ABSTRACT
The level of revenue generated in the state has been in a declining form due to poor administration and collections of taxes and lack of proper return of accounts. These are the negative effects that affect government revenue generation which are targeted to meet her basic functions like provision of basic amenities for her citizenry in the state. The aim of this research study is to evaluate the problem of tax administration on revenue generation in Warri South to state government. The research design adopted in this study was survey research method. Primary and secondary sources of data were used in collecting information which was analyzed using simple percentages and hypothesis tested using chi – square statistical method at 0.05 level of significant for validity and to make decisions. Findings show that there was rampant incidence of tax evasion and avoidance in the state, and the tax administration in Warri south is inadequate, not effective and not efficiently managed thus: inadequate staff and facilities also hinder tax administration and collection. The researcher, in the final analysis drew a lasting conclusion, some of which are: the lack of concern of Warri south people towards payment of tax could be reduced by involving them in the decision making of tax administration, collection and utilization of the tax revenue. The environment should be made better by both the government and its agencies. The staffs of the Warri Internal Revenue Board, should be well remunerated and ensure adequate administration of tax laws in accordance with the laid down rules and regulations.
TABLE OF CONTENTS
Title Page i
Cover Page ii
Certification iii
Dedication iv
Acknowledgement v
Table of Contents vi
Abstract x
CHAPTER ONE 1
Introduction 1
1.1 Background of Study 1
1.2 Statement
of the Problem 2
1.3 Objectives
of the Study 4
1.4 Research
Questions 5
1.5 Research
Hypothesis 6
1.6 Significant
of the Study 7
1.7 Scope of
the Study 8
1.8 Limitation
of the Study 9
1.9 Definition
of Terms 10
CHAPTER TWO 13
Review of Related Literature 13
2.1 General
Overview 13
2.2 General
Origin of Taxation 18
2.2.1 Biblically 18
2.2.2 Origin of
Taxation 19
2.3 Tax
Administration 20
2.4 Purpose
of Taxation 24
2.5 Qualities
of a Good Tax System 28
2.5.1 Equality 29
2.5.2 Economy 30
2.5.3 Convenience 30
2.5.4 Neutrality 31
2.5.5 Flexibility 31
2.6 Classification
of Taxes 31
2.7 Delta State Board of Internal Revenue 38
2.8 The
Revenue Generation in Delta Through Tax 40
2.9 Inadequate Staff And Facilities Hinder Tax Generated
Revenue In Delta
State 42
2.10 Tax Evasion and Avoidance In Delta State 43
2.11 Delta State Board of Internal Revenue and Revenue
Generation 47
CHAPTER THREE 50
Research Design
and Methodology 50
3.1 Introduction 50
3.2 Research Design 50
3.3 Area of the Study 50
3.4 Population of the Study 51
3.5 Sources of Data Collection 51
3.6 Determination of Sample Size 53
3.7 Method of Data Analysis 53
CHAPTER FOUR 56
Data
Presentation and Analysis 56
4.1 Data Presentation 56
4.2 Data Analysis 56
4.3 Test of Hypothesis 68
CHAPTER FIVE 73
5.0 Summaryof Findings, Conclusion and
Recommendation 73
5.1 Introduction 73
5.2 Summary of Findings 73
5.3 Conclusion 74
5.4 Recommendation 75
Bibliography 78
Appendix: Questionnaire
80
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF STUDY
In all generation, the problems of personal income tax
generation and administration continues to surface in one form or another in
virtually every society, especially in this part of the world. It is important
to point out that the federal government has taken adequate steps in effective
tax administration.
This failure on the part of the federal government is
responsible for poor financial positions of both the state and local
government. Besides, this inadequate planning and absolute laws governing taxation,
evaluation and collection is characterized by chaos.
This chaotic nature of the system can be appreciated
by political influence or interferences in the process of taxation during the
civilian administration in the country which gave rise to untrained and
inexperienced personnel being entrusted with the work of collection and
administration of personal income tax.
Taxes do not just constitute the principal source of
government revenue as noted by Uadiale, Fagbemi and Ogunleye (2010) but they
are in fact fundamental components of any attempts to build societies, and
indeed nations. That is why Mckerchar and Evans (2009) agree that taxes build
capacities to provide security, meet basic needs or foster economic
development) as well as legitimacy and consent (helping to create consensual,
accountability and representative government). And since it is the paramount
desire of every patriotic citizen to uplift his society, one expects that tax
compliance ordinarily should not demand any form of coercion. But the volume of
literature that has solely been dedicated to this subject for ages suggests
that willful default in tax compliance remain a major issue in every human
society, especially in developing countries like Nigeria. In fact, as noted by
Kiabel and Nwokah (2009), one of the greatest problems facing the Nigerian tax
system is the problem of tax evasion and tax avoidance. Tax evasion according
to Uadiale et al (2010) is “the fraudulent, dishonest, intentional distortion
or concealment of facts and figures with the intention of avoiding the payment
of, or reducing the amount of tax otherwise payable”. It is accomplished by
deliberate acts of omission or commission, which constitute criminal acts under
the tax laws. Tax avoidance on the other hand is the legal utilization of the
tax regime to one’s own advantage, to reduce the amount of tax that is payable
by means that are within the law (Kasipillai, Aripin and Amran, 2003). The
borderline obviously is legality. However, such legal jargons mean very little,
really, if the ultimate goal is effective funding of government welfare
programmes. As noted also by Omer and Yetman (2005), tax evasion and avoidance
may differ in their legality, but it is not unreasonable to presume that they
would share some common socio-economic roots and that the characteristics of a
taxpayer that make him more likely to evade a tax are more likely to be the
same characteristics that make him an aggressive tax avoider. This is why both
tax evasion and the seemingly harmless tax avoidance must be viewed and
approached in the same light because ultimately they result in less revenue to
the government, and perhaps less development in the society.
With cautious confidence, one could say that most
Nigerians are either traders, or business-persons, or professionals. So
considering the very large number of these classes of people, who could be
described as self-employed, it would not be out of place to expect a large
chunk of government revenue coming from their payments. But according to Kiabel
and Nwokah (2009), in spite of the fact that the self-employed out-number paid
workers and they earn as much as four times that of the formal sector
employees, the bulk of Personal Income Tax (PIT) accrues from employees whose
salaries are deducted at source. This confirms the submission of Torgler and
Schaltegger (2006) that tax evasion is more pronounced on the part of the
self-employed taxpayer.
The desire to uplift one’s society is the first desire
of every patriotic citizen (Allingham & Sandmo, 1972). Tax payment is a
demonstration of such a desire. The payment of tax is a civic duty and an
imposed contribution by government on her subjects and companies to enable her
finance or run public utilities and perform other social responsibilities. Taxes,
thus, constitutes the principal source of government revenue. However, one of
the greatest problems facing Nigerian Tax System as well as Africa is the
problem of tax evasion and tax avoidance. While tax evasion is the willful and
deliberate violation of the law in order to escape payment of tax which is
unquestionably imposed by law of the tax jurisdiction, tax avoidance is the
active means by which the taxpayer seeks to reduce or remove altogether his
liability to tax without actually breaking the law. These “Twin devils” have
created a great gulf between actual and potential revenue. The government has
for the umpteenth time complained of the widespread incidence of tax avoidance
and evasion in the state as companies and other taxable persons employ various
tax avoidance devices to escape or minimize their taxes or deliberately employ
fraudulent ways and means of evading tax altogether sometimes with the active
connivance of the tax officials. As pointed out by Rynoids (1963), since tax is
a principal source of government revenue, if persons are able to escape by
legal or illegal means the tax to which they should logically be subject under
the general scope of the tax, the theoretical equity of the tax to a large
measure is lost. Tax evasion and avoidance no doubt deny any government the tax
revenue due to her, which results in a gap between the potential and actual tax
collections. This study is aimed at bridging this gap.
The important of these issues to tax administration in
the developing countries like Nigeria, can be seen from the following extract
from tax administration in under developed countries. The tax administration
finds himself working with a staff which is inefficient in experienced, and
poorly paid.
1.2 Statement
of the Problem
It is true that problem of tax collection and
administration is universal but the third world countries of which Nigeria is
one, seem to be more plagued and inflicted both in weight and magnitude than
the developed nations of the world.
Although tax evasion and avoidance are problems that
face every tax system, the Nigerian situation seems unique when viewed against
the scale of corrupt practices prevalent in Nigeria. Under direct personal
taxation as practiced in Nigeria, the major problem lies in the collection of
the taxes especially from the self-employed such as the businessmen,
contractors, professional practitioners like lawyers, doctors, accountants,
architects and traders in shops among others. As observed by Ayua (2019) these
persons blatantly refuse to pay tax by reporting losses every year. According
to him, many of these professionals live a lifestyle inconsistent with reported
income, which is usually unrealistically low for the nature of their
businesses. Civil Servants and their salaried workers are the only class of
people that actually pay tax in Nigeria. However, even among the salaried
workers, he added, many have turned the statutory personal allowances and
relief into a fertile ground for tax evasion. Almost all Nigerian taxpayers are
married with four children! Similarly, despite the tax provision meant to plug
loopholes through which taxable persons can minimize tax liability the
selfemployed persons employ all kinds of avoidance schemes to minimize or
escape tax liability and makes you wonder whether there are still any tax
officials working in that capacity. Such scenarios, no doubt, say a lot about
tax administration system in Nigeria both in its design and in the disposition
of some taxpayers towards taxation. While it immediately presupposes that there
are legal framework put in place to punish tax evaders it perhaps raises a
poser on the efficiency and effectiveness of tax laws and tax administration in
Nigeria. Some state governments in an effort towards solving this problem had
even gone to the extent of engaging the services of tax consultants. This
government effort, notwithstanding, the problem of tax evasion and avoidance
still persists (Alabi, 2001 as cited by Ayodele,2006). There is no doubt that
revenue due any government will be reduced by the unpatriotic act of tax
evaders thereby affecting economic growth.
The research work primarily involves identifying the
problems of the personal income tax generation and administration in Nigeria
taking a case study of Board of Internal Revenue, Delta State. The specific
problems of this research are as follows:
1. Improper
system of keeping accounts and records in the internal Revenue office, which
was seen to be quite mechanical and out dated.
2. Lack of
staff and inadequate training of the available tax
collectors.
3. No
enlightenment on the part of tax payers as regards the importance of taxation
is another problem of tax generation and administration in Warri.
4. Tax
collection and administration in Delta State is not efficient and efficiently
managed.
5. Also
corrupt alliance of tax collectors with tax payers to avoid tax for them (tax
collectors) to make fast money.
Thus lack of enforcement power on the board makes tax
laws useless and not serious to tax offenders /defaulters.
1.3 Objectives
of the Study
The general objective of the study is to ascertain the
Tax evasion and avoidance: a twin evil against revenue generation in Nigeria,
Delta State, using the state board of internal revenue as a case study.
The specific objectives of the
research work is to
a. To
ascertain whether lack of adequate staff in the SBIR affect tax administration
on revenue generation in Delta State.
b. To
examine if the use of mechanical and outdated system in recording and keeping
accounts affect.
c. To
examine if enlightening the tax payers on the importance of taxation affect tax
administration in the state.
d. To
determine if the effectiveness and efficiency of personal income tax collection
and administration in the state is properly managed.
e. To
ascertain whether they are corrupt alliance of tax collectors with tax payers
to avoid tax for them (tax collector) to make fast money.
1.4 Research
Questions
Upon the following research
questions, hypothesis where formulated.
i. To what
extent has the use of mechanical and outdated system of keeping and recording
accounts affect tax administration on revenue generation in Delta State?
ii. To what
extent does lack of sufficient staff and inadequate training of the available
tax collectors affected tax administration on revenue generation in Delta
State.
iii. To what
extent has lack of improper enlightening of tax payers has affected tax
administration on revenue generation in Delta State.
iv. To what
extent has tax administration in Delta state been effective and efficiently
manage.
Owing to flexibility of tax laws in
Nigeria and attitude of government toward the local government level in the
area of administration and collection of personal income tax. It is pertinent
to make some assumption that will guide the work for an opinion to be expressed
1.5 Research
Hypothesis
Hypothesis One:
Ho: The use
of mechanical and outdated system does not affect tax administration and
collection in Delta State.
Hi: The use
of mechanical and outdated system affects tax administration and collection in
Delta State.
Hypothesis Two
Ho2: Enlightening the tax payers on the important of
tax payment does not affect tax administration in Delta state.
Hi2: Enlightening
the tax payers on the important of tax payments affects tax administration in
Delta State.
1.6 Significant
of the Study
The researcher is motivated to study the ways through
which internally generated revenue in Delta State could be enhanced.
The information contained here will benefit the
society at large as it will expose the society to the need to pay tax and
consequence of failure to pay tax.
The study will no doubt charge the aggressive attitude
of an average Delta man towards the payment of tax and collectors of taxes who
were hitherto regarded as enemies.
Owing to the present steps taking by federal
government in re – branding the economy activities, the research work will
recommend measure that will be taken by the state Board of internal Revenue,
Federal Inland
Revenue Services, budget and Planning department and
other government decision – making bodies ways to enhance effective
administration of her services and achieve immensely her stated objectives,
especially in the area of tax administration on revenue generation.
The study will also unleash problems affecting tax
effectiveness, which if appropriate corrective measures taken will go a long
way in improving the state internally generated revenue machineries of the
government.
1.7 Scope of
the Study
The research will focus on:
· Reasons
why tax payers avoid or evade tax.
· How
tax evasion and avoidance are carried out.
· The
rate of revenue generation.
· The
manner of sourcing for tax in Delta State.
1.8 Limitation
of the Study
The study will cover Delta State with area of
concentration on Warri South Local Government Area.
This study would have been extended to the entire
local government in Delta State of the Federation but for limitation of
resources and time.
· Inadequate
time due to the combination of class schedule and project work.
· Uncooperative
attitude of some employees that were approached.
· Exeat
restriction to go out and source for materials.
· Insecurity
as a result of bombings in most states in Nigeria during the period which this
work is carried out also limits the study.
· Financial
constrains
Despite all this limitations
mentioned above and hindrances, the research study no doubt turned out to be
successful.
1.9 Definition
of Terms
Words that are frequently used in this research work
are short listed here and briefly discussed to enable the reader get equipped
with their meaning. Some which are:
Tax:
This can be defined as a compulsory
transfer of resources and Income from the private sector in order to achieve
some of the nation “economic goals Okpe (2022: 109)
Tax Evasion:
Here, the tax payer adopts illegal means so as to pay less than he should
ordinarily pay. “It is also involves an unlawful refusal or neglect by a tax
payer to pay the tax due.” Aroh & Nwadialor (2009: 352)
Tax Avoidance:
This is a means where by the tax payer arranges his affairs legally so that he
pays less tax than he should otherwise pay.
Revenue Generation:
This is systematic gathering / collection of income revenue.
Revenue:
This could be described as an income accruable to person(s), government and
organization.
Statutes:
This is a legal frame work upon which actions/ inaction are based.
Tax Jurisdiction:
This refers to an area where one tier of government has power to collect tax.
Tax Allowance:
This refers to the proportion of income exempted from tax.
Tax Holiday:
This is a period of grace granted to a company during which its income is not
subjected to tax.
Taxable Income:
This refers to that proportion of income that is liable to tax.
P.A.Y.E (Pay As
You Earn) is one of the systems of personal income
tax based on the proportion of the income usually deducted at source.
Click “DOWNLOAD NOW” below to get the complete Projects
FOR QUICK HELP CHAT WITH US NOW!
+(234) 0814 780 1594
Login To Comment