ABSTRACT
The purpose of this research work is to
describe the practical approach to an appraisal of pay-as-you-earn system of taxation
with referee to Nssuka local government area. To guide this study, two
hypotheses were formulated. A review of literature was down to ensure solid
conclusion for the study. A structural questionnaire was developed and
administered by the analysis adopted in this research work was chi-square, this
method by researcher to ensure that result obtained were real and not by
chance.
Based on the above statement some of the major findings include
presentation of data and their analysis. The chapter five is discussing a bout
the findings made by the researcher and recommendation as well as conclusion.
Conclusively, the researcher will add to the existing literature on an
appraisal of pay-as-you0-earn system of taxation. Scope of study and limitation
talk about the areas the researcher is going to touch when discussing on the
appraisal of pay-as-you-earn system of taxation system are place or area that
have been unable to by researched upon to time.
TABLE OF CONTENT
Title page …………………………………………………….(i)
Approval page…………………………………………… ….(ii)
Dedication……………………………………………… .….(iii)
Acknowledgment…………………………………………….(iv)
Abstract……………………………………………………....(v)
Table of contents…………………………………………………..
CHAPTER ONE
1.1 INTRODUCTION ………………………………………………
1.1 Statement of Problem…………………………………….
1.2 Purpose of the Study …………………………………….
1.3 Significant………………………………………………..
1.4 Statement of Hypothesis…………………………………
1.5 Scope of the Study…………………………………………..
1.6 Limitation of the study……………………………………
1.7 Definition of terms……………………………………..
CHAPTER TWO
2.0 REVIEW OF RELATED LITERATURE………………
2.1 Definition of Taxation…………………………………..
2.2 Functions of Taxation ……………………………………..
2.3 Ways of Regulating Taxation …………………………….
CHAPTER THREE
3.0
RESEARCH
DESIGN AND METHODOLOGY
3.1 Sources of Data ……………………………………………
3.2 Samples used……………………………………………….
3.3 Method of Investigation …………………………………….
CHAPTER FOUR
4.0 Data Presentation and Analysis……………………………
4.1 Data Presentation and Analysis……………………………
4.2 Text of Hypothesis…………………………………………
CHAPTER FIVE
5.0 SUMMARY OF FIN DINGS CONCLUSION AND RECOMMENDATION
5.1 FINDINGS …………………………………………………
5.2 CONCLUSION ……………………………………………
5.3 RECOMMENDATION ……………………………………
BIBLIOGRAPHY……………………………………………
APPENDIX…………………………………………………
CHAPTER ONE
1.0
INTRODUCTION
The global economic recession, which
started in 1980’s as a result of decline in the economic growth of industries
nation, high rate of inflation, dramatics rise in price of crude oil, increase
cost of important a massive building-up of liquidity in the international
capital market and unusual fluctuation in commodity prices was not fully felt
in Nigeria until 1982, when the developed
countries applied a series of restructure monetary and fiscal policies
to curtail the a fore-stated problems.
Seventeen years ago, precisely in 1983,
the worldbank report that the continuing recession in the industrial world
several constrained developed countries growth in 1982. Weakness in the price
of oil created difficulties for oil exporting developing countries’’.
Reporting specifically on Nigeria, the
bank stated that`` foreign exchange resource declined in 1982 from a level
equivalent to three month worth. Investment, equal to about a third of gross
domestics product (GDP) in 1980 –1981, has been radically reduced as both
foreign exchange and government resource contract (85% of government revenue,
both federal and states are direct generated from oil export).
An attempt to wriggle the country out of
its financial predicament led to the initially of series of belt-tighten
measure since 1982 to date.
These measure include:
Ban on import of a large number of goods,
specially taxes on luxury goods, enforcement of trick exchanges control
reputation liberalized during the earlier boom, wages and ban on employment in
the public sector, increased external borrowing in anticipation of oil income
and of late the introduction of value added tax (v.a.t). The impact of the
dwindling revenues to the federal government and this ever decreasing
portion of statutory allocation to
states, has aroused tremendous interest in other source of revenue. Therefore,
the hitherto relaxed tax laws are vigorously being enforced while levies of
various descriptions are also being in various state of the federation.
Nsukka local government area of Enugu
state is not exempted from this nation economic recession. One of the major
sources of revenue to the local government, second to statutory allocation from
the state and federal government, is the
personal income tax (PIT) impose on all taxable persons in the local government. The personal income tax is
allocated either through the Pay-As-You-Earn (PAYE) system in which employers
of labour deduct tax due from the income of their employees and remit it to the
division
In this study, my interest lies in
appraising the effective and efficiency of Pay-As-You-Earn (PAYE) as a system
of tax collection. The examination of the weakness interest in the system will
be carried out and based on empincal observation, make suitable recommendation
as to how loopholes in the system could be plugged especially at this time of
wide spread awareness of the great potentials of internally generally revenues
1.1
STATEMENT
OF PROBLEM
The
expectation of the public from governments (local, state and federal) in the
developing countries are such that the later are saddle with responsibilities
for the provision of various services. The 1979 nigeria constitution sec.16 (a)
state. Quite clearly that ``the state shall control the national economy in
such manner as to secure the maximum welfare, freedom and happiness of every
citizen as the basic of social justice and equality of status and
opportunities’’.
It is in an attempt to fulfill these expectation and sometimes
constitutionals requirement that government rely on, among either source, the
imposition of various taxes, weather direct or indirect on the defined taxable
persons in their territory. Such tax and poll tax
These taxes are collected at source at source include taxes on dividend
interest and rates. Also induction is tax on personal income tax through the
Pay-As-You-Earn (PAYE) system has been effective in achieving its objectives of
minimizing collection costs and reduction tax evasion while increasing revenue to the local
government. We will all look into the problem of the pay-As-You-Earn system and
suggest measures to solve such problems that might be identified.
1.2
PURPOSE
OF THE STUDY
The purpose of the study can be broken
down vas follows:
(a)
to
ascertain the impact of Pay-As-You-Earn
system effectiveness on personal income tax revenue over a period of ten years.
(b)
To
educate the truthfulness of the data provided by tax – payers in their tax
return and ascertain the percentage of those who do not provide the information
there in.
(c)
To
find out weather there is any relationship between the truthfulness of
information provided by tax payers in their tax returns and their age.
(d)
To
identify the problem (if any) encountered by the internal revenue division and
the employers of labour in the application of the PAYE system.
(e)
To
find out how the employers perceive the PAYE system and the likely improvement
that they would recommend.
On the basis of my
findings, suggestion and recommendation will be made which I hope would be
benefit to the local government it is also hope that future researcher in the
area of the public finance would find the work a valuable source of literature.
1.3
SIGNIFICANT
The significance of adequate revenue for a
developing economy such as that of Nigeria cannot be over emphasized. This
study is being conducted with a view to exposing the inherent weakness on the
Pay-As-You-Earn system of taxation.
The suggestion and recommendation made on
how loopholes in the system could be plugged. Especially at this time of
widespread weakness of the great potential of internally generated revenue
would be very beneficial to the governments.
The local government will find it very
useful in drawing up revenue and other methods of taxation which will in turn
check the ever dividing revenue to the government.
1.4
STATEMENT
OF THE HYPOTHENSIS
A hypothesis is a rational assumption,
which subject to fast could be true or false
The following hypothesis were made as a
guide for this research ho (i) The effectiveness of the Pay-As-You-Earn system
has not affected personal income tax revenue.
Hi (ii) the effectiveness of the
Pay-As-You-Earn system has affected
personal income tax revenue
1.5 SCOPE OF STUDY
The study shall be confined to an
examination of the Pay-As-You-Earn system as in weather it is an efficient and
effective method of personal income tax (PIT) collection in NSUKKA local
government. It thus excludes any other system of tax revenue through
Pay-As-You-Earn system with other tax revenue shall be evaluated only for the
purpose of comparison.
1.6 LIMITATION OF THE STUDY
The
study was limited by the following constraints:
(a)
there
was shortage of relevant texts journal and documentaries on the subject of Pay-As-You-Earn system.
(b)
Some
of the answer givens an opinions expressed in response to question were
subjectively based due to different personal experience.
(c)
A
study of this nature require longer period of time than was actually available
to me.
(d)
There
is this general problem that many Nigeria do not like to disclose their
earnings.
(e)
Finance
available for this study was inadequate considering its scope and my financial
standing as a student.
1.7 DEFINITION OF TERMS
(I)
BASIS
PERIOD: the period in which the income of a taxpayer is assessed for the
purposes.
(II)
ASSESSABLE
INCOME: income of a taxpayer from all sources in a given basis period less all
allowable deductions and nontaxable income.
(III)
PRECEEDING
YEAR BASIS: A basis period by which income of a tax payer in the year
proceeding the year of assessment is assessed.
(IV)
ACTUAL
YEAR BASIS: a basis period by which income of a tax payer in the proceeding the
year of assessment is assead in that year.
(V)
YEAR
OF ASSESSMENT: the government financial year in which the income of a taxpayer
is assessed for tax purpose.
(VI)
CHARGEABLE
INCOME: assessable income less all reliefs.
(VII)
RELIEFS:
deductible allowance granted to a taxpayer by the law in a relevant year of
assessment.
(VIII)
TAX
EVASION: an illegal act of paying less tax than ought to pay.
(IX)
TAX
AVOIDANCE: a legal act by a tax payers to pay less than he ought to pay.
(X)
TAAX
SRETURNS: relevant data supplies by a tax payer for the purpose of assessing
income.
(XI)
TAX
DEDUCTION CARD : a document used in the Pay-As-You-Earn scheme in which total
allowed relief’s are stated.
(XII)
TAX
EMERGENCY CARD: the card temporarily used before the tax deduction card are
made available to the employer by internal revenue division.
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