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 reference to Dutse local government area. To guide this study, a research question was conducted. 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 about 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-you-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 CONTENTS
Preliminary
pages
Title Page………………………………………………………………………………………………………………i
Approval
Page………………………………………………………………………………………………………ii
Declaration……………………………………………………………………………………………………………iii
Dedication……………………………………………………………………………………………………………iv
Acknowledgement………………………………………………………………………………………………..v
Table Of
Content………………………………………………………………………………………………….vi
Abstract ……………………………………………………………………………………………………………viii
CHAPTAL ONE
GENERAL INTRODUCTION
1.0
Introduction………………………………………………………………………………………………1
1.1
Background Information of the
Study…………………………………………………………..1
1.2
Statement of the Problem…………………………………………………………………………….2
1.3
Objective of the Study…………………………………………………………………………………2
1.4
Research Questions…………………………………………………………………………………….3
1.5
Significant of the Study………………………………………………………………………………..3
1.6
Scope of the Study………………………………………………………………………………………3
1.7
Limitation of the Study…………………………………………………………………………………3
1.8
Definition of Key Terms…………………………………………………………………………….4
CHAPTAL TWO
LITERATURE REVIEW
2.1. Conceptual Review……………………………………………………………………………………..5
2.1.1 Concept of Taxation………………………………………………………………..……………….5
2.1.2
Concept of Pay As You Earn (Paye)……………………………………………..…………6
2.1.3
Concept of Nigerian Tax System…………………………………………………………….6
2.1.4
Tax Residency In Nigeria………………………………………………………………………6
2.1.5
Personal Income Tax…………………………………………………………………………….7
2.1.6
Tax Reform In Nigeria…………………………………………………………………………..8
2.2. Related Theoretical Review………………………………………………………………………8
2.2.1 The Benefits-Received Theory……………………………………………………………………..8
2.2.2 Ability To Pay Theory………………………………………………………………………………….8
2.2.3 Empirical Review Of Tax Payment By
(Sme’s)………………………………………………9
CHAPTER THREE
RESEARCH METHODOLOGY
3.0
Introduction………………………………………………………………………………………………10
3.1
Research Deign…………………………………………………………………………..………………10
3.2
Population Of The Study……………………………………………………………………..………10
3.3
Sample Size Techniques…………………………………………………………………………..…10
3.4
Source/Metheods Of Data
Collection………………………………………………………….10
3.5
Method Of Data Nanlysis………………………………………………………………………….11
CHAPTER FOUR
PRESENTATION
AND DATA ANALYSIS
4.0
Introduction………………………………………………………………………………………………12
4.1
Data Presentation………………………………………………………………………………………12
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.0
Introduction………………………………………………………………………………………………16
5.1
Summaery…………………………………………………………………………………………………16
5.2
Conclusion………………………………………………………………………………………………..16
5.3
Recommendation……………………………………………………………………………………..16
References…………………………………………………...……………………………………………18
Appendix………………………………………………………………………….21
CHAPTER ONE
GENERAL INTRODUCTION
1.0
INTRODUCTION
1.1
BACKGROUND
INFORMATION OF THE STUDY
The
global economic recession, which started in 1980’s as a result of decline in
the economic growth of industries in 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
restructuring of monetary and fiscal policies to curtail the a fore-stated
problems. Seventeen years ago, precisely in 1983, the World Bank 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 series of belt-tighten measure since 1982 to date.
These measures 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, hitherto
relaxed tax laws are vigorously being enforced while levies of various
descriptions are also being in various state of the federation.
Dutse
local government area of Jigawa state is not exempted from the 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 of the system will be carried out
and based on empirical 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 generated revenues.
1.2 STATEMENT OF PROBLEM
The
expectation of the public from governments (local, state and federal) in the
developing countries are such that, the later is saddle with responsibilities
for the provision of various services. The 1979 Nigeria constitution sec.16 (a)
state. Quite clearly states 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 this attempt to fulfill these expectation and sometimes constitutionals
requirement that government rely on among either sources, the imposition of
various taxes, direct or indirect on a defined taxable persons in their territory.
These
taxes collected includes taxes on dividend interest and rates. Also, deduction
is taxed on personal income tax through the Pay-As-You-Earn (PAYE) system which
has been effective in achieving its objectives of minimizing collection costs
and reduction in 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.
Nigeria
Pay As You Earn system is confronted with many problems and challenges such as
multiplicity of taxes, bad administration, non-availability of database, tax
touting, complex nature of the Nigerian tax laws, minimum tax, commencement,
change of accounting date and cessation, and non-payment of tax refunds.
1.3 OBJECTIVES OF THE STUDY
The
purpose of the study can be broken down as follows:
i.
To ascertain the
impact of Pay-As-You-Earn system effectiveness on personal income tax revenue
over a period of ten years.
ii.
To find out if
there is any relationship between the truthfulness of information provided by
tax payers in their tax returns and their age.
iii.
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.
1.4 RESEARCH QUESTIONS
Ø PAYE
system has impact on effectiveness on personal income tax revenue?
Ø PAYE
contributes on personal income tax?
Ø The
information giving by the tax payer reflect in their tax return?
Ø Do
the tax payers age and tax return matters in providing information?
Ø Are
you fully aware of the PAYE system?
Ø Is
the PAYE system just and fair?
1.5 SIGNIFICANT OF THE STUDY
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.
1.6 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 DUTSE 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.
1.7 LIMITATION OF THE STUDY
The study was limited by the following
constraints: there was shortage of relevant texts journal and documentaries on
the subject of Pay-As-You-Earn system.
Some of the answer givens an opinions expressed in response to question were
subjectively based due to different personal experience.
A
study of this nature require longer period of time than was actually available
to me.
There
is this general problem that many Nigeria do not like to disclose their
earnings. Finance available for this study was inadequate considering its scope
and my financial standing as a student.
1.8 DEFINITION OF TERMS
BASIS PERIOD:
the period in which the income of a taxpayer is assessed for the purposes.
ASSESSABLE INCOME:
income of a taxpayer from all sources in a given basis period less all
allowable deductions and nontaxable income.
PRECEEDING YEAR BASIS:
A basis period by which income of a tax payer in the year proceeding the year
of assessment is assessed.
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.
YEAR OF ASSESSMENT:
the government financial year in which the income of a taxpayer is assessed for
tax purpose.
CHARGEABLE INCOME:
assessable income less all reliefs.
RELIEFS:
deductible allowance granted to a taxpayer by the law in a relevant year of
assessment.
TAX EVASION:
an illegal act of paying less tax than ought to pay.
TAX AVOIDANCE:
a legal act by a tax payers to pay less than he ought to pay.
TAX SRETURNS:
relevant data supplies by a tax payer for the purpose of assessing income.
TAX DEDUCTION CARD :
a document used in the Pay-As-You-Earn scheme in which total allowed relief’s
are stated.
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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