ABSTRACT
This study focuses on “Personal income tax management in Nigeria: Problem and prospects, a case study of Akwa Ibom Internal Revenue Service 2009-2018”. The major objective of the study was to examine the problems and prospects associated with personal income management in Nigeria. The instrument/method used for data collection were both primary data, where questionnaire and personal interview were used, while secondary data was Akwa Ibom State Internal Revenue Service personal income tax actually collected and their estimated expenditure from 2009-2018, textbooks, journals, internet etc. A sample size of fifteen (15) was determined through Taro Tamena’s statistical formula and a quota sampling technique which is a non-probability sampling technique was used. A survey research design which is descriptive and exploratory in nature was used. The analysis techniques used was person product movement, correlation co-efficient. It was used in order to test the validity of the hypothesis. The major findings were that personal income tax is guided by the personal income tax Act Cap PB LEN 2004 (as amended), findings also revealed that to reduce/eliminate the problems of personal income tax management in Nigeria, Sound internal control system must be setup, staff must be given adequate sanction to the tax defaulters. Based on the findings, the following conclusions were pin-point that, government should guild against loopholes in the tax laws particularly on personal income tax.
Finally, the researcher recommended that a sound internal control system should be setup, tax assessment should be done early in a particular year, tax payers should be educated, Government should also use medium of communication to educate people (tax payers) about the importance of conformity to the tax requirement and highlighting the consequences of tax evasion to them.
KEY WORDS: Personal Income Tax management In Nigeria, Reporting
TABLE OF CONTENTS
PAGES
TITLE OF TABLE
Title page………………………………………………………………………………………..i
Certification………………………………………………………………………………………ii
Acknowledgement…………………………………………………………………………….....iii
Dedication……………………………………………………………………………………...…iv
List of tables……………………………………………………………………………………....v
List of figures…………………………………………………………………………………..…vi
Abstract…………………………………………………………………………………..………vii
CHAPTER ONE: INTRODUCTION
General description of the study
History of case study organization
Statement of the problem
Objective of the study
Research questions
Statement of hypothesis
Scope of the study
Assumptions
Significance of the study
Definitions of unfamiliar terms
CHAPTER TWO: REVIEW OF LITERATURE
2.1 Concept and meaning of personal income tax in Nigeria
2.2 Problems of personal income taxation in Nigeria
2.3 Prospects of personal income tax in Nigeria
2.4 Management of taxation in Nigeria
2.5 Types of assessment
2.6 Approved taxes and levies collected by the federal, state or local
2.7 Taxes collected by the Akwa Ibom State Internal Revenue Service
2.8 The current personal income tax rate in Nigeria
2.9 Problems of tax administration in Nigeria
2.10 Types of tax payable in Nigeria
2.11 The objective of taxation in Nigeria
2.12 Features of a good tax system
2.13 Income exempted from tax in Nigeria
2.14 The composition, functions/power of the state board of internal revenue service
2.15 Summary
CHAPTER THREE: Research methodology
3.1 Introduction of the chapter
3.2 Re-statement of the research questions
3.3 Hypothesis
3.4 Research design
3.5 Characteristics of population of the study
3.6 Sampling design techniques
3.7 Data collection instruments
3.8 Administration of data collection instruments
3.9 Method/procedures for data analysis
CHAPTER FOUR: Presentation and analysis of data
4.1 Introduction of the chapter
4.2 Criteria group return of respondents
4.3 Analysis of data According to research questions
4.4 Presentation and analysis according to Hypothesis\
4.5 Analysis of other data
CHAPTER FIVE: Summary, conclusions and recommendation
5.1 Discussion of findings/implementation of finding
5.2 Conclusion
5.3 Recommendation
5.4 Suggestion for further study
REFERENCES
Appendix A: Letter of introduction
B: Letter of transmission
CHAPTER ONE
INTRODUCTION
1.1 GENERAL DESCRIPTION OF AREA OF DATA
The development of any nation depends on the amount of revenue generated by the government for the provision of infrastructural facilities. One major source of generating this revenue is taxation.
According to Azubuike’s (2009) view, tax as a major source of government revenue all over the world including Nigeria. Government uses tax proceeds to render their traditional functions of law and order, defense against external and internal aggression, regulation of trade and business to ensure social economic justice.
Udokang (2005), tax may be defined as a compulsory levy imposed directly or indirectly by the government of a state against the income, profit and wealth of the individuals, partnership and corporate organization for the purpose of providing social amenities to the people.
Musgrave (2009), also maintained that the economic effects of tax include micro effects on the distribution of income and efficiency of the resources used as well as macro effect on the level of capacity output, employment, price and growth.
However, the use of tax as an instrument of fiscal policy cannot be possible except effective and efficient government tax planning and administrative machinery is ensured in the country.
Personal income tax was first introduced in 1914 by Lord Luguard, since then, the development of income tax has been greatly influenced by the provision of the 1954 constitution, which relates to the sharing of income tax revenue among tires of government in Nigeria.
Personal income tax which is a compulsory contribution exerted from employers and the self employed persons for the purpose of financing some governmental establishment function. It is also a tax imposed on the incomes of individual communities and families. It is also charged on the incomes due to a trustee or an estate.
The personal income tax act, 2004is now amended by the personal income tax Act 2011. This follows many years of agitation for personal income tax law in Nigeria to be brought in line with present day economic realities and also to assist the increment of tax voluntary paid or collected by the Nigerian government. It is noted that personal income revenue constitutes one of the major source of internal revenue to state government in Nigeria while the statutory allocation from the federal government occupy the premier position.
1.2 HISTORY OF CASE STUDY ORGANISATION
The Akwa Ibom State Internal Revenue Service which is used as a case study for this research project has its Head quarter at Block 9 State Secretariat Uyo, Akwa Ibom State. There are responsible for the collection of bulk Internally Generated Revenue (IGR) in Akwa Ibom State of Nigeria. The state internal revenue came to being as one of the state Government extra-ministrial agencies in 1987. In accordance with section 85A(1) of the personal income tax of 1993 as amended.
By virtue of the provision of Akwa Ibom State Board of internal revenue law 1999, the agency has power for jurisdiction in assessment and collection of taxes and penalties due to the state government under the relevant tax laws. Government of Akwa Ibom State as established the relevant administrative structure and the other matters connected therewith to be enacted by the Akwa Ibom State House of Assembly. The 6th Assembly of the Akwa Ibom State House of Assembly (AKHA) immediately swung into their legislative function as passed the law on 30th June, 2016, after engaging in relevant legislative procedures.
The Akwa Ibom State Revenue Administration law, 2016 hereby established a body to be known as the Akwa Ibom State Board of Internal Revenue (herein after referred to as “the Board”), whose operational arm shall be known as Akwa Ibom State Internal Revenue Service (in this law referred to as “internal revenue service). Accordingly, the development birthed the appointment of Pioneer Board Executives, who were sworn into office on 13th April, 2017.
Through this development, the Internal Revenue came up with the statutory responsibilities as provided by section 85B of the personal Income Tax Act of 1993 as amended which include:
Issuance of Tax clearance certificate, controlling and supervision of tax offices and motor licensing offices in the state enlightenment of the public on tax and general matters. Reporting of Internal Generated Revenue collected by the State Government to appropriate quarters monthly. However, the following members make up the Board of the Akwa Ibom State Internal Revenue Service: The Executive Chairman, Executive Director Finance and Account, Executive Director Planning, Research and Strategy, Executive Director Enforcement Recovery, Board Secretary, making up the total of four directors with the core values of professionalism, integrity, efficiency and enterprise spirit.
1.3 STATEMENT OF THE PROBLEM
Personal income tax management is an administration machining setup for the proper management of Nigeria Tax . It is therefore important to obtain a proper understanding of the duties, function and powers of the management team. The major problems being sought out in this study includes tax authorities in Akwa Ibom state internal capacity to administer tax system effectively. Bulk of taxes today is paid by only the employees and less privileged individuals are not equitably taxed. It is observed that due to low level of education, tax officials are not conversant with the tax laws and regulation problems of tax evasion and default may not only stem from the lack of voluntary compliance by tax payers but also from the fact that not all taxes collected reach the public treasure, lack of appropriate incentives to officials and logistics supply for effective tax drive, inadequate enlightenment to tax payers, lack of adequate information to task payers, difficulty in identifying who are the tax payers, inadequate sanction for tax defrauders, lack of staff input such as stationary, vehicles and effective legislation to cover the tax officials, tax evasion.
Since there is a gap between what is supposed to be and what is actually on the ground, it therefore becomes impossible for smooth assessment collection of the tax by Akwa Ibom state Internal Revenue service.
It is on this premises that the researcher have observed the problems on personal income tax management in Nigeria. It aims at establishing a possible relationship brtween personal tax management and the Nigerian tax system in terms of estimated expenditure and personal income tax(PIT) actually collected.
1.4 OBJECTIVES OF THE STUDY
To examine the prospects of personal income tax administration in Nigeria
To examine the effect of tax avoidance and evasion of government revenue generation
To explore ways of reducing/eliminating the problems of personal income tax administration in Nigeria
To find out if tax authorities assess individuals, before imposing tax on them
To assess the performance of personal income tax administrators in Nigeria, particularly Akwa Ibom state
To examine whether Internal Revenue management creates awareness on the relevance of tax payment to the public
The main objective of this research work is to ascertain the problems associate with personal income tax management in Nigeria
To explore ways of reducing the problems associated with personal income tax management in Nigeria
1.5 RESEARCH QUESTIONS
For the purpose of this study, the following research questions are highlighted:
What are the prospects of personal income tax administration in Nigeria?
What are the effects of avoidance and evasion of Government Revenue generation?
What are the ways of reducing/eliminating the problem of personal income tax administration in Nigeria?
Do the tax authorities assess individuals before imposing tax on them?
In my own view, how would you assess the performance of personal income tax administration in Nigeria, particularly Akwa Ibom state?
Does Internal Revenue management create awareness on the relevance of tax payments to the public?
What are the problems associated with personal income tax management in Nigeria?
How can the problems associated with personal income tax management be reduced in Nigeria?
1.6 STATEMENT OF HYPOTHESIS
H0: Personal income tax management has no significance impacts on Nigeria tax system in terms of estimated expenditure and the personal income tax (PIT) actually collected in 2009-2018.
H1: Personal income tax management has no significance on Nigerian tax system in terms of estimated expenditure and the personal income tax (PIT) actually collected in 2009-2018.
1.7 DELIMITATION (SCOPE)N OF STUDY
This study is centered on personal income management in Nigeria; problems and prospects for better understanding and to ease the researcher findings, the researcher narrowed the scope of the study to Akwa Ibom State Internal Revenue Service, 2009-2018. To find out the problems and prospects militating against the efficient and effective management of personal income tax in Nigeria.
A time constraint is also a limiting factor in understanding this study. The time given to carry out this research work was not enough which made it difficult for the researcher to carry out the research work more through and elaborate work on the subject matter. Financial constraint also constitutes a serious limitation to the researcher.
Nevertheless, the research was still as detailed and comprehensive as it ought to be, a high standard was maintained based on the data so gathered from the respondents.
1.8 ASSUMPTIONS
To undertake this study, the researcher made the following assumptions:
That the respondents knows what personal income tax management means
That personal income tax management is practical in Nigeria
That there are problems and prospects of personal income tax management in Nigeria
That a good tax management can help reduce the problem and prospect of tax management.
1.9 SIGNIFICANCE OF THE STUDY
It is believed that this study on personal income tax management in Nigeria; problems and prospects will be of immense benefit to a good number of people and organization in every aspect of the economy like the tax authorities, the ministry of finance, Banks, Investors, Companies, Business organizations and the Students.
This research work is also aimed primarily at providing critical information on personal income tax to enlighten government officials at internal revenue service board especially on the problems and prospects in managing personal income tax in Nigeria.
Furthermore, this study will serve as a reference material to students and other researchers.
Finally, this work will be of great benefit to the researcher as it is conducted to add value to its existing knowledge.
DEFINITIONS OF UNFAMILIAR TERMS
TAX: It can be defined as a compulsory levy imposed directly or indirectly by the government of a state against the income, profit and wealth of the individual, partnership and corporate organization for the purpose of providing social amenities to the people.
PERSONAL INCOME TAX: This is a compulsory payment exerted from employees, employers and self employed personnel for the purpose of financing dome Government establishment functions.
TAX EVASION (BASSEY, 2013): This is simply the refusal to meet one’s legal tax obligation, either by not reporting at all to the appropriate authority the income or revenue of the period.
TAXATION (CHARLES, 2009): This can be defined as a means by which Government finance their expenditure by imposing charges on citizens and corporate entities for its development projects.
TAX AVOIDANCE: This is a deliberate attempt by the tax payer to pay less tax than he ought to pay. This is a legal means by which the tax payer can reduce his burden.
RELEVANCE TAX AUTHORITY: According to the Nigerian tax system, it means the revenue office nearest to the tax payers either local government revenue committee or federal Inland Revenue Service.
SERVICE: This refers to non-physical amenities of Government for public benefit. Example is security.
SOCIAL AMENITIES (ODUSOLA, 2012): Every physical structure provided by the Government for the benefit of the community. Example: water, electricity etc.
PERSONAL INCOME (AJAKAIYE, 2010): This is the annual gross earnings of an individual from all sources such as, salaries and wages, investment interest and dividend among others.
MANAGEMENT (SEYI): This is the organizational process that include strategic planning and setting of goods, organizing, directing and controlling in order to attain stated objectives in an organization.
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