Assessment Of Tax System And Its Effects On The Public Sector

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Assessment Of Tax System And Its Effects On The Public Sector


Abstract


The development of any nation depends on the amount of revenue generated by the government for the provision of infrastructural facilities. Taxation is the key to unlocking the resources required for public investment and infrastructure growth. Taxation and tax management is a stressful activity for everyone, especially for business owners and entrepreneurs. If you’re selling taxable goods or services in any state in Nigeria or you earn some income from working in the country, you almost always have tax obligations. This means you are legally required to collect, file and remit sales and use tax. Nigeria tax system has been in operation for a long time. It is the objective of this study to assess its effects on the public sector.


Chapter One


Introduction

1.1 Background to the Study

Tax constitutes a system of raising money from corporate institutions and persons on behalf of the government for developmental programmes. Tax is a compulsory contribution imposed by government on eligible tax payers in the country to aid in the financing of government expenditures in the provision of essential services such as education, health services, road constructions, security, social payments etc.Taxes are imposed for reason of regulating the production of certain goods and services, protection of infant or certain key industries, curbing inflation and meeting operational costs of governance. Taxes are also imposed to mitigate the consumption of certain undesirable goods and services, correct the country’s balance of payment and attract investors. Regulate certain economic activities; bridge the inequality gap between the rich and the poor.

Consequently in order to achieve these tax objectives, the government implement different types of tax system such as “Pay As You Earn, (PAYE), Value added tax (VAT), Excise duties etc .The research seek to proffer an assessment of Nigeria tax system and its effect on educations system of public sector.


1.2 Statement of the Problem

A fundamental functions of government is the responsibility to provide essential service and infrastructure for the wellbeing of the people such as the provision of education, health facility, security, good roads, quality education etc. Therefore to achieve this objective of government, it became necessary for government to impose taxes on eligible persons and institutions in the country to raise additional financing to meet these services. Consequently government has always formulated various tax laws, policies and system to meet the challenges of raising additional revenue. They include: Income Tax Management Act (ITMA), Companies Income Tax Decree (CIID), Joint Tax Board (JIB) etc. as a measure of ensuring adherence to tax payment and discouraging tax evasion and avoidance. Therefore the problem confronting the research is to proffer an Assessment of Nigeria tax system and its effect on the public sector.


1.3 Objectives of the Study

  1. To determine whether the Nigerian tax system has improved in its operation since adoption.
  2. To determine whether the Nigerian tax system significantly affect the Nigerian public sector.
  3. To ascertain the challenges incurred in the Nigerian tax system

1.4 Research Hypotheses

H0: The Nigerian tax system has not improved in its operation since adoption.

H0: The Nigerian tax system has not significantly affect the Nigerian public sector.

H0: The Nigerian tax system has not incurred challenges in its administration.


1.5 Significance of the Study

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build on their research work. This study contributes to knowledge and could serve as a guide for other study.


1.6 Scope and Limitation of the Study

The study focuses on the assessment of Nigeria tax system and its effect on the public sector. However, the study was confronted by the following constraints;

Financial Constraint:

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time Constraint:

The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.


1.7 Definition of Terms

Tax:

A compulsory sum of money imposed by the government on its citizen for the provision of public goods and services.

Tax Base:

This is the object which is taxed for instance personal income, company profit.

Tax Rate:

The rate at which tax is charged.

Tax Incidence:

It offers to the effect of and where the burden is finally rested.


1.8 Organization of the Study

The study is divided into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to reiterate that the objective of this study was to assess the effects of Nigeria tax system on Public sector

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in supporting the view that diversification is a survival and growth strategy.


5.2 Summary

Tax is a licentious octopus and a potent tool of economic, social reform and development. It pervades every aspect of the economy and individuals, corporate bodies, citizens and foreigners, manufacturers and marketers, workers and pensioners, etc. Taxpayers in Nigeria (individuals and corporate entities) would comply with tax commitment and payment if only they are convinced that government would use the tax they pay to provide good roads, electricity supply, good health systems and other social amenities, etc. There is need to overhaul the entire Nigerian tax system and administration with much emphasis on the reduction or elimination of multiple taxation because it discourages investment, and worsens poverty crises.


5.3 Conclusion

Before a country considers how best to administer its tax system it must possess a clear picture of the scope of its tax system. The quantity and quality of resources required by tax administrators are to a large extent determined by the type of tax system which is introduced. A nation’s tax goals are not achieved by designing a tax system which is fair. Any fair system which is not administered as planned becomes inequitable. Thus, a good tax system is capable of financing the necessary level of public spending in the most efficient and equitable way possible. It should also raise enough revenue to finance essential expenditures without recourses to excessive public sector borrowing, raise the revenue in ways that are equitable that minimized its disincentive effects on economic activities; do so in ways that do not deviate substantially from international norms. (Tanzi and Zee, 2000). The Nigerian Tax system is lopsided and dominated by oil revenue and therefore the establishment of effective and efficient tax systems faces some formidable challenges. The first of these challenges is non availability of tax statistics. The second is the inability to prioritize tax effort. The third is poor tax administration. The fourth is the multiplicity of taxes. The fifth is the structural problems in the economy that affects the maximization of VAT. Finally, the challenge of underground economy. It would take too much space to enumerate all the challenges so a few comments on some of them will have to suffice. The main objective of this paper is to examine these challenges affecting the proper implementation of a good tax system in Nigeria and proffer strategies for an efficient tax regime.


5.4 Recommendation

The study makes the following recommendation:

  1. The Joint Tax Board in the course of discharging its statutory functions, should embark on new mass and awareness campaign on tax compliance and to advise Federal Government to prevail on the state and local governments to desist from collection of double taxation from manufacturers and other entrepreneurs.
  2. The Joint Tax Board should embark on public enlightenment in respect of multiple taxation to educate tax payers to know what they are supposed to pay and what they should not pay, if they are asked to pay something that is not backed by the law, they are free to enforce non-payment by giving to the court.
  3. The Joint Tax Board and the committee set up by the National Economic Council (NEC) should find a workable solution to the problem of multiplicity of taxes. This could be achieved by engaging all stakeholders and legislative provisions in a holistic discourse in order to enable them understand the magnitude and dimensions of the problem and come out with recommendations that will help Nigeria to have a more investment-friendly tax regime.
  4. The Joint Tax Board and Committee should approach the task with a multipronged strategy such that barriers to a harmonized, easy to administer tax regime are eliminated at the three tiers of government particularly the state and local governments in the country.
  5. The governments (Federal, State and Local) should develop a strong base for taxpayers, streamline collection mechanism and stop multiple taxes which is a reprieve to the industrial sector and the entire economy.

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