ADMINISTRATION OF COMPANY INCOME TAX IN NIGERIA: PROBLEMS AND PROCEDURES

 

ABSTRACT

The study examines the Administration of Companies Income Tax in Nigeria: Problems and Procedures. Taxation patterns throughout history are largely explained by administrative consideration. The tax structure of any economy tends to vary substantially according to the level of development reflecting the availability of tax bases and administration capacity. To provide focus for the study, research questions and hypotheses were formulated. Data collected through the use of questionnaire was analyzed using Chi-square statistical technique. The major findings, amongst others, include that the Federal Inland Revenue Service encounter problems in the administration of companies income tax and these problems include lack of cooperation from taxpayers, staffing problem, problems ascertaining the assessable income of individuals/ corporations; problem of tax avoidance and tax evasion by companies.

The based on its finding, the study suggested some recommendations, amongst which include the board should have the names and addresses of all the taxpayers, seek information concerning them and ascertain the correctness or otherwise of such information supplied by the taxpayers to enhance distribution of notices of assessment and collection of tax.

To bring the barest minimum the problem of tax evasion and avoidance particularly among the self-employed persons, they should be made to show evidences of tax payment or exemption from tax payment before granting them various amenities and patronage. Taxpayers should be educated on the importance of paying tax, the purposes for which their tax are been discharged. The revenue department should try as much as possible to secure the respect and trust of the public so as to gain the tax payers cooperation.

 

TABLE OF CONTENTS                                                                             

Table of Contents         

Abstract                      

CHAPTER ONE: INTRODUCTION

  1.       Background of the Study
  2.       Statement of the Research Problem
  3.       Objectives of the Study        
  4.       The Research Hypothesis                    
  5.       Significance of the Study             
  6.       Limitation of the Study        
  7.       Research Methodology                
  8.       Definition of Terms       

References                

CHAPTER TWO: LITERATURE REVIEW

2.0  Introduction   

2.1  Review of Some Definitions of Tax and Taxation

2.2  Historical Outline and Purpose of Taxation

2.3  The Structure of the Tax System in Nigeria

2.4  Administration of Companies Income Tax

2.5  Composition of the Board     

2.6  Power and Duties of the Board     

2.7  Organization Structure  

2.8  Companies Income Tax Rates

2.9  Tax Evasion and Avoidance          

2.10 Problems of Tax Administration in Nigeria

  1.   Roles of Companies Income Tax in Nigeria   
  2.   Computation of Tax Liability        
    1.   Filling of Returns                 
    2.   Loss Relief and Capital Allowance
    3.   Procedure for Assessment    
    4.   Procedure for Collection of Companies Income Tax
    5.   Enforcement Procedure
    6.   Minimum Tax Computation   
    7.   Offences and Penalties of Companies Income Tax

References  

CHAPTER THREE: RESEARCH METHODOLOGY

3.0  Introduction

3.1  Research Design

3.2  Population of the Study

3.3  Sampling Procedure

3.4  Data Collection Method

3.5  Source of Data      

3.6  The Research Instrument

3.7  Data Analysis Method

References

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

  1.       Introduction   
  2.       Data Presentation
  3.       Statistical Presentation Of Respondents
  4.       Descriptive Analysis of Questions in Section B of the Questionnaire   
  5.       Test Of Hypotheses             

CHAPTER FIVE:    RESEARCH FINDINGS, SUMMARY, CONCLUSION AND RECOMMENDATION

5.0  Introduction         

5.1 Research Findings                             

5.2  Conclusion                                

5.3 Recommendations                      

Bibliography                     

 

CHAPTER ONE

INTRODUCTION

  1.      BACKGROUND OF THE STUDY

Government all over the world undertakes huge public expenditures on behalf of their citizens such as the provision of infrastructure in form of reads, bridges, and social services. To meet up with these numerous wants and obligations, government requires substantial (huge) amount of funds. Such funds are usually generated from various sources, which include the imposition of government compulsory levies. Thus, the versatility and imposition of government compulsory levies. Thus, the versatility and importance of taxation cannot be over –emphasized.  

In fact, taxation serves as one of government’s fiscal policy measure used in stabilizing the economy. For instance, it can be used to curtail the velocity of money when inflation arises. Taxation does not only serve as an effective way of income re-distribution among the citizen of a nation, but also as a toll for reprising to discourage the use of certain harmful products.

Furthermore, taxation plays a crucial role in promoting and enhancing economic activity and sustainable growth and development. Through taxation, government ensures that resources the channeled properly towards important projects in the society (Emeni 2000)

The tax system thus features a wide and mixed range or statutes by which the various governments in the country seek to charge and collect revenue for public expenditure. Of these, the most widely based are on income taxation. Once a company is incorporate, it becomes legal entity and is treated under Nigerian law as an artificial person, separate and distinct from its shareholders. Corporate bodies are charged to tax under the Companies Income Tax Act (CITA) 1990, as amended to data. However, while Nigerian Companies are taxed on their worldwide income, foreign companies are liable only as regards the portion of their profits which is attributable to business operations carried on in Nigeria. In addition to the Companies Income Tax, all incorporated companies are required to pay 2% of their assessable profit into an Education Tax Fund. This is changed by virtue of the Education Tax Act.

At this juncture, it is worthy to mention that during the pre-colonial era, taxation functioned more or less on ethnic basis. The Nigerian tax system, suffice to say, took after the British tax system both in administration and governing enactments/laws. It is therefore not surprising that income tax as it is know today was first introduced into Nigeria by the then High Commissioner, Lord Lugard in 1904 in the Northern part of the Country (Anyaduba 1999).

The administration of the taxation of profits of incorporated companies in Nigeria is vested in the Federal Board of Inland Revenue (FBIR). The Board was established under CITA, section 3 of the Income Tax Administration ordinance of 1958 and has since been subjected to series of amendment in order to yield maximum returns (Federal Board of Inland Revenue Bulletin 2006). The study therefore is warranted since the researcher intends to examine the problems and procedures in the administration of Companies Income Tax in Nigeria.

  1.      STATEMENT OF THE RESEARCH PROBLEM

In the absence of a well – structured policy, the collection of tax levies is problematic and often produces inefficient result, which eventually truncates the process of taxation. With regard to the above, the statements of the research problems for this study therefore arise from the question as follows:

  1.              Is there any significant effect or non-compliance of tax laws on the administration of Companies Income Tax?
  2.             How do Companies respond to the payment of Companies Income Tax in Nigeria?
  3.             Does trained and qualified tax personnel/expect affect the administration of Companies income tax?
  4.             How has government’s revenue from Companies Income Tax been depleted as a result of ineffective administration of Companies Income Tax?
  5.      OBJECTIVES OF THE STUDY

The objective of any research work refers to what the study seeks to achieve. Therefore, the study is to primarily examine the problems inherent in the administration of companies’ income Tax in Nigeria. It also includes:

  1.                 To find out if there is any relationship between effective administration of Companies. Income and tax in Nigeria.
  2.      THE RESEARCH HYPOTHESIS

A hypothesis is a conjectural statement of the relationship between two or more variables. (Spiegel,1972). In view of the objectives of the study, the hypotheses below are formulated.     

Hypothesis One

HO:  There is no relationship between trained/qualified tax personnel/experts and the outcome in the administration of Companies income tax in Nigeria. 

HI:  There is a relationship between trained/qualified tax personnel/experts and the outcome in the administration of Companies income tax in Nigeria.

 

Hypothesis Two

HO:  Effective Administration of Companies income tax does not determine Companies response to the payment of Companies Income Tax in Nigeria?         

HI:  Effective Administration of Companies income tax determines companies response to the payment of Companies Income Tax in Nigeria?

Hypothesis Three

Ho:  Ineffective administration of Companies Income Tax do not determine the outcome of government’s revenue from Companies Income Tax in Nigeria.

HI:  Ineffective administration of Companies Income Tax determines the outcome of government’s revenue from Companies Income Tax in Nigeria.

  1.      SIGNIFICANCE OF THE STUDY

The relevance of Companies Income Tax and taxation as a whole cannot be under – valued because they contribute tremendously to the immense economic growth and development in Nigeria. The following study group will find the study useful. 

  1.        Tax administrators and government: This study suffices to say will assist this category of group to realize the importance of taxation towards revenue generation so that much attention will be paid to it.
  2.       Policy makers and lawmakers: They will find the research work useful/handy, especially in the areas of policy formulation and simulation on tax matter in addition, this study will assist our lawmakers to make reasonable laws which are capable of transforming and improving the tax system in Nigeria.
  3.        Investors: This study will be useful to investors as it will assist and proved a clear explanation to investors on which sector of the economy they should invest, the way companies income tax and other  related taxes are administered, and how it can influence their business operations
  4.       Researchers: The study will also provide information to researchers who would want to write working papers and articles or embark on further research on the issue of Companies Income Tax in Nigeria.
  5.      LIMITATION OF THE STUDY

It is a well-known fact that no research work is perfect. Hence, there are bound to be some impediments that would crop up from one place or the other limitation of this study includes:

  1.           The sample size to be selected because of the large nature of Companies in Nigeria.
  2.          The policy of companies visited and the attitude of workers in giving the requisite information needed for the study.
  3.           The inability to obtain a complete random sample
  4.          Inadequate research materials online and even in academic publications and journals were problem.
  5.           The high cost of sourcing for information also made it difficult to access most of the publication of research institution.

 

  1.      RESEARCH METHODOLOGY

The research work adopted the primary and secondary sources of data collection. The primary source of data collection involves the use of questionnaire, personal interview while that of the secondary source adopted the use of other relevant materials which include journals, literature publications, textbooks, etc. The questionnaire will be administered to both companies in the manufacturing and service industries, which are

  

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