THE IMPACT OF TAXATION AND PROBLEMS ASSOCIATED WITH ITS COLLECTION IN NIGERIA
(A CASE STUDY OF NNEWI NORTH LOCAL GOVERNMENT AREA)
The research study examining the importance of taxation and problem associated with its collection in Nigeria (A case study of Nnewi North Local Government Area). The value quality and effect of taxation in the Nation cannot be over emphasized because it is a satisfying collection wants (e.g basic services which cannot e provided) by individuals and for government policies. The research is the process of collecting relevant information distributed questionnaire as its primary sources of information and the researcher also use textbooks as secondary source of data for study. There is also the rise tables and percentages used to analyzed the data collected. The research revealed that the problem of tax collection was due to some factors like high rate of illiteracy, dishonesty among the payers and attendant high cost of tax collection.
Moreover, those companies that pay tax are not usually honest about their profit because there is no high rate of the incentive. However, based on the findings the researcher made some recommendations.
1.1 Background of Study
1.2 Statement of Research Problem
1.3 Purpose of Study
1.4 Research Question
1.6 Scope of the study
1.7 Statement of Problem
1.8 Limitation of the Study
2.0 Literature Review
2.1 Administration Structure
2.2 Justification for Taxation
2.3 Requirement for A “Good” Tax
2.4 Reasons/ Purpose of Taxes
2.5 Tax Collection System and Assessment
2.6 Problem of Tax Collection
2.7 Effect on Demand and Taxation
2.8 Measures of Checking
2.9 Problems of Enforcement
3.0 Research Methodology
3.1 Research Design
3.2 Area of Study
3.3 Population of Study
3.4 Source of Data
3.5 Sample of the Study
3.6 Instrument for Data Collection
3.7 Validation of the Instrument
3.8 Method of Data Analysis
4.1 Data Analysis
4.2 Test of Hypothesis
1.1 BACKGROUND OF THE STUDY
Tax system in Nigeria can be traced back to the 1904 when it was introduced by Lord Lugard in Northern Nigeria. Also the native ordinances were introduced in 1917 in Northern Nigeria which later extended to the West in 1928. In this tax system the committees taxed themselves through communal labour to prosecute communities projects or to help the community suppress external aggression.
Taxation as one of the fiscal operation that carryout many limits of government called in jurisdiction.
According to Okonkwo, he stated that, the three major fiscal function are: Allocation, distribution and stabilization which has economic reason to the operated by each levels of government.
This fiscal operation can be traced back to the three region as Nigeria was previously constitution, (example) Eastern, Northern Western regions. They have various legislature for direct and indirect personal taxes before the Nigeria independence 1960.
The first tax law in Nigeria came into force in 1961 known as the income tax management Act of 1961. The existence of the law was due to fact that the ordinance Europeans in the region areas. Therefore, for this lapse to be ratified, the Rainsman fiscal commission of 1958 recommended that inclusion of the tax law that will provide for the Europeans in regional areas.
Although (ITMA) income tax management Act of 1961 provided for the taxation of Europeans in the regional areas. ITMA tried to correct certain issues in Nigeria taxation there were still some anomally. To amend this, various regions enacted some financial law. The Eastern Nigeria anected the financial law of 1962 which replaced the direct taxation ordinance Act of 1950. The western Nigeria adopted the financial law of 1962 of the Eastern region. In addition the Northern Region promulgated the personal tax law of 1962 with similar tax provision as the finance law of 1962 of Eastern regions. These efforts made by the three regions brought about harmony in taxation laws in Nigeria. To strengthen the efforts already made by these three region, the federal government promulgated various legislations such as 1979 Act and inclusion of tax matters in the yearly federal government budget.
The budget is first read through radio and television by the Head of State to the general public on the 31th day of December proceeding the year of the budget execution.
Later on ITMA was effectively replaced by the personal income tax decree generally referred to Decree No 104 to 1993. This personal income tax Act regulate personal income in Nigeria, or machinery by which communities or group are made to contributed part of their income in some agreed amount and method for a purpose of the administration of the society.
Tax can be defined as a compulsory levy by government through its agencies on the income consumption and capital of its budget.
Taxation can also seen as primitive but yet compulsory levy on properties and income of individuals and corporate bodies. The money realized therefore constitutes part of source of finance for general government expenditure in the economy.
Another definition by Chief Olorunmeke, tax is a way of making persons, individuals and corporate entities contribute money through legalized levies according to their level of income or some other criteria to a common fund of a community for the purpose or running the affairs of that community or state.
Also, is a compulsory levy on individuals and non human e,g company involves transfer of resource or income from private sector to the public in order to accomplish or achieve some of the major economic and social responsibilities taken by the government. Basically tax can be classified into to major groups namely; Direct and Indirect tax.
Direct Tax is based on ascertainment of income and the assessment of income either individual or group of individuals.
According to Osita, he explained direct tax as when the incidence of tax falls on the person assessed and also bears the burden of the tax. Direct tax has two divisions, the personal tax and companies tax. The personal tax is for individuals and it is assessed and collected by the state while companies income tax is charged on corporate bodies and that is the responsibility of Federal Board of inland revenue. On the other hand, indirect taxation is when the incidence of tax falls on the tax payer but the impact of shifted to another person.
The form of taxation may be progressive, regressive or proportional. In progressive taxation, the tax rate increase as the actual amount of tax increase. In regressive tax, the higher, the amount the lower the rat. In proportional taxation, the tax increase as in proportion to amount the taxed.
1.2 STATEMENT OF PROBLEM
many people seems not to understand why tax should be paid purpose of taxation is to being’s about Nigeria rate of tax evasion. This imposed numerous problems on them by local government . hence they fail to understand the need and evade tax payment. Some illiterates who engage themselves in one business or the other do not keep accurate record of their business transaction income , thereby creating problems for tax assessment .
some individuals lack means of livelihood and a result of that, they have inability to pay tax while some rich one’s keep wealth in form of commodities examples, commodities like gold, precious store ecetera, thereby making tax assessment difficult.
1.3 PURPOSE OF STUDY
the objective of this study is to examine the purpose of taxation and undertake and insight into the problems associated with it’s collection in Nigeria. It is also aimed at educating who believed that taxes are form of punishment to them. Mina purpose of this study include the followings:
1. To identify the need for taxation.
2. To highlight the benefits of taxation
3. To find out the various problems associated with tax collection.
4. finally to recommend ways to minimize these problems
1.4 RESEARCH QUESTION
i. Does tax help to regulate the economic position of the local government
ii. Does the communities in your local government derive jointly used goods and services from tax payer?
iii. Can in accurate records of business transaction bring about a problem to collection of tax?
iv. Does illiteracy in the communities contribute to the problems of collection of tax in your local governments
v. Do greater involvement of people in subsistence production impose problem on collection of tax?
vi. Can keeping wealth in form of commodities constitute a problem to collection of tax?
vii. Does dishonesty on the side of tax collector’s hinder the effectiveness of tax collection?
Viii. Do inadequate finance constitute a problems to tax collection suffer humiliation in the hands of people in four local government during the course of collecting tax?
i. Hi: Tax help to regulate the economic position of the local government.
ii. Ho yes the communities in your local government derive jointly used goods and services form tax payment
iii. Hi: Yes inaccurate records of business transaction brings about a problem to collection of tax
iv. Ho: Yes, illiteracy in the community contribute to the problems of collection of tax in your local government
v. Hi: Yes greater people involves in subsistence production impose problems of collection of tax.
vi. Ho: Yes, keeping wealth in form of commodities constitute a problem of collection of tax
vii: Hi Yes, dishonesty on the side of tax collectors hinders the effectiveness of tax collection.
viii. Ho: Yes, inadequate finance constitute a problem to tax collector suffer granulation in the hand’s of people in four local government during the course of collecting tax.
1.6 SCOPE OF THE STUDY
The research was conducted in Anambra state but the actual study was limited to Nnewi North local government area. It has been carried out and subject to some limitations. It could be worthy of mentioning that the researcher could not cover as much areas as expected owing certain setbacks among which include;
A. FINANCE CONSTRAINT
The increase in the cost of materials and other things used to enhance research, and not permit further research.
The time allocated for the study is very short as a study academic work is enormous further erances of this write up may yield the best.
C. LACK OF RELEVANT LITERATURE
Unavailability of enough relevant literature on the subject matter is based on Nigeria environment strikes, there is a limitation to the write up.
1.7 SIGNIFICANCE OF STUDY
the nature of this study is to educate the public on the need for tax payment so as to reduce the rate of tax evasion, aversion and avoidance. As a result of the following under listed will benefit from the study.
i. The tax payer
ii. The public
iii. The government
The research will enable the tax payer to realized the reasons who he / she should pay tax when due and the consequence of non - compliance with relevant tax law’s.
Again, the member’s of the public who feel cheated about the allocation of infrastructures will find this work very useful.
Moreover, the outcome of this study will be of great benefit to the government in general as the tax payers will start to dance to the tunes of tax laws . Also to the public on the activities of the local government tax collector, which funds derived goes to the state government purse for construction of infrastructural development of the state etc.
1.9 DEFINITION OF TERMS
i. TAX EVASION
This refers to one’s total refusal to meet one’s legal tax obligation eighter by not reporting at all to the appropriate authority, the income or revenue of the period or misrepresentation of the demand of tax authority .
ii. TAX AVERSION
This refers to the general human tendency to been stingy with money. The stinginess will lead to outright giving not pay taxes where it is possible
iii. TAX AVOIDANCE
This is a deliberate attempt by the tax payer to pay less than the surpose amount to pay. This is a legal means by which the tax payer can reduce this burden
iv DIRECT TAX
This is situation whereby incidence of tax falls on state and federal board of inland revence
V. INDIRECT TAX
This on the other hand is when the incidence of tax falls on the tax payer but the impact is shifted to another person.
vi. PROGRESSIVE TAX
It is the rate at which tax increase as the actual amount of tax increases.
vii. REGRESSIVE TAX
Regressive taxation is the tax rate whereby, the higher the amount to be taxed the lower the rate .
viii. PROPORTIONAL TAX
In proportional taxation, the tax increase as in proportional taxation, the tax increase as in proportion to the amount of being taxed.
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