TABLE OF CONTENT
of Content v
Background of the Study 1
Statement of Research 5
Objective of Study 6
Justification of Study 7
Hypothesis of Study 8
Scope and Limitation of Study 9
Plan of the Study 10
LITERATURE REVIEW 13
and Objective of Taxation in Nigeria 13
of the System in Nigeria 15
of Taxation 16
2.2 Nature and
Objective of Withholding Tax System in
2.3 Income to
Which Withholding Tax in Applied and
Tax Applicable 22
of Parties involves in Withholding Tax 24
and Implementation withholding Tax
in Nigeria 31
of Relevant Tax Authority 37
tax return and income exempted from
2.6.2 Offence and Penalties 40
of Withholding Tax System 41
2.7.1 Contentious Issue on Withholding
2.7.2 Distinction between Withholding Tax
and VAT 44
RESEARCH METHODOLOGY 47
and Method of Data Collection 47
of Sampling 48
and Sample Size 49
of Data Analysis 49
Techniques used in Data Analysis 51
DATA PRESENTATION AND ANALYSIS 52
4.1 Introduction 52
Analysis and Interpretation 53
SUMMARY, CONCLUSION AND RECOMMENDATIONS 73
5.1 Summary 73
5.2 Conclusion 74
5.3 Recommendation 76
of the Study 79
OF THE STUDY
responsibilities of government toward its citizen include provision of
infrastructure facilities security important welfare development project, to
improve the standard of loving to promote economic development etc. It is quite
obvious that such activities will only be possibly carried out through the
support from an efficient and effective financial base.
financial base can be gotten from various sources including “Taxation”.
can simple be define as the concept and science of imposing tax as the citizen (Sun
Ni 2009). Tax in the other hand is a compulsory levy imposed by the government
through its agents and for which it is not bound to offer service or
consideration (Ola 2006).
is levied on income (individual) profit (enterprise and companies). Capital
(capita gain tax) and consumption (tariff) of a subject (citizen). Basically,
taxes are classified into direct and indirect taxes. This classification is
based on how the taxes are paid.
taxes are levied on individual or institution examples of direct taxes in
Nigeria are personal income tax (including PAYE) company income tax, capital
gain tax, withholding tax.
taxes are levied on manufacturers or wholesalers and importance of goods is
passed on to the ultimate consumers in the form of price increased. Indirect
taxes include customs duty, exercise duty, stamp duty, vat etc. (Ola 2006).
are many types of tax system in Nigeria, which include personal income tax,
company income tax, capital gain tax, vat, withholding tax systematic.
study intends to examine the tax system known as withholding tax system as well
as its relevant and adequacy. Withholding tax is an advance payment of income
tax. It is deductive at the point of neither payment nor when credit is taken,
whichever comes earlier for the specified activities. Any cooperation or
incorporated body who is a recipient of the payment or the credit for the
specified activities or services is therefore liable to suffer tax (Ola 2006).
tax can also be tax collection device that can be built into any type of tax.
It is a system in which a debtor is empowered by law to withhold a certain
percentage of the money due to his creditor and pay it over to the government
in lies of the tax to be paid lat and on that sum by the creditor. It is
deductible as source (Ishola 2010).
withholding tax system was introduced by section 9 (21c) of degree 98 of 1979
and section 4 (5) of decree 80 of 1977. The purpose is to bring the prospective
taxes payer to the tax notices. There by widening the income tax base. In other
words, withholding tax system is used to track down tax payers and the income
which may otherwise not be reported by them.
tax is among other things nothing more than a collection, machinery to curb tax
is not a separate tax on its own suffices is to say that it is a payment on
account of income tax and is available as set off against tax assessment of
relevant periods. It is common knowledge that the percentage of voluntary
compliance with the law on taxation matters by the citizen and indeed corporate
bodies is very negligible and the need for government to generate as which
revenue as possible is imperative.
justified the need for the law on withholding tax system.
OF THE PROBLEM
the introduction of withholding tax system, the government realized with great
concerned the increase in incidence of tax evasion among recipients
particularly landlords and shareholders.
the ineffective manner of deducting tax from board of directors’ members of the
companies especially those who hold multiple O. chains directorship was equally
of great concern to the government.
study provides answer to the following questions:
the implementation and administration of tax fully understood by the
the system (withholding tax) bring effectiveness in deducting from the
withholding tax system brought any good to Nigerian economic?
anything be done to improve its adequate and relevance in Nigeria tax system?
there any punitive measure for the tax evader put up by the government?
OF THE STUDY
study will examine the relevance and adequacy of the withholding tax system in
Nigeria with the aim correcting uniformed impression about its implementation.
The need to understand the withholding
tax operation in Nigeria cannot be over emphasized the study will include the
need for effective and efficient financial base for the government as
imperative. The study will also look into how withholding tax is efficiently
managed in order to generate adequate revenue from the source. Other specific
Explain to taxpayers, the public and
other interested parties on how the withholding tax operates.
other important aspect in the implementation and administration of the system.
to evaluate the adequate of the system in line with its stated objectives.
OF THE STUDY
study should the immense benefit to the tax payers, public and corporate
organization that suffer the tax. The more they were informed the more
livelihood of understanding and appreciation of the usefulness of the system
and more importantly the less they lively to evade tax.
study served as a mechanism or tool for investment decision-making process for
the investors. Finally, the study is set to reawaken government to their
responsibility by making necessary amendments and additional provision to the
withholding tax law in Nigeria.
OF THE STUDY
test of hypothesis is a rule that specifies for each possible setoff
observation what to accept or reject the null hypothesis i.e. HO and HI (Alternative
line with the above statement the hypothesis that will be tested is HO: - The withholding
tax system has no significant impact on the economic development in Nigeria.
HI: - The
withholding tax system has significant impact on the economic development in
There is significanct relationship between the incidence of tax evasion development
and introduction of withholding tax in Nigeria.
HI: - There
is significant relationship between the incidence of tax evasion and
introduction of withholding tax in Nigeria.
1.6 SCOPE OF THE STUDY
The scope of the study will be
restricted to the federal Inland Revenue service Ilorin. The emphasis will be placed
on the impact of the bard of Inland Revenue on the Nigeria tax system. This study
will make revenue to the provision of various tax laws, which Confer the
Federal Inland Revenue Service the authority to withhold tax and withholding tax
account. Without any doubt there are limitations to this study. Due to starter
time frame. This study is restricted to Federal Inland Revenue Service, Ilorin.
Another Constraint is Finance couple with accessibility to some information and
1.7 PLAN OF THE STUDY
The study will be divided into five
One contains, Introduction, this will give the general background of the
research work, statement of the problem, Jurisdiction of the study, Objective of
the study ,, research question, hypothesis of the study, scope of the study.
Two contains, the literature review; reviewing of related works of different authors,
research in related field, journal e.t.c
three deals with Research methodology, this will include method data
collection, population of the study sample and sample size and method of data
four contains data analysis of presentation, this will deals with data presentation,
analysis and interpretation.
Five contains the summary, the research work, draw conclusion and make recommendation
1.8 DEFINITION OF TERMS
WITHHOLDING TAX SYSTEM: It is
a method of collecting tax at source from a certain source of income (such as Individuals,
rent, interest, royalty, director’s e.t.c.)
I. INDIVIDUAL: are under
the tax jurisdiction of the state tax authority where individuals resides except
individual like non-resident, resident of Abuja (FCT) member of the Police and Armed
Forced and external affairs officers who are under the Jurisdiction of the Federal
Inland Revenue Service (FIRS)
II. RENT: As from
1994 year of assessment to date the rate of tax on rent is 10% both on companies
III. INTEREST: On
bank pass-book saving account with balance less than
N50, 000 is exempted.
IV. ROYALTY: where
a payment such as interest or royalty is due or payable to a person, the payer shall
at the date which the payment is made or credited whatever first occurs, deduct
tax there from at the rate of 10% of the gross interest and 15% of the gross royalty
(year 2005) and pay over the amount deducted to the tax authority.
V. DIRECTORS FEES: Section
of the PITD 1993as amended stated that, where any payment of directors fees become
due or payable to a person, the payer at the date when the payment is made or credited,
which ever first occurs, shall deduct from tax at the rate of 10% (year 2005)