INCOME TAX ADMINISTRATION IN RIVERS STATE 2006-2008 (THE CASE OF TAI L.G.A)
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INCOME TAX ADMINISTRATION IN RIVERS STATE 2006-2008
(THE CASE OF TAI L.G.A)
This work is an investigation of income tax administration in Rivers State 2006-2008. A case study of Tail Local Government Area. It objectives includes: i. The effect of tax administrative machineries on the tax revenue generation in Tail Local Government of Rivers State. ii. To ascertain the impact of government ability to provide basic amenities with tax revenue generated. iii. The impact of awareness of tax payers’ response to tax payment. iv. To find out the impact of adequate registering and keeping of business records on tax administration. In the research methodology, an experiment research design used, questionnaires were administered on three hundred respondents selected randomly from among the business owners and staff of Tail local government area. These constituted the sample of the study while the entire staff and business owner tag the non-tax-officials all constituted this population of the study. Research question was generated analyzed with the percentage method also; hypothesis was formulated and tested with chi-square. The result indicates that there is relationship between tax revenue generation, and the provision of basic amenities; and also between the existence of business records and tax payers awareness as well as the ability of pay tax regularly. The study therefore, recommended that: i. the government should take it as its statutory duty to use tax monies for the provision of basic amenities than squandering it on things that are not the felt needs of the people. ii. Enough awareness should be embarked upon by the authorities concerned on tax affairs as a way to enlighten tax payers on the need to pay taxes, means and method of payment as this will enhance the prompt payment of tax. iii. The tax personnel’s to be engaged in tax administration should be trained; and professional economists, accountants, lawyers finance managers, as this will enhance efficiency on the job. iv. It also recommends that, there should be provision of modern facilities and information technological equipment to make computation and documentation easy.
TABLE OF CONTENTS
Title Page i
Table of Contents v
List of Tables vii
CHAPTER ONE: INTRODUCTION
1.1 Background to the study 1
1.2 Statement of the problem 5
1.3 Objectives of the study 6
1.4 Research questions 7
1.5 Hypothesis 7
1.6 Significance of the study 8
1.7 Scope and limitation of the study 9
1.8 Organization of the study 10
CHAPTER TWO: LITERATURE REVIEW
2.1 History of taxation in Nigeria 12
2.2 Tax theoretical framework 14
2.2.1 Principles of taxation 15
2.2.2 Functions of taxation 17
2.4 Challenges of tax administration in Nigeria 21
2.4.1 Assessment collection and computation challenges assessment
2.5 Summary of literature review 31
CHAPTER THREE: METHODOLOGY
3.1 Research design 33
3.2 Population and sampling technique 33
3.3 Data collection method 34
3.4 Validity and reliability of questionnaire 34
3.5 Data analysis technique 35
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Introduction 36
4.2 Data presentation and analysis using research 38
CHAPTER FIVE: FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 Findings 49
5.2 Conclusion 50
5.3 Recommendation 51
LIST OF TABLES
Table 1: Percentage analysis of tax generated and government ability to provide basic amenities 37
Table 2: Percentage analysis of how creating awareness can effect tax revenue generation 38
Table 3: Percentage analysis of how quality of tax personal affect the amount of tax revenue generation 39
Table 4: Percentage analysis of how the absence of business records book affect tax payment and collections 40
Table 5: (A)represent general responses of the relationship between tax revenue generation and basic amenities provision 41
Table 5: (B) Represent general responses of the relationship between tax revenue awareness creation on the tax payers 41
Table 5: (C) Represent total responses on the uses of qualified personnel’s and tax revenue generation 42
Table 6: using tables 5 (A) to find chi-square 43
Table 7: using table 5 (B) above to find the value of chi-Square (X2) 45
Table 8: using table 5 (C) above to find the chi-Square (X2) 47
1.1 BACKGROUND TO THE STUDY
This work seeks to examine the administration of income tax in Tail local government area of river state (2006-2008) fiscal year.
Tax overtime, has been the major source of revenue for financing government expenditure in both develops and less developed countries (DCS and LDCS) irrespective of the economic institutional economic system in use in the economy. However, in recent time reverse is the case for some less developed countries (LDCS) including Nigeria, this is as a result of the economic windfall causing boom in revenue accruing from oil and gas.
Apparently, if Nigeria a developing economy will undermined the importance of good administration of tax in the effective and efficient functioning of an economy then there is doubt if her dream of being among the best world economies in 2020 (vision 2020) will be realized considering the views of AGIO, ONU and AJIE (2002) who revealed that function of tax goes beyond taking it as source of revenue to includes; redistribution of income and wealth, stabilization of economic activities achieving full employment creating incentive for investor and promoting economic growth balance of payment (BOP) equilibrium. Sequence to the financial meltdown in the oil market caused by the world economic crisis, the revenue from oil and gas has drastically fallen causing a huge reduction in the amount of allocation shared for state and local government operations from the federal account allocation committee (FAAC). This will on the long run will not go down well with government projects and programmes in the country expect reserved in the excess crude account (FAAC) will be judiciously managed.
Tax administration covered tax collection, assessment, rating, computation and laws implementation. One can be of the opinion that if this measure were effectively in place there would not have been much fear for the oil price meltdown. Makafi (2009) shared the same view when he postulated that even a country with low rate of taxation but efficient collection machineries handled by responsible government will tends to the fact that several industrialization and medium power economies of the world such as Great Britain, united states, Germany France and China have begun to develop an alternative to oil, such as ethanol to fuel their automobiles. Akino (2009) pointed out that about seventy percent of Brazil automobiles run on ethanol and solar energy. Whereas, this experiment succeed in the near future a mono-cultural economy like Nigeria which depend entirely on oil revenue for survival would be in for a real hard time. However, the only way out is to have a well-administered tax system which is a more stable form of revenue generation.
Although, in rivers state and its local government area; some measure had been in place by successive government administration to improve internal revenue generation. But these strategies are loop-sided giving rise to different mal-practices and mal-administration has, failed to yield expected results. What can be attributed as the causes of these challenges and what can be done to improve its administration?
The quest to find answers to this question informed the need for the researcher to delve into this study on the tax administration in Tail local government area of rivers state.
1.2 STATEMENT OF PROBLEM
This work is designed to examine the problem and prospect of personal income tax administration in Tail local government area of rivers state 2006-2008.
The marginal gap between tax revenue and the ever increasing government expenditure is alarming and should be taken seriously. Before the oil boom, this gap led to the incurring of debt on the country from international organizations like the Paris Club, world banks, international monetary fund and the likes.
It is obvious that from time immemorial tax had proved to be a more dependable source of government revenue to increase its return; the administrative machineries in charge of it should be overhaul and planned adequately. Also, now that everything has been taken over by technology, the tax system should not be left behind.
Hence, this work is therefore saddled with the responsibility of determining the problems of tax administration generally in Tail local government area of rivers state. It will further ascertain if the cause of dwindling tax revenue is from the side of government, the tax payers or the tax administrative machineries. This work will further concentrate on the below tax related problems;
1) If our tax administrative machineries lack the relevant training skill and human and material, to carry out their duties effectively.
2) If any relationship exist between the ability to pay tax by the taxpayer and the ability to provide amenities by the government.
3. If it is alleged that tax burden is more on employees than self-employed persons.
1.3 OBJECTIVES OF THE STUDY
The purpose of this study will among other thing find out what have been responsible for the low revenue generation from tax in Tail local government area of rivers state since 2006-2008. It will strictly concentrate on the following:
i. The effect of tax administration machineries on the tax revenue generation.
ii. The impact of government ability to provide basic amenities with tax revenue generated; and
iii. The impact of awareness on tax payers and adequate registering and keeping of business records on tax revenue generation.
1.4 RESEARCH QUESTION
1. Is low tax revenue generation caused by government inability to provide basic amenities with the tax revenue collected?
2. Has tax payer’s awareness any effect on tax revenue generation?
3. To what extent does the quality of tax personal affect the generation of tax revenue?
4. Do the absence of business records affect tax revenue?
The following hypothesis will be tested for this study.
1. There is no significant relationship between tax revenue generation and provision of basic amenities by the government.
2. There is no significant relationship between tax revenue generation and the existence of business records.
3. There is no significant relationship between tax revenue generation and tax payer’s awareness.
1.6 SIGNIFICANCE OF THE STUDY
The significance of this study is enormous; this is because the result of the study will be beneficial to the Local Government board of internal revenue and the state board of internal revenue.
Especially in the face of the present continue depreciation of the naira and the persistence meltdown of the price of the oil in the oil market which serves as the government major source of revenue. Revenue consultants, taxpayer, students in tax related studies, future researchers, lecturers and other academic alike will also benefit from the findings.
Moreso, this study will serves as guide for tax payers to know their right in terms of tax payment, the tax administration machineries not be left out since the problems affectively income tax will be categorically highlighted.
1.7 SCOPE AND LIMITATION OF THE STUDY
The scope of this study will cover all classes of income tax such as personal income tax, corporation tax, capital gain tax, profit tax, among others. But more effort will be concentrated on analyzing the problems and prospect of personal income tax.
This research finding is constrained by so many factors which include time, finance, and dearth of relevant data bureaucracy in retrieving information from relevant authorities regard tax. The time at the disposal of the researcher to carry out this research work is very limited and do not allow the research to go into a very intensive test and verification.
Also, lack of sufficient finance needed to visit tax office, agencies sort-materials and access other related document on income tax limit the scope of this study releasing the bureaucracy involve the data of fiscal report from the state ministry of finance, federal board of inland revenue, state board of internal revenue, local government board of internal the effort of the researcher in expanding the scope of the study.
1.8 ORGANIZATION OF THE STUDY
This study critically looks at the income tax administrative in Rivers State, especially Tai Local Government Area.
Consequently, the following topics are look at the general introduction of the study, problem, and objectives of study, research questions, scope of study and significance of the study. Chapter two cover the literature review, it also includes sub-titles like the history of taxation in Nigeria, tax theoretical framework, principles of taxation. Chapter three covers the research methodology and techniques used in carrying out the research. While chapter four seeks to present and analyze the data and also discuss the data. In chapter five the study is summarized, concluded and various recommendations are given.