Problems Of Assessment And Collection Of Personal Income Tax In Nigeria (A Case Study Of Board Of Internal Revenue Delta State)

Project and Seminar material for Accountancy

Project and Seminar material for Accountancy


Abstract


Collection and assessment of personal income tax has been bedeviled with problems. These problems made the researcher to investigate if there were problems existing and if so, what are the consequences to the state.

As a result, some related literature was reviewed; some vital data were also collected from primary and secondary sources. The major findings of the study was that the personal income payer who measured their profit do not follow acceptable format from profit and loss account measurement e.g. cash and stock withdrawn from business are not properly recorded.

Absence of proper assessment have no noticeable impact on tax payers in the management of their business, most of the tax payers do not keep proper books of account of their business. More incentive such as promotions and rebates should be given to tax officials on the tax collected.


Table Of Content


Preliminary Page(s)

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

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 Significance of the study
  • 1.5 Scope of the study
  • 1.6 Limitations of the study
  • 1.7 Definition of term

Chapter Two

2.0 Literature Review

  • 2.1 Concept and meaning of taxation
  • 2.2 Classification of taxes
  • 2.3 Concept of personal income tax
  • 2.4 Administration of tax in Nigeria
  • 2.5 Assessment of tax
  • 2.6 Effect of tax Assessment
  • 2.7 Problems assessment and collection of personal income tax

Chapter Three

3.0 Research Design and Methodology

  • 3.1 Introduction
  • 3.2 Research Design
  • 3.3 Sources of Data
  • 3.4 Data collection instrument
  • 3.5 Population of the study
  • 3.6 Sample size determination
  • 3.7 Validity and reliability
  • 3.8 Method of data analysis

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1 Introduction
  • 4.2 Data presentation and analysis
  • 4.3 interpretation of data

Chapter Five

5.0 Summary of Findings, Conclusion and Recommendation

  • 5.1 Summary of findings
  • 5.2 Conclusion
  • 5.3 Recommendation
  • Bibliography
  • Appendix

Chapter One


1.0 Introduction

Nigeria is a country with three tiers of government, federal state and local. Each has responsibilities to the people as specified in the constitution of the federal republic of Nigeria. Thus since taxation is partnership with government for provision of goods and services to the people.

The taxes and Levies in Nigeria are divided among the three-tiers of government. Personal income tax has always been a social contract between the people and their government. As argued by Margret Thatcher “when people pay nothing, they care nothing” various studies have shown that there is a high correlation between tax compliance and good governance as people who pay taxes tend to ask question and hold their leaders accountable.

Personal income tax is payable to the state in which the individual has his principal place of residence. The board of internal revenue administers personal income tax decree, 1993. This decree repealed income tax management act (IT MA) and the income tax (Armed forces and pensions) (special provisions) Act.


1.1 Background Of Study

Government of a State needs money to secure its tertiary and to provide social services such as maintenance of law and order, security, lives and properly of its citizens. This is becomes compulsory that every subject of a State must given financial support to the Government as nearly as possible in proportion to their income. That is, in proportion to the revenue which they respectively enjoy under the protection of the state (Smith, 1904:310).

Therefore, tax is a compulsory levy imposed by Government against the income, profit, or wealth, of the individual partnership and corporate organizations.

Tabanisis Ochigu (1994:1) stated that “in Nigeria tax is levied on the authority of the Federal Government, income tax Government Act 1961 (FAMA) and subsequently amendments including the finance (Miscellaneous Taxation Provisions) Decree 1992 and the (Finance Miscellaneous provision) Decree 1993.

These laws are not static as they are changed almost each year during the budget speech. The direction is determined by what the Government wants to achieve.

However, the yield from personal income Tax (PIT) has been less than the expect or budget. This poor yield has found to be as a result of personal income tax. This has adversely affected the yearly income of Government, since taxation is one of the major source of Government revenue

Personal income tax was introduced in 1799, as a means of paying for the war against the French forces under napoleon. The cost of persecuting the war had drained Britains resources and run up a considerable national debt. The army was starving, and poor conditions in the Navy in 1797 had led to muting so tax was introduced as an “aid and contribution for the prosecution of the war”. Taxation had to continue amidst protests from people. Even lady Goliva Roda naked through the streets of currently in the century to persuade her husband to reduce it.

In the year 1979 where a tax clearance certificate issued to late Dr.Nnamdi Azikiweb was contested assessment as and when due. The court ruled that in accordance with the faster region finance low 1958, Azikiwe objected to the tax and made part payment of up to 50% of amount due accordingly and waited for his objection to be resolved thereafter and therefore was deemed to have paid his tax as when due.

In the Northern Region, such part payment would not have sufficed, because in the personal income tax 1962 of the North full payment of tax most be made irrespective of pending objections tax legislation throughout the country.

In Delta State, this is the case study in one the thirty-six (36) States in Nigeria which is located in South- South region. The state capital is Asaba in Aniocha Oshimiri Federal Constituency. It is made up of twenty- seven (27) local Government Area. Its state Board of internal Revenue is located at NO. 42 Ezenei Street Asaba the board comprises of :

  1. Executive Head of State services as chairman, appointed by the state Governor.
  2. Three other persons nominated by the commissioner for finance in the state on their personal merits.
  3. The Directors and Head of Department within the state service.
  4. The Secretary is appointed by the board from within the state service.

The legal adviser is a member of the state board and represents the board in his professional capacity in any proceeding in which the state board is a party. The Quorum is five members of which one must be the chairman of a director.

On the basis of the problem surrounding the and collection of personal income tax, that this project is based in order to guest for and finding solution to them.


1.2 Statement Of Problems

Sequel to the distressed state of most state board of internal revenue arising from tax evasion i.e. in the form of understatement or non-declaration of income absence or proper account keeping into given the correct financial statement. Prior to the emergences of the tax avoidance which means the use of legal means top prevent or reduce tax liability which would otherwise have been incurred by taking advantage of some provisions in the law. Personal income tax assessment and collection was in area deep mass.

As a result, people became skeptical of the tax collection as they were in no way willing to pay tax again one result of such method, if they succeed, to be applied by tax collector and assessors, is to increase potent to the load of tax in the shoulders of the great body of the good citizen who do not desire, or do not know how to adopt, these manover


1.3 Purpose Of The Study

Taxation of income has existed in various forms for thousand of years. In all civilized societies, a control administration had collected portions of peoples productive output to use as a reserve in hard times, to provide for the needy, and to increase the wealth and power of rules. Until the modern era, rules and their administrator would commonly take portions of peoples crops with no consideration of the cost farm work.

For example, in one of the earliest, know civilization, the 6000 year-old society of legashi summe, in present day Iraq, taxation is supported massive warfare. During a time of peace, a new king established freedom by ending all tax collection. Lag ash soon fell to outside invaders. The old testament of the bible also contains rules requiring farmers to turn over a “ tithe” (one- tenth) of the crops to their crops to their kings. Some portion of these taxes served as a safety net for those in need. Once the food was collected, it was to be made available to’’ the strangers, and the fatherless and the widow, so that they could eat and be satisfied (see Deuteronomy 14:28-29)

The Delta state board of internal revenue Asaba, are seen in very nooks and crannies in the state visiting offices canvassing for people to pay tax.

In this study, we are to mention this problem of assessment and collection of personal income tax in Delta State and Nigeria as a whole, thereby making recommendations which the tax assessors and collectors might adopt to give Nigerians sense of belongings.


1.4 Significance Of Study

This study will bring into focus the deficit in generating revenue from personal income tax as compared to the budgeted income from personal income tax.

It would help in better analysis by policy makers and other users as wit would show the impact of the problems of assessment and collection of personal income on the state board of internal revenue Delta State.

It would also guide policy makers as to the measured to be adopted to combat evasion of tax in Nigeria. The fining would help the Government in reaslizing sizable revenue which helps her in fulfilling her obligation to the people.


1.5 Scope Of Study

This study covers board of internal revenue. Although it is limited to at state board of internal revenue, Delta State, the findings are applicable to all states board of internal revenue since they have the same problem.


1.6 Limitation Of Study

Certain constraints were encountered in the course of this research. The staff of board of internal revenue which is the case study of this research were restricted from providing information on the tax issues with prior permission from their director.

Another major limitation emanated from financial constraints computed with the limited time and unwillingness of the director to give his supportive hand before the later succumbs, and since the research is not Delta State always, the frequent travelling skyrocated the transport fair.

Hence, this research work was delayed more than expected.


1.7 Definition Of Terms

For the purpose of presenting system, clear and precise use of concepts as well as ambiguity. The following terms are defined in the context of this study.

Direct Assessment:

the assessment of people based on the business they do and on the best judgment of the tax officials.

Purchased Tax:

tax payable on the procurement of certain extensible commodities.

Tax Payer:

any taxable adult that earns income subject to taxation.

Petroleum Profit Tax:

tax paid by companies engaged in petroleum operations in Nigeria.

Tax Avoidance:

a legal means of reducing the tax burdens on a tax payer by the exercise of his legal right under the ITMA 1961 as amended and the CITA 1979 as amended.

Tax Evasion:

a willful default which is a criminal offence by a tax payer by the exercise of this legal right under the ITMA 1961 as amended and the CITA 1979 as amended.

Capital Gains Tax:

it is chargeable on profit made on disposal of an assets. Disposed here includes charge of ownership of parting with interest or rights in a property.

If the asset disposal is situated outside Nigeria capital Gains tax is imposed only on the amount received or brought into Nigeria.

The rate of capital Gains tax is now ten percent (10E) it is been assessed on actual year basis.

Value Added Tax (Vat):

it can be define as a form of direct tax that is levied on some selected goods and services known as “taxable goods and services” it is based on the value added of these goods and services.

Value added tax decree came into force on 18th December 1993 by administratively. On 1st January 1994. It was introduced to replace the exiting sales tax and its adequate notable narrow based in terms of the category of goods and services.

The rate of (VAT) in Nigeria is 5% of any Value added of the goods and services (i.e both input and output tax is 5%).

Input Tax:

it is paid by a registered person which he buys any valuable goods and services including raw materials from suppliers.

Output Tax:

it is the tax collected by a registered person when he sells any taxable goods and services.

Education Tax:

it is imposed on asses-sable profit of companies registered in Nigeria. The rate is 2% on the asses-sable profit of a company. The Federal tax along with company income tax. They pay education tax into education tax account. A board of Trustee is charged with the responsibility of administering the fund.

An education tax commence in 1993 and is for the restoration, rehabilitation and consolidated of education in Nigeria.

Questionnaire:

this is a list of question designed by the researcher to staff of the board to enable him gather the relevant information for the study.


Chapter Five


5.0 Summary, Conclusion and Recommendations

5.1 Summary

This research work the findings are as follows:

  1. Most of the tax payers do not keep proper books of account of their business.
  2. Absence of proper assessment have no noticeable impact on tax payer in the management of their business.
  3. The personal income tax payer who measures their profits do not follow the acceptable format for profit and loss account measurement e.g. cash and stock withdrawn from business are not properly recorded.
  4. It also revealed that effective training of tax collectors and assessors boast income tax payers morale, thereby, increasing the number income generation. The over whelming number of the respondents agreed that training helps than to know their strength and witnesses ( personal income tax payers).
  5. Most of the income tax payer appears to have no knowledge of account and thereby do not boarder in keeping accounting records.

5.2 Conclusion

With the available information produced by this research work on the “ problem of assessment and collection of personal income tax, a case study of board of internal revenue, Delta State, the following conclusion were drawn.
Personal income payers do not maintain or pay attention to accounting records.

They regard accounting records as a waste of resources and times as these do not contribute to their profit maximization.

Another factor employed by board of internal revenue revealed by this study is the constraint training and retraining of their staff. This keeps the staff abreast with the latest technology in accounting sectors.

The effects of these problems are very obvious. The state government would not have enough found form taxes to carryout her rural development programmes. This is as a result of the target revenue not being met.


5.3 Recommendations

With respect of the result derives from this r3esearch work the research is claimed to recommend that the board of internal revenue should not relent in the ears in motivating their staff to achieve their mission and organization objectives.

The working conditions of the tax officials should be improved.

  1. More incentives such as promotions and rebates should be given to the tax collectors on the sum collected. Sufficient equipment and working materials necessary for effective execution of the assignments should be provided. The government should develop the rural area so that they should see the needs to pay tax. This could be done by the provision of social amenities (water, roads, electricity etc.)
  2. Mass enlighten campaign to be educate the people on the needs to pay tax promptly should be vigorously perused.

In opinion if these recommendations are adopted and strictly adhere to it would improve the effectiveness and efficiency in the assessment and collection of personal income tax.


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