Tax Management And Revenue Generation (A Case Study Of Anambra State)

Project and Seminar material for Accountancy

Project and Seminar material for Accountancy


Abstract


This study was set to determine the impact of good tax management on revenue generation in Anambra State, using Orumba south Local Government Area as the area of study. The study was necessitated by the increasing financial burden on the government at levels occasioned by the surging need to provide social services and infrastructural development for the governed.

To accomplish the objective of the study, the researcher has reviewed the opinions of established authorities on the subject matter of study. Well- structured questionnaires were used to elicit information from respondents forming the sample of study. Data were collected using questionnaire and were analyzed using frequency tables and percentages.

The analysis result revealed that;

  1. The tax system is designed and formulated to facilitate generation of revenue.
  2. The tax system is planned to prevent evasion and avoidance of tax by citizens.
  3. In spite of the high demand for social services and infrastructural development, tax payers still avoid tax.
  4. Tax management in Orumba south L.G.A is effective and has resulted to increased generation of tax revenue.

On the basis of the above findings, the researcher recommends that;

  1. The citizens should be sensitized on the need to pay their taxes as a civic responsibility.
  2. Tax personnel should be persons of proven character
  3. Government should ensure stricter enforcement of existing tax laws to ensure compliance.

Table Of Contents


Preliminary Page(s)

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

Chapter One

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Objectives of the study
  • 1.4 Research Questions
  • 1.5 Significance of the study
  • 1.6 Scope of the study
  • 1.7 Limitation of the study
  • 1.8 Definition of terms
  • References

Chapter Two

2.0 Literature Review

  • 2.1 History of Orumba-South L.G.A
  • 2.2 Meaning and definition of Taxation
  • 2.3 Statutory Tax Laws in Nigeria
  • 2.4 Tax Administration in Nigeria
  • 2.5 Sources of generating revenue
  • 2.6 Cannons of Taxation
  • 2.7 The Purpose of Taxation
  • 2.8 Tax System
  • References

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 Sampling techniques
  • 3.6 Method of data analysis
  • References

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1 Introduction
  • 4.2 Presentation of data
  • 4.3. Analysis of data

Chapter Five

5.0 Summary, Conclusion and Recommendation

  • 5.1 Summary of finding
  • 5.2 Conclusion
  • 5.3 Recommendation
  • 5.4 Area of study
  • Bibliography
  • Appendix
  • Questionnaire

Chapter One


1.0 Introduction

1.1 Background Of The Study

The prime objective of every government is to maintain law and order, to provide and maintain basic essential services without which the community will be unimaginable and which by their nature cannot be left appropriately in the hands of private entrepreneurs. Such services include Internal Law and Order, Maintenance of National defense, provision of good healthcare system, educational system, transportation system, agricultural system etc. To cover the cost of providing these goods and services for the public good, government must generate financial and adequate revenues. The quest to governing meaningful financial resources has often led government to designing and administering some efficient and effective revenue generation systems. Primarily the main source of government revenue includes the following:

  1. Taxation on citizens
  2. Taxation on income of companies
  3. Borrowing
  4. Grants.

Amongst these sources, taxation (the demand made by the government of a country for a compulsory payment of money by the citizens of that country.) remains the most outstanding. This may be due to it being a civic responsibility that must be performed by the citizens of the state. As a non-penal by compulsory transfer of resources from the private sector, taxation must be levied on the basis of equity, certainty, convenience, economy and productivity. Unfortunately, taxes are not paid in exchange for specific things but are collected for the sake of public welfare and interest.

Government often uses various kinds of taxations to generate the required revenues. For instance, direct taxes which include personal income tax, often applied on employees, sole traders, partnership, capital gain tax on companies, individual and non- co-operate entities, capital transfer tax (applicable asset transferred from one person to another), purchase tax, petroleum profit tax, and company income tax has constituted a significant source of revenue to the government. Similarly, indirect tax, e.g. stamp duties, custom duties, industrial training fund, toll paid on federal highways, will have often enhanced government revenues.

The administration of tax in Nigeria is in the hands of three relevant tax authorities viz:

  1. The joint Tax Board
  2. The federal Board of Inland Revenue
  3. The various state Board of Internal Revenue

In Nigeria, persons liable to pay income tax include men, women, married or single, trustees and executors, families, villages and indigenous communities. Though government can also raise funds through natural resources such as oil, palm oil, coal and gas which are exported, those alternative sources of income to government are hardly enough to shoulder the burden of government expenditures, especially in the area of economic and social spheres in each year, hence the need for tax payment.

We must emphasize here that income Tax Law must be interpreted in strict- to- sensor. There is no equity in tax law. The tax payer must be brought within the letter of the law and rigid adherence is the rule. Nothing should be read in and nothing should be implied. The onus of bringing a tax payer into the tax net is on the revenue or assessment authority. Another important point to note is that tax is not imposed on person or individual. Section 4 (1) of ITMA 1961 states that “the tax shall subject to the provisions of this act, being payable for each year of assessment upon income accruing in derived form, brought or received in Nigeria. Studies have shown that in Nigeria, workers pay more than the rich people who invest in various proper ties such as building, transporters, etc as a result of ineffective administration of taxes. Yet those investors are the category of people who would want government to move mountains in terms of raising their socio-economic well being, without meaningfully contributing towards the funds.

Now that our various government are gearing efforts to revamping over bettered economy and improving the living condition of Nigerians, the need for the evolvement of more effective strategies to ensuring regular tax payment by taxable individuals need not be overemphasized. Taxable adults and organizations in various sectors of the economy must discharge their civic responsibilities. Unfortunately, this can only be achieved if tax systems are effectively administered so that people would in government revenue generation, willingly and without grudges pay their taxes. This will result to improvement in government revenue generation, hence the basis for this research study.


1.2 Statement Of The Problem

In developed societies, taxation is a sure, steady and main source of funds for social and economic development. This is because citizens of these societies are voluntarily committed to it. But in developing countries such as Nigeria, majority of the self employed people dread any mention of income tax. They see tax collection as nuisance in their life. Some take to their heels once a tax collector is sighted. In some case, they engage in physical combat with tax collectors.

Those who summon courage to pay, underpay their tax liabilities by resulting to false declaration of their income, yet absence of well audited financial statements to enhance proper assessment often compound the situation. Most traders, salaried persons are companies are guilty of this evil act. They device the means of evading appropriate payments by swearing false affidavits in a bid to collecting much tax- free income. This trend of event has often resulted to loss of tax revenues, which would have aided government in financing its expenditure. For instance, studies have shown that in 1986, then Imo state realized 73% of its total revenue projection from taxation for that year. In that same trend, the 1987 account of the state revealed a short fall of tax revenue of about 19.42% from three year’s projected tax income to government.

In the light of these monumental failures on the part of government to meet its responsibility of providing adequate economic and social infrastructures to make life worthy of living, the researcher has beamed his search light on the management aspect of taxation in Anambra state, using Orumba south L.G.A as the case study. By determining the effect of tax management on revenue generation, the researcher hopes to contribute meaningful in assisting government improve the generation of its tax revenue. Several studies have been conducted on taxation and tax management, but none of these studies has been based on Orumba south L.G.A of Anambra state. The researcher’s ability to do this constitutes the point of departure from others.


1.3 Objective Of The Study

Specifically, the study seeks to:

  1. Determine whether tax administration in the state is effective enough to enhance the generation of adequate tax revenue.
  2. Expose the lapses inherent in the management of tax systems in the state so that, corrective step can be taken by those concerned with tax administration
  3. Determine whether the lapses in the management of tax systems are responsible for power tax revenue generation.
  4. Recommend appropriate ways of tax management that will enable the governed appreciate tax payment as necessary burden which all taxable adults should voluntarily bear.

1.4 Research Question

In accomplishing the objective of this research study answers would be provided to the following research questions

  1. Can effective and efficient tax management result to increased generation of tax revenue?
  2. Is government’s inadequacy in the provision of social amenities attributable to default in tax payment?
  3. Are these well- developed statutory systems by which taxation is regulated in Nigeria?
  4. Are the existing tax laws in Nigeria effective enough to enhance the generation of adequate tax revenue?
  5. Do the tax laws provide enough authority for prosecuting tax defaulters?
  6. Do Nigerians see tax payment as a civic duty?
  7. Why do Nigerians avoid tax payment?

1.5 Significance Of The Study

In this research study, the researcher would through the review of related literature, establish a theoretical frame work of what effective tax management is all about. Such frame work if judiciously followed, will enhance generation of adequate tax revenue which has often eluded government. The significance of the study therefore is that;

  1. Those charged with the responsibility of generating tax revenue will have the opportunity to appraise the system of tax administration in use by them vis-à-vis the established framework. They could compare their system with that provided in the study so that necessary adjustment can be made to restraining the effectiveness of this system. The report will also provide various measures to be adopted in combating task evasion and avoidance in Anambra state so that tax revenue to government can be enhanced.
  2. The study will be useful to students of financial studies e.g. Accountancy, Banking and Finance, Economics, Business education and member of the Nigerian taxation (N. I. T) apart from constituting a source of secondary data for scholars wishing to carry on research studies in tax management, the report will also form the basis upon which further studies on our topic of study can be advanced.

1.6 Scope Of The Study

This research study was conducted to determine the impact of good tax management on revenue generation in Anambra state using Orumba south L.G.A as the area of study. The result of the study will reflect the circumstances in terms of the subject matter of study will reflect the circumstances in terms of the subject matter of study in Orumba south and will only be generalized to cover other Local Government areas in Anambra State, having similar structures, infrastructural status and operation under the influence of similar environmental variables as Orumba South Local Government Area.


1.7 Limitation Of The Study

1) Time:

Due to unavailability of time, as we had to combine both research and lectures, the study was limited. Also lack of resources was a limitation to the study.

2) Distance:

Finance is one of the major problems encountered during the research of this study. This was in terms of transport fair and typing the questionnaire.

3) Extraction of useful information:

This was another problem encountered the respondents were busy with their worker and pay less attention to the questionnaire for their opinion.

4) Finance:

Finance is one of the major problems encountered during the research of this study. This was terms of transport fair and typing the questionnaire.


1.8 Definition Of Terms

1) Tax:

This is a compulsory levy imposed on taxable individuals by the government and corporate citizens of a country.

2) Personal Income Tax:

This is tax on income of individuals.

3) Direct Taxes:

These are taxes in which the incidence falls directly on the tax payer.

4) Tax Avoidance:

This involves utilizing the lapses in the tax system to ensure a reduced tax liability.

5) Tax Evasion:

This is a deliberate and unlawful means of reducing the tax liability of a person.

6) The Income Tax Management Act (ITMA):

This contains the provisions that govern the administration of personal income tax.

7) Tax Revenue:

Income generated by government from collection of tax levies.

8) Income Tax:

This is concerned with taxes on income of companies and taxable person

9) Tax System:

Method of collection and administration of the tax.

10) Taxable Adult:

Any adult carrying out business profession or vocation and generate income.


Chapter Five


5.0 Summary, Conclusion And Recommendations

5.1 Summary Of Findings

In the case of carrying out this researcher made findings, which were made in the course of the study:

  1. Nigerian tax laws are well formulated and packaged to facilitate effective generation of adequate tax revenues to finance government expenditure.
  2. Tax management in Nigeria is a specialized function performed by three levels of government through some designated authorities or organs
  3. Taxes are levied on the armed income of individuals, corporate bodies, communities, etc. to enable government generate adequate revenue to finance its expenditures. However, because tax payers do not willingly pay their taxes when there is need to do so, evasion and avoidance of taxes when tax payers have often militated against government effort to adequately provide social infrastructures for the use of the governed.
  4. Tax evasion and avoidance is not caused by the tax system.
  5. The management of tax system in Orumba south L.G.A is highly effective.
  6. Effective and efficient tax management result to the generation of adequate tax revenues.

5.2 Conclusion

Tax administration has been described as the application of tax laws by the tax authorities to generate the desired tax revenue for the use of government. The tax laws serve as the regulating frame work governing tax imposition and collection in Nigeria. it contains provisions for offences as well as the deserved rewards for offenders. There has been a tremendous development in Nigerian tax system, both in organization and administration. Orumba south Local Government in Nigeria uses the Nigerian tax laws through the relevant agencies to generate tax revenues for government. The laws are effectively formulated to curb loss of revenues by government through evasion and avoidance. Though some mischievous tax payers still beat the laws, those caught in the act are usually rewarded with fines or imprisonments of various terms, depending on the magnitude of their offences. However, studies have shown that adequate tax revenue can only be generated if the management of the tax system enhances the generation of adequate tax revenue. The researcher therefore concludes that impact of good tax management in Anambra state is positive since it results to increased tax revenue generation for the use of the government.


5.3 Recommendations

There still exist chances of making significant impact if under noted recommendation are considered and implemented.

  1. It is necessary that the tax laws be reviewed from time to time so that obnoxious provisions having little or no relevance with the present conditions faced by tax payers can be changed.
  2. Tax payers are human beings, they are sensitive to their environments and feel its impact
  3. Efforts should be made to enlighten the citizens to change the view and belief they hold of tax payment.
  4. The tax personnel should be persons of proven characters.
  5. Use should only be made well- trained personnel to generate tax revenues.

5.4 Area For Further Study

Additional studies may be conducted in the following areas:

  1. The impact of tax evasion and avoidance on government revenue in Anambra state.
  2. The critical analysis of the Nigerian tax system. a case study of Anambra state.
  3. The development of Nigerian tax system (an overview)
  4. Tax evasion and avoidance in Nigeria (problems and prospects)
  5. The roles of the accountant in generation of tax revenues for government (A case study of Anambra state)

Tax Management And Revenue Generation (A Case Study Of Anambra State)


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