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INCOME TAX ADMINISTRATION IN RIVERS STATE
2006-2008
(THE CASE OF TAI L.G.A)
ABSTRACT
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
Certification ii
Acknowledgment iii
Abstract iv
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
22
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
References
Appendices
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
CHAPTER
ONE
INTRODUCTION
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?
1.5 HYPOTHESIS
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.
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