THE EFFECTIVENESS OF TAX ENFORCEMENT STRATEGIES IN NIGERIA ABSTRACT This is an empirical study carried out to determine the effectiveness of tax enforcement strategies in Nigeria. It is aimed at resolving issues regarding the relationship between tax and its enforcement on its citizenry. The study was motivated by the need to promote economic growth and development by effecting measures that will cut down corrupt practices in the country. Giving answers to the research problems, hypotheses were developed, related literatures were sourced as well as questionnaires administered. The results obtained were presented in percentage frequency tables and statistical analysis was carried out using the Z test. From the analysis, findings revealed that government and have a role to play in the fight against tax evasion and enforcement in the country. The success of fight against tax evasion and enforcement is dependent on the objectivity, moral values competence of tax enforcement workers as well as on an enabling environment. TABLE OF CONTENTS CHAPTER ONE: INTRODUCTION Background of the Study Statement of the Problem Statement of the Research Question Objectives of the Study Statement of Hypothesis Scope of the Study Significance of the Study Definition of Terms References CHAPTER TWO: LITERATURE REVIEW Introduction Historical Background of Taxation Nigeria Tax System Principles of Taxation Tax Evasion Effectiveness of Tax Enforcement Strategies Concepts of Tax Evasion Concept of Revenue Problems of Revenue Generation Tax Enforcement Strategies Tax Law in Nigeria Enforcement Strategies under the Different Types of Taxes Enforcement Strategies for Making False Statement and Returns Enforcement Strategies for Making Incorrect Return Enforcement Strategies for Offences By Authorized and Unauthorized Persons Capital Gain Tax Education Tax References CHAPTER THREE: RESEARCH METHODOLOGY Introduction The Research Design Types and Sources of Data Population Sample Size and Technique Instrumentation Method of Data Presentation Method of Data Analysis References CHAPTER FOUR: 4.1 Data Presentation, Analysis and Interpretation 4.2 Test of Hypothesis CHAPTER FIVE: SUMMARY OF FINDINGS, RECOMMENDATION AND CONCLUSION Introduction Summary of Findings Recommendation Conclusion Bibliography Appendix CHAPTER ONE INTRODUCTION BACKGROUND OF THE STUDY Tax enforcement strategies are measures/or practices laid down by the enforcement bodies i.e. Federal Inland Revenue Service (FIRS) to ensure correct payment of taxes and punish offenders i.e. tax evaders according to the law. Tax enforcement strategies can not be complete without taking a look at tax evasion which is the main reason or what brings about tax enforcement strategies. Tax Evasion is a phenomenon where the tax payer practically neglects to pay tax, in such instance the tax payer either does not declare the correct position for tax purposes or does not file any return at all. This is sometimes considered criminal in nature and may result to tax payer been convicted. Tax evasion involves a willful default and is therefore a criminal offence. The desire to up lift one’s society is the first desire to every patriotic citizens of tax payment. However, in order to reduce the incident of tax evasion and to ensure fairness and transparency of tax system, federal government as part of on-going reform in the sector, inaugurated a tax appeal to handle dispute between aggrieved tax payer and tax authorities. The internal revenue service oversees the regulation of tax, it also prosecutes any person’s identity that avoids payment of tax dues and can assess penalties. The first classical model on tax evasion was produced by (Allingham and Sandom 1997) where an individual tries to maximize his expected utility from evasion of tax. The model considered a monetary file along with loss of reputation as a penalty and had static as well as dynamic version of the same, it also include comparative static result with respect to actualization. The way forward is for the government to implement the enforcement strategies or the tax policy. Corporate tax payer have elaborate records which are simple too voluminous to analyses completely and individual tax payer may have no records at all. Situation like this compel the revenue agent to look beyond the superficial appearance as presented in the tax form and supporting document. Despite the aforementioned and several investigation already conducted issues relating to taxation in Nigerian a missing link which is very easily seen has been a complete lack of an empirical perception on the determinant of tax paying behaviour. Attempt shall be made to adequately search deeply into these determinants to unravel How they influence attitude of tax payer payment to create a system of taxation a nation must make choices regarding the distribution of the tax burden, who will pay taxes and how much they will pay and how the tax collected will be spent. Tax evasion affects the potential to generate revenue internally and also equity and fairness with the tax system. Most people take pleasure in evading tax, others exhibit disobedience when it comes to filling their tax obligation, a situation that Nayeru in his article titled “Taxation and Economic Development” attributed to value orientation (Nayeru 1988). According to Brain and Paul (1996) the lack of adequate and imperfect information processing is responsible for this situation. (E.g. tax payer and tax agent conflicts). It is therefore imperative to design a tax payer identification system to identify potential tax payer and reduces the possibility of evading tax and making false declaration on tax returns. The penalty for non-payment is 10% of the amount unpaid plus interest at the ruling bank lending rate. Behind every tax legislation are tax penalties high cases of tax is still being recorded by relevant tax authorities. The study examines the se-enforcement strategies and how they can be utilize to reduce tax evasion in Nigeria. STATEMENT OF THE PROBLEM Government at all levels have been concerned about the downward trend in revenue generation one of the most obvious causes of this fall in government revenues is the problem associated with tax evasion. One of the means of reducing tax evasion is the inclusion in tax law various enforcement strategies and penalties. But despite this numerous penalties tax evasion is still on the increase in Nigeria. Whether we believe it or not valuable resources are lost as a result of the problem associated with tax evasion. This situation call for concern because even in a state where the economic factors are favourable some problem still comes up that now threatens the other state with minimal revenue generation base. Based on this understanding urgent means of solving these problems are now being sought so that the system can move forward from the present state. STATEMENT OF THE RESEARCH QUESTION Arising from the above problem are the research question which this study intend to generate data to address are; What are the constitute of tax enforcement strategies in Nigeria? Are tax enforcement strategies effective in deterring tax in Nigeria? What are the specific problems associated with the non-effectiveness of tax enforcement strategies in Nigeria. To what extent are tax payers aware of tax enforcement penalties in Nigeria? What improvements are required to make a tax enforcement penalty effective? Are constant review and rigid implementation of tax assisting greatly in reducing tax evasion in Nigeria? OBJECTIVES OF THE STUDY The objectives of the study are to determine the effectiveness of tax enforcement strategies in Nigerian, they include; To identify what constitutes the tax enforcement strategies in Nigeria. To find out if constant review and rigid implementation of tax penalties will assist greatly in reducing tax evasion in Nigeria. To examine the extent to which the tax enforcement strategies are effective in deterring tax evasion in Nigeria. To identify the problem associated with the non-effectiveness of tax enforcement penalties in Nigeria. To examine the extent to which the tax payers are aware of tax enforcement penalties. To identify what improvement are required to make tax evasion penalties effective. To make recommendation based on the finding of the study. STATEMENT OF HYPOTHESIS In a related development of a research to be worthwhile, hypothesis must be stated and tested to be for the establishment of the stated fact. If the null (HO) hypothesis is rejected the alternative (HD) hypothesis is accepted. Therefore the following formulated hypothesis was tested in the course of the research study:- HO: Tax enforcement strategies are not effective in reducing tax evasion in Nigeria. H1: Tax enforcement strategies are effective in reducing tax evasion in Nigeria. HO: The awareness of members of the public on the implication of tax enforcement strategies/penalties is not effective in reducing tax evasion in Nigeria. H1 The awareness of members of the public on the implication of tax enforcement strategies/penalties is effective in reducing tax evasion in Nigeria. HO Constant review and implementation of tax enforcement strategies/penalties will not effectively reduce tax evasion in Nigeria. H1 Constant review and implementation of tax enforcement strategies/penalties will effectively reduce tax evasion in Nigeria. SCOPE OF THE STUDY The study of the nature out to cover all aspects of tax enforcement strategies in Nigeria. However the study tends to focus on the tax evasion penalties and enforcement strategies of the federally collected taxes. Specifically the tax enforcement strategies/penalties associated with companies income tax, petroleum profit tax, value added tax, educational tax, withholding tax, capital gain tax and personal income tax (Abuja Resident and members of the armed forces). SIGNIFICANCE OF THE STUDY The study is significant, in that it will help government in formatting tax law that will be effective in reducing tax evasion in Nigeria. It also provide the platform for regulatory authorities to appreciate the impact of tax enforcement penalties on revenue generation in Nigerian. Study of this nature also helps in enlightening members of the public on the nature and types of enforcement penalties. This makes them to be tax conscious and also working towards reducing penalties paid from tax evasion. Researchers in this area of study and similar area also benefited immensely as the study provides ample literature on tax evasion. DEFINITION OF TERMS Tax: Is a compulsory levy imposed by a public authority on income, profit or wealth of an individual, family, community, corporate or unincorporated body e.t.c for public purpose. It is one of the main sources of government revenue generation in many countries. REFERENCES Allingham, M.G and Sandom A. (1997), Income Tax Evasion. A theoretical Analysis, journal of public Economics. Brain and Paul (1996), Taxation and Tax Management in Nigeria, Enugu Meridians Associates. Nayeru (1988), The Nigerian Tax law, Ibadan Spectrum Law Publishing. Song, Y. and Yarbrough, T. (1978), Tax Ethics and Tax Payer Attitudes? A survey, public administrator review 442-452.
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