use of the system to facilitate tax obtain cash in the country.

Table Of Contents

Preliminary Page(s)

• Title page
• Certification page
• Approval page
• Dedication
• Acknowledgement
• Abstract
• Table of content

Chapter One

1.0 Introduction

• 1.1 problem analysis
• 1.2 History of case study
• 1.3 Objectives of the study
• 1.4 problem analysis of the study
• 1.5 Purpose of study
• 1.6 Delimitation (Scope)of the study
• 1.7 Assumption
• 1.8 Significance of the study
• 1.9 Definition of terms

Chapter Two

2.0 Literature Review

• 2.1 Introduction
• 2.2 Types of tax
• 2.3 Capital transfer tax
• 2.4 Administration of tax law
• 2.5 Penalty
• 2.6 Best of judgment
• 2.7 Assessment of payment

Chapter Three

3.0 Research Methodology

• 3.1 Introduction
• 3.2 Research Design
• 3.3 Sources / Method of Data collection
• 3.4 Population and sample size
• 3.5 Sample Design
• 3.6 Instruments Used
• 3.7 Personal Interview
• 3.8 Observation
• 3.9 Data Analysis techniques

Chapter Four

4.0 Presentation and Analysis of Data

• 4.1 Introduction
• 4.2 Presentation of Data
• 4.3 Analysis of data
• 4.4 Interpretation of Results

Chapter Five

5.0 Summary, Conclusion and Recommendations

• 5.1 Discussion of findings
• 5.2 Summary of findings
• 5.3 Conclusion
• 5.4 Recommendation
• 5.5 Area for further Research
• Bibliography
• Appendix
• Questionnaire

Chapter One

1.0 Introduction

Government as an economic unit needs financial for its continuous existence the finance or revenue comes from different sources of which taxation is one of the major source. Taxation is a prominent source of fund to the government and as such calls for adequate system and control. Hence there are laws guiding the administration of tax, assessment of tax legality collection and accountability of the tax collectible.

A tax is a compulsory levy ( by the government through an appropriate agency usually the inland or board of internal revenue department) on the income of an individual or any legal entity it is an amount paid on account of the fact that the tax payer has income of a minimum amount for certain tangible and intangible economic activities which have been chosen for taxation.

It may be noted however that a public receipt having an element of compulsion does not automatically become a tax. Public authority could distribute certain goods services of which payment from the beneficence are compulsory. This has not qualified it to become tax, it has direct benefit, thus before a payment could be regarded as tax there are four essential elements which must be observed, which are; the art of compulsion. It must be levied by the public authority it is not fine and it must not have any direct guide.

Taxation no matter how it is obtained is precisely a liability on individuals income. Tax has its influence on the economy either by discouraging or encouraging economic activities, in fact it has been an effective tool in the hands of any government and economic planners to control the economy, in a depressed economy. The government can reduce the tax rate to stimulate the economy, thereby increasing disposable income of the people which however reflect in increased investment. The government on the other hand during inflation increases the tax rate to mop up the excess money in circulation. Thereby leaving the tax payer with little income to spend. This affect investments in the private sector.

Furthermore, taxation is used to avoid the consumption of harmful goods and their importation of commodities made locally and importation of ostentation goods. Also it is effective fiscal tools for redistribution of income in the economy.

1.1 Problem Analysis

Taxation being a major source of revenue to the government of the notion has to be adequately managed. In addition, taxation is been as an economic factor amongst others determining the tempo of investment and other economic activities. These call for effective management of tax. In the Nigerian tax system, the actual result is far below the expectation. Critical analysis of both state and federal budget has reveled out to be revenue from tax but the actual realization is usually in each case below the estimated amount.

It has been argued that with taxation, depressed economy would be stimulated and the consumption of harmful and ostentation goods will be checked. But for some years our economy has been in a mess and the consumption of harmful goods has instead been on the increase.

These and many other short comings are due to;

1. The inability to enforce the tax law
2. Lack of adequate knowledge to tackle tax issues.
3. Little or non- existence of adequate follow up of earning.
4. In adequate staff and employment of unqualified staff
5. False declaration of assets
6. Lack of reliable statistical figure on the population of the taxable individuals of the state.
7. Fraudulent behavior of some tax efficacious.
8. The problem of tax evasion.

There has been the public outcry by the rural dwellers “ no development no tax” concerning development neglect of their area by the government yet they pay tax. This discourages them from paying tax pay. This discourages them form paying tax hence results to much tax evasion in rural areas. This problem is similar to America before their independence in 1776 with their slogan “No representation to taxation.

1.2 History Of Case Study:

Board of internal revenue Abakaliki Ebonyi State.

Ebonyi state was created on the October 1,1996 where then military head of state under the late General Sani Abacha announced the creation of new state . it is made up of 13 local government areas.

Afikpo North, Afoikpo South, ohaozara, Ezza North, Ezza South, Izzi, Abakaliki ikwo ivo, Onite ha, Ohaukwu, Ishielu and Ebonyi. Local government. The capital is Abakaliki. The present day Ebonyi start at different times belong to Ogoja province eastern region, eastern central state, Anambara and Imo simultaneously,Enugu, Abia state. There were also Abakaliki province which comprises of both non – Igbo speaking communities whose relationship was only to suit political and administration convenience.

Ebonyi state is richly blessed with natural resources blessed with abundant mineral resources across the local government areas. At Ebonyi is Zine and Tead at Uburu in Ohaozara local government is natural salt water, this served the people of Nigeria during the Nigeria civil war at Ivo local government are blessed with Marbles quarry rock etc.

Ebonyi state is the salt of the nation and its blessed with fertile farmland. The major occupation of the people of Ebonyi state is farming. The farmers are mostly peasant, one who grows cassava, yam rice, maize, and vegetable. In terms of political cultural and social life the is people of Ebonyi state are not behind Nigeria is made up of many ethnic groups with different cultures. In Afikpo we have the Ogo society with many other culture which is the highest society in Afikpo, in Ohaozara we have Enyibe and the traditional head in each village called the Igwe and Eze who co – ordinates and represents the people in every issue that concerns them.

The first milltary government to take the oathnary general captain wealter her Feghabor followed by the assistant inspector general of police simion oduoye after him was the indigenous civilian governor DR. SAM OMINIYI EGWU after him is our present Governor MARTIN ELECHI EGWU who is now piloting the seat of the government.

Furthermore Ebonyi state has a common boundary with the people of Ohafia local government in Enugu state and the people of Idoma in Benue state. The problems of this Young state is lack of good infrastructure facilities such as a good road, electricity and pipe – born water. The consequence of this is that the people are inflected with the guinea worm disease due to ugly situation of the road the farmers are left with their farm products without attracting foreign investors who would have use those products for production. This will encourage our economy through the revenue that would have been generated imposition of taxes. Even the tax officials could not have access to some of the interior communities due to poor bridge network and road.

This hampers the effect of Nigeria tax system which also will effect government revenue. Abakaliki board of internal revenue was created, the board of internal revenue was created. The board is responsible for the collection of taxes within Ebonyi state and also for the administration of the state tax matter, it was established by PITA NO 104 OF 1993.

1.3 Administration Of The Study

The Ebonyi state Abakaliki board of internal revenue is one of the parastatal in collection of all taxes, which is charged with the responsibility of all tax revenue due to the state government it is headed by the executive chairman. There are presently four departments being operated by the board.

1. Assessment department
2. Collection department administration department
3. Planning research and statistical department.

The finance and supply section under the administration department. The state motor registry is under the collection department. The board of internal revenue operates two major offices in which of the 13 old local government area. The offices are tax offices and motor license offices.

The tax offices is headed by the tax assessment authority with a tax collector responsible for collection of all road taxes such as vehicle licenses, driving licenses, change of ownership, prove of ownership driving test, vehicle test, conductors badge etc.

But the tax officer collects personal income tax through direct assessment of normal nite assessment for instance PAYE with holding tax, hackney permit, development levies etc.

Furthermore each of the departments is headed by a head of department ( HOD) experienced in that department while the secretary heads the police section and coordinates the activities of other department. The chairman heads the police section and coordinates the activities of other departments. All those taxes are collected by the field official and are paid into the state government account in designated banks. The tellers of the lodgment are presented to the treasury along with the copies of the revenue cash book where the collection were entered to show evident of the judgment.

The sub- treasury issues such officer with the treasury book 6 (six) with which the officer renders returns of collection of the headquarters. The returns of collection are collection from different officers totaled and presented to the government on monthly bases as the internal revenue monthly collection.

1.4 Problem Analysis Of The Study

Government need revenue to carry out its budgeted projects. There is no other means which this project could be executed when taxes are not administered properly in the state. This is the problem of Nigeria tax system, poor economic improvement and that people evade or run a very for paying tax without being noticed. These are various causes of poor tax system in Ebonyi state. They include the following:

1. Poor tax information and accounting record
2. Corrupt officials of tax agencies.
3. Where income and poor fits of the tax payer are not
4. Accurately rendered to tax collection.
5. Where tax are not collected from that tax payer as at when due.

If this problem should continue, government may not afford to pay their staffs, pro vide the necessary social amenities such as good road, pipe born water and electricity, it may also lead the state into borrowing both internal in order to meet up their budgeted expenditure. The problem remains that people who are suppose to pay tax are by making collection of tax so difficult. They also obtain tax clearance through wrong channel, forgery thereby reducing government estimated revenue, all this problem contributes to the poor tax system in Ebonyi state Abakaliki.

1.5 Purpose Of Study

The purpose of this study are:

1. To determine and identify the impact of tax on improving government revenue.
2. Highlighting the need for tax in Nigeria
3. To suggest and recommend solution that will help improve tax system in Ebonyi state Abakaliki.

1.6 Delimitation (Scope) Of The Study.

The research work is restricted to Abakaliki and Afikpo in Ebonyi state where the tax system are collected. This information collected in entirely from the board of internal revenue. Abakaliki and Afikpo. There were constrained by time and finance. However the work was successfully carried out according to the above restriction.

1.7 Assumption

It is assume that;

1. The respondent at Abakaliki and Afikpo North local government board of internal revenue will co – operate with the researcher and complete the questionnaire and grant audience for intervenes.
2. The supervisor will give the researcher all the necessary guidance and direction for the completion of the study.
3. The researcher will be alive to see the end of the study.

1.8 Significance Of The Study

This research would be significant in these aspect;

1. creating awareness to the Ebonyi state government and the general public about the positive effect of an appraisal of Nigeria tax system on improving government revenue.
2. To consider the appropriate measures necessary for effective tax system in Ebonyi state.
3. To enumerate and identify persons organization and properly liable to tax.

1.9 Definition Of (Unfamiliar) Terms / Concepts.

In this research study, certain terms / concepts are used for the purpose of proper understanding are clearing, the unfamiliar term used are defined as follows:

Tax:

This is a compulsory levy imposed by the government on the citizens of the state.

Taxation:

This is a way or method of generating revenue through taxes by the government.

Tax Base:

This refers to the items to be taxed

Tax Rate:

This is the object taxed.

State Board Of Internal Revenue:

This is the board in the state level charged with there possibility of tax collection.

Revenue:

This is an income i.e. the total annual income of the state.

Computer:

A computer is a processor of information of data.

Chapter Five

5.0 Summary, Conclusion And Recommendation

5.1 Discussion Of Findings

The data presented in the proceeding face to face interview and desk research. The authority of some of the data were confirmed by personal observation made by the researcher during visits to BIR it is the researcher firm belief that the responses represented the candid view and feeling of the respondents about the system attitude of both the tax officials and tax payers.

The response given by the tax personnel in table 4.2 and 4.7, the researcher found that there are numerable problems facing the system of taxation in Nigeria as a while.

This problem generated due to false declaration of profits / income by payers which however makes it extremely difficult for tax personnel to ascertain reasonable liabilities and individual income. Thus, 20% of there respondents said that most times people indulge in tax evasion / avoidance thereby will not pay any thing at all, whereby they try showing up may take a long while before declaring their income to tax office.

In table 4.9 only 60% of the respondents agreed that they make up to 5,000 per annum while 40% of the respondents do not make up to 5,000 annually showing that large number of the population are tax free due to poverty. This is in line with the response the researcher obtained from the tax office in the open questionnaire administered to them. They give the factors why there has always not been 100% realization of budgeted revenue as; that individuals are as poor due to unemployment. However some engage in evading tax, some assessment where found that they do not make up to 5,000. following the 1993 budget pronouncement which exampled any individual whose annual returns are not up to 5,000 from paying tax but will file a return at lat for record purpose.
Another reason mentioned are that the system do at times over estimate the expected revenue excess budget. High rate of taxation is also another problem for under realization of budget revenue lack of adequate information or knowledge of new and existing business firms and their address problem of identifying legal tax payer non-availability of records of statement of account in business set ups, inefficient executive action by the revenue personnel.

In a close interview with tax personnel 70% of the respondents answered on the valuation of assets transferred interview and at death. Collection at taxes in such assets the assets are valued at current market price, that is at the prevailing price at the time of the transfer. The researcher found that capital transfer tax is to cultural socio – economic and religious factors and there is no documentation of the assets, the assets, thus valuation is not easy.

A further problem in this types of tax is that provided by the capital transfer tax is payable on transfer of property with minimum value of 100,000 but excess of such amount many assets today o not worth up to 100,000 which means no taxation of them. Again residential possible collection from this aspect of taxation is very little or never zero in each year.

Collection of taxes on capital gain tax had been easier because most of assets involved in this type of tax are registered but form 1992 budget pronouncement by the head of state it was reviewed and related.

A further findings made by the researcher, 55% its those interviewed said that there has been dishonesty and corruption practices by tax agent. They take bribe form the tax payer and leave him to run away so may fictitious receipt and issue them to people.

5.2 Summary

Tax system in Nigeria has been a controversial issue over the past years. Many have written on it but none being all embracing in its research and findings to be tenable all embracing and convincing, any research on this topic must develop deep into the three entities that are connected ( i.e tax payers, tax authority and the government) and articulate their activities to come in with a model of work that will be helpful in our tax system. The researcher of this work has endeavored to see that these are adequately taken care of.

In chapter one the topic was introduced and the scope of the work set . in the second chapter the researcher reviewed what many author have written on the topic of discussion and information obtained from board of internal revenue ( BIR) while chapter three gave various techniques employed by the researcher to obtain information needed, chapter fur dealt with the presentation analysis and the interpretation of findings showing why tax collectable have always been less than expected revenue and taxation has been falling short of achieving what it is set to achieve. These have been as a result of poverty tax evasion / avoidance unscrupulous behavoiur by tax personnel and the government in general.

Reduction in tax will help eradicate most problem encountered in (BIR). Therefore, the government has greater role to do in abid to bring back the lost glory of taxation.

5.3 Conclusion

The researcher was carried on to appraise the tax system in Nigeria using Ebonyi state board of internal revenue in effect it was proposed to find out the main evil that hampers effectiveness and efficiency of tax system and there has always less reliable in the project revenue.

Tax evasion / avoidance fraudulent behaviour by tax official effect these, many people in our society do not want to pay tax. They never want to show up for assessment and if they do, they may delay payment in the year of assessment while some people use legal means to pay little or nothing. The workers in the tax authority exits some amount of fraudulent practical.

There is no good accountability of the revenue realized from taxes and more so there have been bribery and corruption in activities of the staff. Either helping people to evade or avoid liabilities furthermore, people are not being persuaded. To pay tax and when they pay it was less than they supposed lack of incentives champions the unscrupulous behaviour of the BIR workers.

The Generality of the population is suffering from poverty and the government has not ameliorate the situation per sei, providing employment opportunities instead unemployment rate increases. There is lack of infrastructural facilities which is always acclaimed to be the main reasons for taxation. These coupled with non- challant and unfriendly attitudes of the staff of tax authority discourages people from paying tax.

On the other hand government has not made public awareness on the need for taxation in the minds of the populace they do not know what tax is and they should pay.

The tax have not been adequately amended to their short comings. Compare to other worker in other government setup, the staff are not motivated there is constant incursion and they always employ unqualified labour.

5.4 Recommendation

In view of the difficulties encountered in tax system the researcher recommends that.

The government should have programme like education for the tax payer.

This will educate the masses and create awareness on why tax payment is necessary.

Government should make available infrastructural facilities to the masses not only in the urban areas also, this will induce people into responding positively.

Employment opportunity should be created for the masses to eradicate poverty.

Government should endeavor to employ experts in the tax matters (administration) they should be thus polities should not be played in the appointment of workers.

The government should reduce the tax rate and laws to lessen the harshness on individual tax payers.

They should be a good census to get accurate population figure which the taxation population should be known in the state or in nation this will curb over budgeting.

There should be strict enforcement of laws on the defaulters e.g (the fraudulent worker false declaration of return).
Working materials (such as vehicle , forms, biro, files, computer etc). should be provided to the workers. Government also should check the motivating factors they should be given training services up to university level and organization of seminars and conference to improve in their working standards.

Laws on the registration of business should be more forceful, payment with cheque should be preferred to paying by cash. This will eradicate the rate of fraud by the tax officials. Tax clearance should be issued on yearly basis that is tax clearance certificate for a particular year should only contain payment for that year only.

It is the opinion of the researcher that if these recommendations are followed there will be a drastic change or improvement in tax system in the state and the nation in general.

5.5 Area Of Further Research

The study suggests that further research on this topic should be conducted with larger population than what was used, and this showed out across other Appraisal of Nigeria tax system in Abakaliki Ebonyi state.

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