ABSTRACT
Personal income tax is a tax level on
individual income. It is a source generating fund for the execution of various
projects.
The project therefore look at the
problems, prospects and contributions of these source of fund to the economic
development of Lagos State with Lagos State Board of Internal Revenue services.
Chapters one discuss the background
of the study. In chapter two which discuss literate review talks about the
administration, computation, imposition of income tax and contributions.
Chapter three shows the data
methodology. In chapter four analysis was made to the data collected while
chapter five discuss the summary, conclusion and recommendations.
TABLE OF CONTENTS
CHAPTER ONE – INTRODUCTION
1.1 Background
of the study
1.2 Statement
of the problem
1.3 Objective
of the study
1.4 Significance
of the study
1.5 Research
question
1.6 Research
hypothesis
1.7 Scope
of the study
1.8 Limitations
of the study
1.9 Definition
of terms
CHAPTER TWO - LITERATURE REVIEW
2.1 Historical
background of PIT in Nigeria
2.2 Administration
of personal income tax
2.3 Statutory
bodies
2.4 Tax
collectors
2.5 Computation
of Personal Income Tax (PIT)
2.6 Imposition
of income tax
2.7 Assessment
procedure
2.8 Objection
and appeal
2.9 Residence
2.10 Components
of personal income tax
CHAPTER THREE - RESEARCH METHODOLOGY
3.1 Area
of study
3.2 Study
population
3.3 Sample
and sampling procedure
3.4 Instrument
for data collection
3.5 Method
of data analysis
3.6 Justification
CHAPTER FOUR - PRESENTATION AND ANALYSIS OF DATA
4.1 Introduction
4.2 Presentation
of data
4.3 Analysis
of data
4.4 Test
of hypothesis
CHAPTER FIVE - INTRODUCTION
5.1 Summary
of findings
5.2 Conclusions
5.3 Recommendation
based on conclusion
REFERENCE
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
Government be it in
federal, state or local has ways of raising revenue for the purpose of meeting
it’s financial obligations to the people it governs. One of the direct ways is
personal income tax (PIT).
Personal income tax is an
income tax levied on the wealth or income of Individuals, Corporate and Public
Companies, Trustees and Partnership. This tax imposed must be backed by
legislation, as nobody would agree to pay tax without being convinced that such
tax is authorized by law. The law that empowers the imposition and collection
of tax on Individuals, Companies and Trustees is the INCOME TAX MANAGEMENT ACT
(ITMA) 1961. This act has been amended several times and the most recent amendment
is act 104 of PIT 1993, which is now applicable throughout Nigeria.
The development of
taxation in Nigeria
can be traced under three distinct period before the advent of British
administration (Pre colonial era), colonial era, and postcolonial era.
Ever since the nation
Nigeria came into existence, the assessment and collection of personal income
tax (PIT) has been an uphill task and there has been widespread avoidance of
this many states.
Lagos state accommodates a high population
whose personal income tax (PIT) are collected from source through PAYE and
therefore there is an observed difference in disposable revenue of Lagos state and other states in Nigeria.
According to the Act, the
following categories of people are assessable to personal income tax (PIT)
(1) Individual (2) Trustee (3) Person (4) Executor
(5) Settlement
(6) Community
(i)
Individual
: - This includes a
corporate sole, and body of individuals other than a company, partnership,
trustee or executor.
(ii)
Person : -
This include an executor, trustee, company could be used jointly,
singly or together and where this occur, the intention is to use the
word together.
(iii)
Trustee : -
Is any person who handles the administration of a trust is a conveyance
of real and or personal property(ies) to persons to be applied for the benefit
of named person called beneficiary.
(iv)
Executor : -
This includes any person on administering the estate of a deceased
person. This person is held responsible
for payment of taxes due from a deceased taxpayer and his estate where
applicable.
(v)
Settlement : -
This is an agreement made in writing in which money is made available to
another person for his/her use without any interference whatsoever.
(vi)
Community : -
This represent tax charged on either the estimated total income of all
members or the amount of any communal income which is impracticable to
apportion with certainty among its members.
In accordance with section 3 of the
PITA of 1993, income chargeable or assessable to tax for a relevant year of
assessment are income accrued in,
brought into, derived from or received in Nigeria irrespective of any salary,
wages, fee, allowance, divided interest or discount, pension charged or annuity
and
i.
Gains
or profit from trade, business, profession or vocation
ii.
Gains
or profit including any premium arising from a right granted to any person for
the use or occupation of any property.
iii.
Gains
or profit from employment including
gratuities, compensation, bonuses, premiums, benefit or other than
(a) Any sum reimbursement to the employee on
expenses incurred by him in the performance
of his duties and from which the employee is not expected to make any
gain or profit.
(b) Medical
or dental expenses incurred by the employee
(c) Compensation
for loss of employment
(d) Cost
of any postage to or from Nigeria
incurred by the employee.
1.2
STATEMENT OF THE PROBLEM
Personal Income Tax is a
global and wide topic that undisputedly requires investigation and provision of
possible solution to the problems associated with effective administration of
the tax some of these are:
(1) Development
of unskilled tax management personal in administration.
(2) Ineffective tax system which makes
government unable to implement its tax policies.
(3) Unreliable
tax monitoring system of tax payers and evaders
(4) Acute
shortage of man power and working equipment
(5) Improper
and insufficient enlightenment of tax payers
(6) Misunderstanding
of tax legislation and purpose
(7) Non
availability of complete and accurate data to the tax administrations
(8) Incomplete
and inaccurate returns made by tax payers
(9) Misinterpretation of vital aspects of the
decree by tax authorities in the effect that expected benefit to the tax payers
or giants to government are not realized
(10) Multiplicity
of tax system
(11) Penalties
attached to non-companies with PIT regulation are too soft and
(12) Recovery
procedure is cumbersome and counter productive
1.3
OBJECTIVES OF THE STUDY
The general objective of
this study is to appraise the problems, prospect, and contribution to the
economic development of Lagos
State.
The specific objectives
are to:
(i) Analyse the PIT assessment and
collection (PIT AC) machinery for the state based on perceived and verified
economic predominance in each area of the state.
(ii) Examine the machinery designed to enhance
revenue planning and control in the system.
(iii) Identify a system, which will ensure equity
and fair play so that the citizens will respond to it positively.
(iv) Recommend how tax legislation could be
administered efficiently.
1.4
SIGNIFICANCE OF THE STUDY
This research work will
be relevant because of the need to alleviate the pressure on the resources of
the Lagos State which account for the shortage in
the provision of services and the present stagnation in the overall development
of the assessment and collection which will lay a solid foundation for the
generation of income for the government.
1.5 RESEARCH
QUESTIONS
The
important parts that will be examined in the research question are:
(i)
What
is Personal Income Tax?
(ii)
Are
there any relationship between Personal Income Tax and the Total Revenue of
Lagos State?
(iii)
What
are the composition of the Total Revenue of Lagos State
(iv)
What
proportion of the Total Revenue of Lagos State is the Personal Income Tax?
(v)
What
is Economic development and how is it measured?
(vi)
Is
there any direct relationship between Personal Income Tax and Total Revenue.
(vii)
Is
PIT a reliable source of revenue to the government?
(viii) Is PIT an equitable system?
(ix)
Can
PIT be considered as a key factor for promoting government overall economic and
social objective?
1.6 RESEARCH HYPOTESIS
The hypothesis to be
tested is as follows
(i)
Null
Hypothesis (Ho) : PIT is not a major source of the total revenue of Lagos
State.
(ii)
Null
Hypothesis : There is no significant relationship between Personal Income Tax
and Total Revenue of Lagos State. Hence it does not contribute to the economic
development.
1.7 SCOPE OF THE STUDY
The personal income tax
(PIT) is applicable to a very range of people in Lagos
State and hence cannot be researched
into within the conferment of a single sector of Lagos State.
The scope of this study is based on the Personal Income Tax and Total Revenue
of Lagos State.
Thus, the scope of this
study covers basically two sectors of employees in Lagos State.
1.8 LIMITATIONS OF THE STUDY
The major limitations
however envisaged in the course of
research work is the inavailability of absolute correct appropriate and needed
information to be provided by the respondent, time to cover a large and cost to
run them. An appreciable amount of co-operation on their part will be paramount
importance to the success of this project.
The
major limitations are:
(i)
Inadequate relevant literature on the topic i.e. past
research works carried out on the topic.
(ii)
Conferred
access to required and relevant information.
(iii)
Inadequate
time to cover a large area.
(iv)
High
cost of running a large area.
1.9 DEFINITION OF TERMS
PIT
- Personal
Income Tax
PIT - Personal
Income Tax Act
YOA - Year
Of Assessment
PAYE - Pay
As You Earn
ITMA - Income
Tax Management Act
BIR - Board
of Internal Revenue
IRS - Internal
Revenue Services.
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