Taxation, Major Source Of Revenue In Nigeria (A Case Study Of Ekiti State Government)

Project and Seminar Material for Accountancy / Accounting

Taxation, Major Source Of Revenue In Nigeria (A Case Study Of Ekiti State Government)


The aim of this study was to investigate on taxation as a major source of revenue in Nigeria. One of the objective carried out by the researcher was to examine people’s perception on taxation. Taxation is seen as a tool aimed at improving the performance of the national economy by such means as altering the balance between current consumption and capital investment. The study adopted the survey research design and randomly enrolled participants in the study. A total of 100 responses were validated from the enrolled participants where all respondent are staff of Ekiti Internal Revenue Scheme, Ekiti state. From the data collected and analysed, it was evident that tax collection plays a great role in the development of the Nigeria economy. Conclusively, discussion, summary, conclusion, and recommendations were made to achieve the purpose of this work.

Table of Content

  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of Content
  • List of Tables
  • Abstract

Chapter One:


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

Chapter Two:

Review of Literature

  • 2.1 Conceptual Framework
  • 2.2 Theoretical Framework
  • 2.3 Empirical Review

Chapter Three:

Research Methodology

  • 3.1 Research Design
  • 3.2 Population of the Study
  • 3.3 Sample Size Determination
  • 3.4 Sample Size Selection Technique and Procedure
  • 3.5 Research Instrument and Administration
  • 3.6 Method of Data Collection
  • 3.7 Method of Data Analysis
  • 3.8 Validity of the Study
  • 3.9 Reliability of the Study
  • 3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Analysis of Data
  • 4.3 Answering Research Questions
  • 4.4 Test of Hypotheses

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References

Chapter One


1.1 Background to the Study

In all generation, the problems of personal income tax generation and administration continues to surface in one form or another in virtually every society, especially in this part of the world. It is important to point out that the federal government has taken adequate steps in effective tax administration.

This failure on the part of the federal government is responsible for poor financial positions of both the state and local government. Besides, this inadequate planning and absolute laws governing taxation, evaluation and collection is characterized by chaos.

This chaotic nature of the system can be appreciated by political influence or interferences in the process of taxation during the civilian administration in the country which gave rise to untrained and inexperienced personal being entrusted with the work of collection and administration of personal income tax.

The important of these issues to tax administration in the developing countries like. Nigeria, can be seen from the following extract from tax administration in under developed countries. The tax administration finds himself working with a staff which is inefficient in experienced, and poorly paid

Taxation is seen as a burden which every citizen must bear to sustain his or her government because the government has certain functions to perform for the benefits of those it governs (Afuberoh and Okoye, 2014). A précised definition of taxation by Farayola (1987) is that taxation is one of the sources of income for government, such income as used to finance or run public utilities and perform other social responsibilities. Ochiogu (1994) defines tax as a levy imposed by the government against the income, profit or wealth of the individuals and corporate organizations.

According to Adams (2001) taxation is the most important source of revenue for modern governments, typically accounting for ninety percent or more of their income. Taxation is seen by Aguolu (2004), as a compulsory levy by the government through its agencies on the income, consumption and capital of its subjects. These levies are made on personal income, such as salaries, business profits, interests, dividends, discounts and royalties. It is also levied against company’s profits petroleum profits, capital gains and capital transfer. Whereas, Ojo (2008) stresses that, taxation is a concept and the science of imposing tax on citizens. According to him, tax is itself a compulsory levy which is required to be paid by every citizen. It is generally considered as a civic duty. The imposition of taxation is expected to yield income which should be utilized in the provision of amenities, both social and security and creates conditions for the economic well-being of the society. Okon (1997) states that income tax can be regarded as a tool of fiscal policy used by government all over the world to influence positively or negatively particular type of economic activities in order to achieve desired objectives. The primary economic goals of developing countries are to increase the rate of economic growth and hence per capita income, which leads to a higher standard of living. Progressive tax rate can be employed to achieve equitable distribution of resources. Government can also increase or decrease the rates of tax, increase or decrease the rate of capital allowances (given in lieu of depreciation) to encourage or discourage certain industries (e.g. in the area of agriculture, manufacturing or construction) or may give tax holidays to pioneer companies. Income tax therefore can be used as an agent of social change if employed as a creative force in economic planning and development.

Revenue generation in Nigeria local governments is principally derived from TAX. Meanwhile tax is a compulsory levy imposed by government on individuals and companies for the various legitimate function of the state (Olaoye, 2008). Tax is a necessary ingredient for civilization. The history of man has shown that man has to pay tax in one form or the other that is either in cash or in kind, initially to his chieftain and later on a form of organized government (Ojo, 2003). No system or rules can be effective whether foreign or nature unless it enjoys some measures of financial independence.
Local governments in Nigeria has developed over a number of years. Historically, the development of direct taxation in local government in Nigeria can be traced to the period before the British pre-colonial period. Under this period, community taxes were levied on communities (Rabiu, 2004) recently the revenue that accrues to local government is derived from two broad sources, viz: the external sources and the internal sources.

External sources of local government finance include: Statutory allocation from the Federal Account in accordance with section 160 (2) of the constitution of the Federal Republic of Nigeria (Promulgation) Decree 1989. Statutory allocation from each state government to the local governments in its areas of jurisdiction, Federal Grants-in-aid, State-Grants-in-aid, Borrowing from state government and other financial institutions, Local Rates on markets and shops, while internally generated source of finance includes; local rates, markets taxes and levies excluding any market where state finance is involved, Bicycle, truck canoe, wheelbarrow and cart fees, other than a mechanical propelled truck, Permits and fines charged by Customary Courts Local Government Business Investment, Tenement Rate Fees from schools established by the local governments Shops and kiosks rate, on and off Liquor Licence fees, Slaughter slab fees, Marriage, birth and death registration fees.

Naming of street registration fee, excluding any street in the state capital, right of occupancy fees on lands in the rural areas, excluding those collectable by the federal and state governments excluding the state capital, Cattle tax payable by cattle farmers only, Merriment and road closure levy, Religious places establishment permit fees.

Signboard and advertisement permit fees, Radio and Television licence fees (other than radio and television transmitter), Vehicle radio licence fees (to be imposed by the local government of the state in which the car is registered), Wrong parking charges.

Public convenience, sewage and refuse disposal fees, Customary burial ground permits fees, Fees collected from amusement centers established and operated by the local authority and that of Tourist centers and Tourist attractions, Rents, Fees on Private Institution, Motor park levies, Domestic and licence fees etc. Inspite of the above sources of revenues, Local government is faced with varieties of difficulties to source adequate revenue from federal government, state government and the internally generated revenue, such problems are cogwheel to the smooth running of local government administration.

They are the dishonesty on the part of officers collecting the revenues, such as cases of printing receipts by the officers had been the major problem in releasing the expected revenues.

The machinery put in place for collection of revenue is inadequate hence, most of the government money is not collected and this is in case of the internally generated funds. Meanwhile, as government is the means by which the common problems and needs of a community constituting a country are economically catered for, so as local community revolves jointly those common problems and needs, which could have been difficulty to solve individually. The very objective of having local representation is in order that those who have an interest in body of their country men may manage that joint interest by themselves. This is why every state find it desirable to create local government councils to provide and deliver local public goods and services hasten development (Olaoye, 2006) and bring government closer to the people.

1.2 Statement of Problem

Afuberoh and Okoye(2014) observed that over the years, revenue derived from taxes has been very low and no physical development actually took place, hence the impact on the poor is not being felt. Inadequate tax personnel, fraudulent activities of tax collectors and lack of understanding of the importance to pay tax by tax payers are some of the problems of this study.
It is true that problem of tax collection and administration is universal but the third world countries of which Nigeria is one, seem to be more plagued and inflicted both in weight and magnitude than the developed nations of the world.

The research work primarily involves identifying the problems of the personal income tax generation and administration in Nigeria taking a case study of Board of Internal Revenue, Enugu state. The specific problems of this research are as follows:

  1. Improper system of keeping accounts and records in the internal Revenue office, which was seen to be quite mechanical and out dated.
  2. Lack of staff and inadequate training of the available tax collectors.
  3. No enlightenment on the part of tax payers as regards the importance of taxation is another problem of tax generation and administration in Enugu state.
  4. Tax collection and administration in Enugu state is not efficient and efficiently managed.
  5. Also corrupt alliance of tax collectors with tax payers to avoid tax for them (tax collectors) to make fast money.

Thus lack of enforcement power on the board makes tax laws useless and not serious to tax offenders /defaulters.

1.3 Objectives of the Study

The broad objective of this study is to critically assess the taxation, major source of revenue in Nigeria, using Ekiti state Internal Revenue Scheme as a study, specifically the study will also to:

  1. Determine the extent taxation has contributed to revenue generation in Nigeria
  2. Examine the extent taxation has contributed to the steady growth in Gross Domestic Product in Nigeria
  3. Determine how Nigeria can revolutionalise her tax system in order to boost revenue generation through this source
  4. Determine sources of tax in Nigeria

1.4 Research Questions

The principal question of this research is: Is tax the major source of revenue generation? This research will also try to provide answers to the following sub-questions in the course of this study:

  1. To What extent has taxation contributed to revenue generation in Nigeria?
  2. To What extent has taxation contributed to the steady growth in Gross Domestic Product in Nigeria?
  3. In what ways can Nigeria revolutionalised her tax system in order to boost revenue generation through this source?
  4. What are the sources of tax in Nigeria?

1.5 Research Hypothesis

  • Ho: The use of machnical and oudated system does not affect tax administration and collection in Ekiti State.
  • Hi: The use of mechnical and outdated system affects tax administration and collection in Ekiti State.

1.6 Significance of the Study

This research study will be significant in the following areas:

  1. It will create a better understanding of the roles and functions of Local Government Administration It will elucidate on the essence of establishing Local Government Administration. It will also help the citizens to understand how the establishment of LGAs affect them socially and economically.
  2. The researcher is motivated to study the ways through which internally generated revenue in Ekiti state could be enhanced.
  3. The information contained here will benefit the society at large as it will expose the society to the need to pay tax and consequence of failure to pay tax.
  4. The study will no doubt charge the aggressive attitude of an average Enugu man towards the payment of tax and collectors of taxes who were hitherto regarded as enemies.
  5. Owing to the present steps taking by federal government in re – branding the economy activities, the research work will recommend measure that will be taken by the state Board of internal Revenue, Federal Inland
  6. Revenue Services, budget and Planning department and other government decision – making bodies ways to enhance effective administration of her services and achieve immensely her stated objectives, especially in the area of tax administration on revenue generation.
  7. The study will also unleash problems affecting tax effectiveness, which if appropriate corrective measures taken will go a long way in improving the state internally generated revenue machineries of the government.

1.7 Scope of the Study

The Present study will focus on fathoming the social as well as the economic effect of the Local Government with respect to Ajeromi-Ifelodun, Ekiti state.

1.8 Limitations of the Study

Traders in Ekiti State are mostly, the self-employed in the informal sector; this as a result made it difficult to access some vital information even though their confidentiality was assured.

Apart from the aforementioned limitation, the researchers also encountered other problems in the course of carrying out the research work, such as inadequate time as other academic works were combined with data collection.

1.9 Definition of Terms

Words that are frequently used in this research work are short listed here and briefly discussed to enable the reader get equipped with their meaning. Some which are:


This can be defined as a compulsory transfer of resources and Income from the private sector in order to achieve some of the nation “economic goals Okpe (1998: 109)

Tax Evasion:

Here, the tax payer adopts illegal means so as to pay less than he should ordinarily pay. “It is also involves an unlawful refusal or neglect by a tax payer to pay the tax due.” J.C Aroh & E.O Nwadialor (2009: 352)

Tax Avoidance:

This is a means where by the tax payer arranges his affairs legally so that he pays less tax than he should otherwise pay.

Revenue Generation:

This is systematic gathering / collection of income revenue.


This could be described as an income accruable to person(s), government and organization.


This is a legal frame work upon which actions/ inaction are based.

Tax Jurisdiction:

This refers to an area where one tier of government has power to collect tax.

Tax Allowance:

This refers to the proportion of income exempted from tax.

Tax Holiday:

This is a period of grace granted to a company during which it’s income is not subjected to tax.

Taxable Income:

This refers to that proportion of income that is liable to tax.

P.A.Y.E (Pay As You Earn):

Is one of the systems of personal income tax based on the proportion of the income usually deducted at source.

1.10 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows.

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary, Conclusions and Recommendations:

5.1 Introduction

This chapter summarizes the findings on taxation as a major source of revenue in Nigeria, Ekiti State as case study. The chapter consists of summary of the study, conclusions, and recommendations.

5.2 Summary of the Study

In this study, our focus was on taxation as a major source of revenue in Nigeria, Ekiti State as case study. The study is was specifically the study will also to: determine the extent taxation has contributed to revenue generation in Nigeria, examine the extent taxation has contributed to the steady growth in Gross Domestic Product in Nigeria, determine how Nigeria can revolutionalise her tax system in order to boost revenue generation through this source and determine sources of tax in Nigeria.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 100 responses were validated from the enrolled participants where all respondent are staff of Ekiti Internal Revenue Scheme.

5.3 Conclusions

With respect to the analysis and the findings of this study, the following conclusions emerged;

The study was to find out the problem connected with income tax evasion on the economy. The research revealed many problems on individuals’ attitude towards income tax. It was found out that their educational background were low. This was especially in the case of traders. Most of them were basic and secondary school leavers who had no in-depth education in taxes. Also, it was observed that the traders did not keep proper records, which makes it difficult to ascertain their correct and actual assessable incomes. Again the traders’ taxes were used on public officials instead of using it for national development to the benefit of the tax payers and the nation at large, the traders claim. Other conclusions drawn from the study are as follows;

Income taxes are very high in that it takes almost half of their income

There is a poor customer relation on the part of the Imo State tax officials. Tax collectors connive with income tax payer to cheat. Thus figures are understated for tax payers to pay low and the rest of the money which is supposed to be credited to the consolidated fund rather went into individual income tax collector’s pocket.

Most people did not know the importance of tax and therefore feel reluctant to come forward boldly to declare their incomes for tax purposes.

5.4 Recommendation

Based on the findings the researcher recommends that;

Based on the primary data obtained from our study through questionnaires and interviews, the researcher recommended that;

  1. The government should ensure organizing regular and frequent tax education for the public to encourage self-employed people about the role their contributions play in the country’s development. This would allow more tax payers to rope into the tax system.
  2. The government of Imo State through the Imo State tax (Domestic tax division) should impose moderate taxes on traders. This is to enable their business to grow and mostly because the operations of traders had been a major source of employment for the youth in LGA who did not have the privilege to pursue higher education, as the study revealed that about 87.88% of traders had their academic qualification to be SSCE and below.
  3. Tax officers should pay visit to self-employed place of business in order to make real assessment.
  4. Provision of infrastructure should be seen to be equitably distributed (that is hospital, roads, schools, good drinking water and electricity supply). That is to say, the government should at least distribute its resources fairly for the public to feel impact of the income tax paid.
  5. With regards to the traders, it is being recommended that there should be non- formal classes organized for them in the evening at least three times a week to prepare them overcome their illiteracy deficiency.
  6. Finally, the Imo State tax official should be increased in terms of number and should be well-equipped with the requisite logistics so that they can reach tax payers all the time, to at least guide them on how to prepare up to date tax returns.

Get Complete Project Material

5,000 5000

The Complete Material Will Be Sent to You in Just 2 Steps

Quick & Simple…

Step One Purchase

Make Payment (Through Transfer) of ₦5,000 to the Account Below

Zenith BankAcc No: 1225513212
Samphina Academy
Current Account

Or CLICK HERE To Pay With Debit Card

CLICK HERE To Purchase Material ($15)

Step Two Purchase

Send the Following Details on WhatsApp ( 08143831497) After Payment

  1. Payment Details

  2. TOPIC: Taxation, Major Source Of Revenue In Nigeria (A Case Study Of Ekiti State Government)

The Complete Material Will Be Sent To You On WhatsApp After Receiving Your Details
T & C Apply

  Contact Our Help Desk

Need a Different Topic? Perform a Quick Search

List of Related Works

Click on Any Topic to Preview the Content

Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.