Problem And Prospects Of Companies Income Tax Administration In Nigeria: A Case Study Of The Federal Inland Revenue Services (FIRS) Owerri

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Abstract


This research work is titled “Problems and prospects of in of income tax Administration in Nigeria” the aim of this work is summarization as determining the proportion of taxation adults who pay tax, the root cause of non payment of tax, rate of tax compliance of self employed persons, taxes collected whether they are correctly remitted to the government. In the light of these the research problem is to identify the hophoces in the administrative machinery of income tax in Nigeria.

However, in the course of this work data were collected from both primary and secondary sources which include discussions with officials of the board, questionnaire, tax journals, website of the board and other information circulars. The data collected in the questionnaire were analyzed using simple percentage method and chi-square.

From the analysis carried out the following findings were made:

  1. Poor administration of income tax creates problem in the economy.
  2. Improvement of income tax administration in Nigeria.
  3. Few out of the taxable adult pay tax because they want all their civil responsibilities.

Based on the researcher advance the following recommendations:

  1. The entire tax system in Nigeria should be regularly reviewed.
  2. Activities of the various tax officials should be closely monitored to minimize the incidence of fraud.
  3. The federal inland revenue services (FIRS) should be equipped with modern facilities

Table Of Content


Preliminary Page(s)

  • Title Page
  • Approval Page ii
  • Dedication iii
  • Acknowledgement iv
  • Abstract vi
  • Table of Content viii

Chapters

  • Chapter 1: Introduction
  • Chapter 2: Literature Review
  • Chapter 3: Research Design and Methodology
  • Chapter 4: Presentation and Analysis of Data
  • Chapter 5: Summary, Conclusion and Recommendation.

Chapter One

1.0 Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Objective of the Study
  • 1.4 Research Questions
  • 1.5 Statement of Hypothesis
  • 1.6 Significance of the Study
  • 1.7 Scope of the Study
  • 1.8 Limitation of the Study
  • 1.9 Definition of Terms

Chapter Two

2.0 Literature Review

  • 2.1 Introduction
  • 2.2 Nature of Taxation
  • 2.3 Structure and Administration of Nigeria Tax System
  • 2.4 The State board on internal revenue
  • 2.5 Process of Tax administration in Nigeria
  • 2.6 Looking at some tax legislation in Nigeria
  • 2.7 Problems of tax administration in Nigeria
  • 2.8 Problems of tax administration in Imo State
  • 2.9 Tax evasion and avoidance
  • 2.10 Prospect of income tax administration

Chapter Three

3.0 Research Design And Methodology

  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Sources/methods of data collection
  • 3.4 Population and sample size
  • 3.5 Sample technique
  • 3.6 Validity and reliability of measuring instrument
  • 3.7 Method of data analysis.

Chapter Four

4.0 Presentation And Analysis Of Data

  • 4.1 Introduction
  • 4.2 Presentation of data
  • 4.3 Analysis of data 59 4.4 Test of hypothesis

Chapter Five

5.0 Summary, Conclusion And Recommendations

  • 5.1 Introduction
  • 5.4 Summary of findings
  • 5.3 Conclusion
  • 5.4 Recommendations
  • References
  • Appendix 1
  • Appendix 11

Chapter One


1.0 Introduction

Nigeria is organized by a federal system, hence its fiscal operation adhere to the same principle. This has serious implications on how the tax system is administered in the country. In Nigeria the government’s fiscal power is based on a three tiered tax structure divided between the federal state and local government, each having a different tax jurisdiction, as at 2003 about forty (40) different taxes and levies are shared among the three levels of government which are their sources of revenue.

The Nigeria tax system is lopsided and dominated by oil revenue. The most veritable tax are handled by the federal government and the lower tiers are responsible for the less buoyant ones. The federal tax corporate bodies while state government and local government tax individual except the residence of federal capital territory, personnel income of police, armed forces department of foreign affairs which are strictly for federal government.

The federal government on average account for 90% of the overall revenue annually. In 2005 the breakdown of total tax and levy collection of the three tiers of government was 96.4 percent for the federal state and 0.6 percent for the local government (Philips) (1997). A major element contributing to this development was the prolonged military rule that has ignored constitutional provisions. Indeed because of the various quest of the government in redistribution of income, redistribution of income, poverty eradication emphasizing the rise in per capital income solving unemployment problems and reduce inequality which is a breath on the nostril of a modern government.

Taxation therefore, is a compulsory levy imposed by the subjects or upon his properties as to up it’s over sight function. The main purpose of taxation is to raise fund to meet government’s expenditure and redistribute incomes or wealth and management of the economy. Tax collected comes back to the people informed of social amenities. As these amenities increase taxation assure as greater importance since it’s the major source of government revenue. Taxation encourages savings and regulates expenditure.

The granting of tax relief provides incentives for the private sector; the direct tax especially the pay-as-you-earn (PAYE) is progressively high so as to redistribute income of individuals equitably. Some individual regard taxation as important fiscal measures not only for the benefits it yields to the government but also because it directly affects this income level and therefore, their standard of living.


1.1 Background Of The Study

Below are some of the needs of this study

  1. To determine the proportion of taxable adult that pays their tax as at when due from the salaries/wages and the self employed and whether they pay the correct amount.
  2. To discover the causes of non or inadequate payment of tax.
  3. To identify the loopholes in tax administration machinery in Nigeria.
  4. To determine the effectiveness of the methods used by tax officers in the collection of tax.
  5. To find out if tax collected are correctly remitted to the government.

1.2 Statement Of The Problem

There are legions of problems militating against the income tax administration in Nigeria. Some of them are highlighted thus:
Tax evasion by tax payers were by an individual makes a deliberate attempt to establish tax.

  1. Full identity of persons to be taxed are not known because an adequate tax roll is not available.
  2. Lack of requisite and qualification of tax officials.
  3. Problems of assessment whereby notice can be served to an individual because of his address and place of residence cannot be easily traced.
  4. Problem of income identification and false income declaration.
  5. Difficulties of tax collectors: These occur whereby some individuals refuse to pay tax.
  6. Embezzlement and pilferage of tax proceeds. These happen when tax collectors and officials are unable to make proper account of tax so collected.
  7. Poor infrastructure and other facilities for tax officials.

1.3 Objectives Of The Study

This research work concentrates on the aims as well as the targets of the research work which are discussed below.

  1. To determine the proportion of taxable adults from both the salary/ways earners and the self employed that can pay tax and if they do whether they pay the correct amount.
  2. To determine the root cause of room payment or inadequate payment of taxes
  3. To determine the loophole in administration machinery of tax in Nigeria
  4. To determine the effectiveness of the methods used by tax officers in the collection taxes
  5. To find out if taxes collected are correctly remitted to the government.

The Tax Payer

The tax payer from this study will know his right and obligation in respect of tax. He will also understand the reason why he ought to pay the correct and as when due to an appropriate tax authority.

The Non Accounting Individual

They also stand to benefit from this study because they are affected in one way or the other by tax in the country. This study will help in cleaning the ignorance of taxable individuals with regards to the concept of taxation which may be the major reasons for their reluctance to pay tax.

Self Employed Persons

This study will help them keep adequate accounting records of their enterprise which will make the following possible.

  1. Enable him calculate profit or loss on trade for a particular period.
  2. Enable him know the operating capacity over a period of time.
  3. Enable him to compare his present and past performance level to aid effective and efficient planning, leading to better management of his resources in a future period.

Tax Authority

The study is also relevant to the tax authority since it studies the problems of income tax administration and then recommendations will help to improve their performance and thereby increasing revenue field of the government. This study will also help the tax authority to find tax assessment and collection a pleasant task of performing not becoming an enemy of progress to the tax payers as seen by some tax payers. Proffer tax administration, which will emanate from the result of this study, should also contribute to the equitable distribution of income which is one of the purposes of taxation both here and in Diaspora.


1.4 Research Questions

For the purpose of the study the following are the research questions.

  1. Is there really problem of income tax administration?
  2. What are the causes of those problems?
  3. How efficient is income tax administration in
    Nigeria?
  4. Do you receive adequate returns from your plans?
  5. Can the problem of inaccurate and incomplete tax returns to the government be difficult to curb?
  6. Has your revenue generation been affected by the tax system?
  7. Is tax laws in Nigeria reviewed as regularly as they should?
  8. How effective is the implementation of tax laws in Nigeria.
  9. What are the causes of inefficient tax system?
  10. Is there any hope of importing the tax system in Nigeria?
  11. Will improvement of tax administration lead to better prospects.

1.5 Statement Of Hypothesis

For the purpose of the study, the following hypothesis will be tested.

  • Ho: The improper administration of income in Nigeria did not cause inefficiency.
    Hi: The improper administration of income tax in Nigeria caused inefficiency.
  • Ho: Improving income tax administration in Nigeria will not lead to better prospects
    Hi: Improving income tax administration in Nigeria will lead to better prospects.

1.6 Significance Of The Study

For the purpose of this study it is assumed that

  1. The information obtained in Imo state will not contradict with that obtainable from other states
  2. The respondents understand the meaning of taxation and what it entails.
  3. The answers to the questionnaires by the respondents were stated objectively.

1.7 Scope Of The Study

This study will concern itself with on how effective the system has been and the problems associated with assessment and collection of taxes during the post colonial year. Hence, in the process of this there exist some constraints militating against of the comprehensiveness of this research work. It is worthy of note that the researcher limited himself to federal Inland Revenue Imo State and federal inland revenue services.


1.8 Limitation Of Study

In the process of this research work there exists some constraints that hindered the comprehensiveness of this work some of them are:

Time Constraints

Time is one of the major limitations of this work because of that the researcher is unable to get sufficient information for this work.

Financial Constraints

Finance is a major limitation of this work as a result if that the study was only limited to Imo state.

Unfriendly Attitude Of Staff

Most strategies staff of the board were uncooperative and unfriendly, to the extent that some of the materials necessary for the work could not be fetched insisting that they will receive orders from the top before they can release any information.


1.9 Definition Of Terms

The following terms are hereby defined as many be used in the context of this work.

Board:

Tax administrative machine in the federal and state.
Year of assessment: a period of 12 months commencing in any month of the years.

A Company:

Corporations (other than a corporation sole) establish by the act of national assembly or any other act enforced in Nigeria.

Persons:

Any tax payer including company or individuals.

Tax Base:

This is a legal description of the subject with which tax applies.

Tax Avoidance:

This is a legal way of reducing one’s tax liability. It can also be seen as tax act of winning game without cheating which involves the tax payer identifying the loopholes in tax laws and taking advantage of them.

Tax Evasion:

An illegal way of reducing tax liability which is a criminal act.

Direct Tax:

These are taxes levied directly on incomes or profits of individuals and

Income Tax:

This is levied on incomes of individuals, sole traders and partnerships.-

Indirect Tax:

Taxes imposed on goods and services.

Grants:

This refers to monetary assistance or acts given by one government to another

Payee:

This is pay as you earn taxes deducted from salaries of workers especially civil servants.

Generated Revenue:

Income actually realized in a fiscal year.


Chapter Five


5.0 Summary, Conclusion And Recommendations

5.1 Introduction

In this chapter the findings on the problems and prospects income tax administration in Nigeria will be disclosed, conclusion will be drawn and recommendation will follow.


5.2 Summary Of Findings

Some of the findings of this research work are as follows:

  1. Improper administration of income tax in Nigeria caused efficiency.
  2. Improving income tax administration in Nigeria lead to letter prospects.
  3. Few out of the taxable adults pay tax because they want all their civil responsibilities.
  4. Civil servants pay more tax than the self employed; this is true because under pay-as-you-earn system the formers is obligated to pay tax.
  5. Tax officials demanded and accept some gratification from tax payers because they needed some incentives to work.

The following are attributed causes of on payment of adequate taxes.

  1. Honesty among the tax officials
  2. Some motion towards tax payment.

5.3 Conclusion

Conclusion of this research work is drawn from the following;

  1. There is improper administration of income tax in Nigeria.
  2. Proving income tax will lead to better prospects.
  3. Few taxable adults pay tax just to fulfill their civil abilities and civil servants pay tax more than the self and persons because of the PAYE system.
  4. Tax officials demand some gratifications because they needed some incentives to work and are faced with poor working conditions.
  5. There is dishonesty among tax offices.

5.4 Recommendations

In order to enhance performance through efficient administration of income tax in Nigeria tax system, the following are hereby, recommended.

  1. The entire tax system should be regularly reviewed.
  2. Activities of the various tax officials should be closely monitored to minimum the incidence of fraud.
  3. The federal inland revenues services (FIRS) should be equipped with modern facilities including computers, for accurate and up to date statistical records or tax returns.
  4. The government should encourage tax officials and employ those knowledgeable in taxation, so as to improve the efficiency and effectiveness of our tax system.

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