PERSONAL INCOME
TAX ADMINISTRATION IN KWARA STATE: PROCEDURES, PROBLEMS AND PROSPECTS
CHAPTER
ONE
INTRODUCTION
1.1
Background
to the Study
The desire to uplift
one’s society is the first desire of every patriotic citizen. Tax payment is
the demonstration of such a desire. The payment of tax is a civic duty and an
imposed contribution by government on their subjects and companies to enable
her finance or run public utilities and perform other social responsibilities.
Taxes, thus, constitute the principal source of government revenue (Kaibel and
Nwokah, 2009).
However, one of the
greatest problems facing Nigeria tax system is the problem of tax evasion and
tax avoidance. While tax evasion is the willful and deliberate violation of the
tax law in order to escape payment of tax which is unquestionably imposed by
the law of the tax jurisdiction, tax avoidance is the means by which taxpayer
seeks to reduce or remove altogether his liability to tax without actually
breaking the law. These “Twin devils” have created a great gulf between actual
and potential revenue (Kaibel and Nwokah, 2009).
The tax administrations
in Nigeria are weak, corrupt and non-transparent (Kiabel, 2009). This
inefficiency reflects on the mix of taxes and the faulty design in their
structure and in there operational systems (Kiabel, 2009). The tax
administration is also affected by policies relating the salary, the attitude,
the reward and the punishment system of personnel. The tax administration in
Nigeria is driven by detailed revenue targets not by the tax laws and
accounting records. The tax officials are allowed to earn money and still meet
their revenue targets. Many things are done through negotiation rather than
basis of information processing (chartered Institute of Taxation of Nigeria).
In addition, low tax
compliance is a serious issue in Nigeria, limiting the capacity of the
government to raise revenue for development purposes. It is commonly
acknowledged that many factors contribute to this weakness such as corruption,
weak legal system, high marginal tax rate, paucity of adequate information,
accounting system and ineffective tax administration (chartered Institute of
Taxation of Nigeria Website). However, it has never been easy to persuade tax
payers to comply with requirement of a tax system.
Furthermore, taxpayer
tends to have low level of literacy, low tax morale and negative attitude
towards government. (UNSW Law Research paper no 2009-17).It is therefore felt
that personal income taxation in Nigeria requires radical handling to ensure
that a large chunk of the taxable population does not escape tax. An effective
tax system, aside from maximizing revenue for development is expected to be
well structured and managed with a feeling of common purpose, joint
responsibility or obligation amongst the taxable person in a country.
From the foregoing, the
future prospects of the study can be established. A key component of any tax
system is the manner in which it is administered. No tax is better than its administration, so
tax administration matters a lot. An essential of objective tax administration
is to ensure the maximum possible compliance by tax payers of income.
In summary therefore,
according to Chris and Elizabeth (2001) tax has three basic features namely; a
compulsory levy imposed by government, or local authority, for public purpose
and to encourage social justice. A tax according to Ayua (1996) is not a
voluntary payment but a compulsory pecuniary burden placed on taxpayers for the
benefit of the society.
Generally, taxation can
be described as a form of levy imposed on all residents living and
non-residents doing business within a tax jurisdiction. It is a civic and
patriotic responsibility of citizens to pay taxes imposed which also come to
the government as income or revenue yielding device to finance the provisions
of socio-economic and infrastructural amenities and also to enhance industrial
efficiency.
1.2 Statement of the Problem
Over the years, the
assessment and collection of personal income tax from taxable individuals has
been difficult in the various states in Nigeria. There is apathy not only on the
part of the educated but also the uneducated (Kiabel and Nwokah, 2009). The
illiterates refuse to pay tax because they are unaware of the purpose of
taxation and therefore regard the tax collector or a tax officer as an
instrument of oppression; the rich ones refuse because they are not encouraged,
not only by the government which wastes tax payers’ money on white elephant
projects, but also the tax officials who live above their means (Kiabel, 2009).
The Nigerian tax system
also lacks competent and honest administrators. The problem of tax avoidance
and evasion has reached an alarming proportion. The need to improve the
administration of our tax system cannot be over emphasized.
1.3
Research Questions
In relation to the problems identified the following questions are
asked:
i.
Why has there been low revenue from personal income tax?
ii.
What are the problems or difficulties encountered by the tax administrators?
iii.
What are the possible prospects for personal income tax in Nigeria?
1.4 Objectives
of the Study
The main objective of the study is to examine personal income tax in
Nigeria, However, the specific objectives of the study are:
i.
To examine the performance and contribution of personal income to Nigeria revenue.
ii.
To evaluate the problems associated with personal income tax administration.
iii.
To assess the prospects of personal income tax in Nigeria.
1.5 Statement
of Hypotheses
The hypotheses for the study are stated here
and they are stated in null forms
Hypothesis one
H0: Personal income does not
contribute significantly to Nigeria revenue.
Hypothesis two
H0: There are no problems associated
with personal income tax administration in Nigeria.
Hypothesis three
H0: There are no prospects for personal
income tax in Nigeria.
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