THE IMPACT OF EFFECTIVE TAX ADMINISTRATION ON NIGERIA ECONOMY (A CASE STUDY OF FEDERAL INLAND REVENUE SERVICE)

TABLE OF CONTENTS

Title Page

Certification                                                                         i

Dedication                                                                            ii

Acknowledgement                                                                iii

Table of Contents                                                                 iv

Chapter One: Introduction

1.1       Background of the Study                                            1

1.2       Statement of the Problem                                           2

1.3       Purpose of the Study                                                  3

1.4       Significance of the Study                                            4

1.5       Hypothesis                                                                  5

1.6       Limitation of the Study                                               6

1.7       Definition of Terms                                                     7

Chapter Two: Review of Existing Literature

2.1       Definition of Tax Administration                                9

2.2       Organs of Tax Administration                                     9

2.3       Technical Committees of FBIR                                   11

2.4       Joint Tax Board                                                          12

2.5       Effectiveness of Tax Administration of the FIRS        13

Chapter Three: Research Methodology

3.0       Preamble                                                                     19

3.1       Population of the Study                                              19

3.2       Sample and Sampling Techniques                              19

3.3       Method of Data Collection                                          20

3.4       Advantages of Questionnaire                                      20

3.5       Method of Data Analysis                                             21

Chapter Four: Data Presentation, Interpretation and Analysis

4.0       Data Presentation                                                       22

4.1       Data Interpretation                                                     25

4.2       Data Analysis                                                              26

4.3       Testing of Hypothesis                                                  35

Chapter Five: Summary of Findings, Recommendation and Conclusion

5.1       Summary of Findings                                                 40

5.2       Recommendations                                                      41

5.3       Conclusions                                                                42

Bibliography

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

Tax administration involves interpretation of tax laws and execution of the requirement. Referring to Agbetunde L.A. in the textbook “Nigerian Personal Income Tax (2004). Tax Administration had been existing in Nigeria before we were colonized. It started from north when the colonialists did a sort of consolidation and codification of existing taxation in 1902. the colonialist did these through various policy regulations encoded in the Native Court Regulation (1902)  and Native Revenue Proclamation.

After the amalgamation of the Northern and Southern provinces in 1914, the Native Revenue Ordinance was enacted in 1917 in the north and 1918 in the south. There was a problem in that these ordinances were applicable to specific sections of the country.

In 1951, Raisman Fiscal Commission was set up to look into fiscal issues and the country to solve the problems of inconsistency and confusion where not in the exiting laws. Raisman Commission provided on recommendation that there should be uniformity in taxation and thus from a basis of modern tax system and was contained in the 1960 constitution.

This was enacted into law via Income Tax Management (ITMA) of 1961. This Act provided for the administration of both individual and company tax, from this came the gradual reduction of the role of local authority in tax administration as the move was towards the federal and state governments. The federal is to administer income of limited companies while both federal and state are to administer Personal Income Tax (PIT).

More reforms came through the constitutional reforms of 1963, 1979 and 1989 as more and more responsibility for tax administration is put on shoulder of the federal governments. Further amendments were made on the Act in 1979 and 1990 constitution. 

1.2       STATEMENT OF PROBLEM

Here, we will look into the effectiveness of tax administration on Nigeria. Tax administration is encountered with so many problems such as untimely remittance of tax collected by agent. Another problems is the failure of some organisation to register and pay tax on themselves as the law requires, also some professionals like lawyers, accountants and estate agent to mention a few.

1.3       THE PURPOSE OF THE STUDY

According to Prince Adejuwon Jonathan, in the textbook “Analysis of Taxation”. This project is aimed at providing information on the impact of effective tax administration on Nigeria Economy. Here are some facts which will assists to understand the implementation of tax in Nigeria:

i.             Tax is paid by all chargeable persons and cooperate organisation.

ii.           Tax charged on income of person other than company is referred to as “Personal Income Tax (PIT). The income charged under this tax are income of individuals (either as an individual or in partnership) from sources like employment, trading, business etc.

iii.         The tax is at ten percent

iv.          Companies incorporated in Nigeria under CAMA are charged on the taxable profit of company on the basis of 30%

v.           Petroleum profit tax is a tax charged on taxable profit of petroleum companies involved in petroleum operation in Nigeria.

vi.          Records and accounts have to be kept.

vii.        Federal Inland Revenue Service (FIRS), Tax directorate provided a free information and advisory service to help you with tax.

1.4       SIGNIFICANCE OF THE STUDY

The significance of this research is to enlighten the public on what tax administration is all about and to devised series of strategies to combat these problems. The problems detected in tax operation and administration which research intend include untimely remittance of tax by agents because most collecting agents tend to keep the money collected, problems encountered in obtaining statement of account and untimely reconciliation of such account. 

Tax operation and administration in Nigeria really warrant investigation because of the failure of some organisation to register and collect tax as required by law; these include big parastatals and statutory corporation of government such as Nigeria Post Plc and Nigeria Railway Corporation. This research work will even go a long way bringing about proper implementation of tax operation and policy when all parastatals are finally privatalized.

1.5       HYPOTHESIS

Hypotheses are statement of preposition about the existence, size, form, differences in relationships between or distinctions of some variables. For the purposes of this study to be properly guide, some hypothesis are formulated; they are:

Inform of null hypothesis (H₀) and Alternative hypothesis (H₁).

i.             H₀:    Tax administration does not boost the economy of Nigeria.

H₁:   Tax Administration had boosted the economy of Nigeria.

ii.           H₀:    There are no problems concerning the administration of tax in Nigeria.

H₁:    There are lots of problems concerning the administration of tax in Nigeria.

iii.          H₀:    There is untimely remittance of tax collected by agents in Nigeria.

H₁:    There is timely remittance of tax collected by agents in Nigeria.

iv.          H₀:    Tax operation and administration in Nigeria does not warrant investigation.

H₁:    Tax operation and administration in Nigeria warrant investigation.

1.6       LIMITATION OF THE STUDY

The limitation of this research study might include the following:

i.             Time Constrain: The research study is being conducted alongside the earning process in the classroom. This entails a distribution of limited available time between both activities. Hence, such time constraints offer a limitation on the research study.

ii.           Financial Constraints: Being that the financial requirement of a research study is enormous, my lean finance may not be enough to go round the study as designed.

iii.         Other Constraints: These include constraints imposed by analyst, professionals and other personnel who may be approached during the course of the study as to their opinion on the subject matter.

Despite the above limitation, it is my intentions that the study will be an eye opener into the necessity of effective tax administration in the country.

1.7       DEFINITION OF TERMS

Various definition of terms will be covered under this heading. Thee include the definition of:

i.             Tax

ii.           Tax Consultants

iii.         Tax Clearance Certificate

iv.          Tax Evasion

v.           Assessment Notice

According to Adesola S.M. (1998) Tax Law and Administration.

He defined the above listed terms as:

i.      Tax: This is a compulsory levy imposed by the government authority through its agent on its subject or his property to achieve some goals. It is paid without expecting something in return.

ii.          Tax Consultants

These are tax professionals that give expert advices to the tax authority and taxpayers. Commissions or fees are charged for services rendered. 

iii.        Tax Clearance Certificate

This is a document issued by the tax authority on the request of the tax payer when it is satisfied that the tax payer has fully paid his tax for three years preceeding the current year of assessment or that no tax is due on the income of that person.

iv.         Tax evasion

This is a criminal attempt to escape tax liability (wholly or partly) by breaking the law. It results from inefficiency in tax administration.

v.           Assessment Notice

This is a notice prepared by tax authority and served on or sent by a registered post to each taxable person on persons whose income are charged to tax. It contains the amount of income assessed, amount of tax charged and where to pay the tax.

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