TAX ADMINISTRATION IN NIGERIA, PROBLEM AND PROSPECTS
ABSTRACT
This research work is set to identify the effects of tax evasion, tax avoidance on the Nigerian Economy with particular reference to the Lagos State Internal Revenue Services.
This project work is designated to find out the factors responsible for tax evasion in Nigerian Economy. The deviation effects and specifically considers different way in which it could be reduced and controlled in order to meet the present day challenges.
In addition, the study is aimed at revealing the economic and sociopolitical effects of taxation in Lagos State and highlight to all beneficiaries of this research work the effect of tax evasion in the Nigeria Economy. To proffer possible solutions to this menace, the civil servants and business organizations should religiously discuss their income.
CHAPTER ONE
1.1 Historical Background Of The Study
This paper examined tax policy in Nigeria. It traced the history of tax in Nigeria and the implementation of tax policy in Nigeria. The paper argued that tax policy has been ineffective over the years. It found that the federal government has been working towards tax reforms. The paper highlighted the flaws in the tax reforms and made recommendations for effective tax system in Nigeria.
1.2 Introduction
A tax administration represents key resource allocator between the public and private sectors in a country, it is usually imposed on individuals and entity that make up a country. The funds provided by tax are used by the states to support certain states obligations such as Education system, Health care system, Pensions .for the elderly, Unemployment benefits, Public transportation, etc. A nation tax system is often a reflection of its communal values or the values of those in power. To create the system of taxation, a nation must make choices regarding the distribution of the tax burden about who will pay taxes, how much they will pay and how the taxes collected will be spent.
In Nigeria, the taxation system dates back to 1904 when the personal income tax was introduced m northern part of Nigeria before the unification of the country by the colonial masters. It was later implemented through the native revenue ordinances to the western and eastern regions m 1917 and 1928 respectively. Among other amendments in the 1930’s, it was later incorporated into, direct taxation ordinances no. 4 of 1940 since then different governments have continued to try to improve on Nigeria taxation system. The general opinion among scholars is that Nigeria’s fiscal regime is characterized by unnecessary complex, distortion largely inequitable taxation laws that have limited application in the formal sector that dominates the economy.
Taxation in every sense is a tool of economic re-enforcement. Most government in the world has always found ways of imposing various taxes on their subjects. This is done with a view to raise funds for its expenditures. Therefore, taxation is a process of levying-and collection by a tax authority with proper jurisdiction of compulsory contribution from individuals, business organizations and corporate bodies, to defray expenses incurred by the government in common interest of all.
Fundamentally, its payment is usually in monetary terms, which the citizen has to pay the government to enable it perform its functions. It may be levied on income or goods or services.
Tax can be defined in various ways;
- As a charge or duty imposed by government on income or property. Anyanwura (1999).
- As transfer of resources from private public sector in order to accomplish some of a nation’s economic and social goals. Agyel (1988).
- A contribution of wealth by citizens of a country, business Organizations and corporate bodies to the government, with the necessary money needed for the provision of social, economical and fiscal services by the government. Fagbule (1982).
- A compulsory contribution from a person(s) incurred in the common interest of all without reference to the special benefits provided. Adegboyega (1998).
From the various definitions of tax stated above, the main objectives of taxation include wealth or income redistribution, revenue generation, stimulation or stabilization of economic growth, discrimination against certain types of goods and services with regards to both production and consumption and correction of disequilibrium in the balance of payment etc.
1.3 Statement Of The Problem
This research is set to identify the effects of tax evasion, tax avoidance on the Nigeria economy with particular reference to the Lagos State Internal Revenue Services.
Over reliance of government on the sales of crude oil for its much needed revenue has left the opportunities and potentials of taxation untapped. Unfortunately in Nigeria, only the salary earners bear the full burden of income tax, while the private businessmen most times escape such. This is defeating the social, political and economical objectives of income redistribution which is one of the cardinal aims of taxation.
The problem of this research centers on the effects of tax evasion, causes of tax evasion, tax avoidance and the various methods used by payers to carry out these acts and how those acts can be curtailed if it cannot be completely eradicated. In conclusion, a kind of taxation which is based on professionals and self employed persons, given that tax evasion is high with respect to this category of tax payers, it has been suggested that the reduction of evasion would raise considerable revenue yield from this category.
Efforts to increase revenue from this category of tax payers have been hampered by two problems.
The first one is inability to get them assessed properly and in most cases not assessed at all. The consequence is that the revenue from tax is lost while the actual and potential tax payers in this category enjoy a tax free world.
The second problem which makes assessment difficult is lack of information about this category of people, of which many of them do not register their business name and when they do, some do not give genuine information but incorrect and false information, thus, impairing any monitoring, inadequate and lack of information makes tax administration difficult.
1.4 Research Objectives
This project is designed to find out the factors responsible for tax evasion in Nigeria economy. The deviation effects and specifically the different ways in which it could be reduced and controlled in order to meet the present challenges of this nation.
Additionally, the study is aimed at revealing the economic and socio- political effects of taxation in Lagos State and highlight to all the beneficiaries of this research work the effects of tax evasion in the Nigeria economy.
To proffer possible solutions to this menace, the civil servants and business organizations should religiously disclose their income from other sources (if any) and the tax authority should carry out their statutory responsibilities diligently.
1.5 Research Questions
This study aim at giving answers to the following questions;
- What does the internal Board Revenue (Lagos State) consider as being the major causes of tax evasion?
- How does tax evasion affect the financial activities of the Lagos State Government?
- Is there any penalty imposed by the Lagos State Internal Revenue Board on tax evaders?
- Is there any public awareness on the importance of taxation?
CHAPTER TWO
2.0 Literature Review
2.1 Introduction
The review of relevant literature is the main topic of this chapter. A literature review covers theoretical and methodological contributions to a certain issue in addition to the state of knowledge at the time of writing. It provides information about the state of the art in relation to the subject you are writing about. It examines the body of work on the chosen subject. The literature evaluation in this study comprises the …
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