PROBLEM OF PERSONAL INCOME TAX COLLECTION IN ANAMBRA STATE
A CASE STUDY OF AWKA SOUTH LOCAL GOVERNMENT AREA OF ANAMBRA STATE
PROBLEM OF PERSONAL INCOME TAX COLLECTION IN ANAMBRA STATE
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
A tax could be defined as a compulsory payment levied on individuals by government or paying a specific percentage of their earnings or a specific amount of money in order to raise revenue for development purposes.
A tax according to Agyei (1985:2) defines tax as “the transfer of resources from the private sector to the public sector in order accomplish some of the nation’s economic and social goals”. Well, the primary economic goal of developing countries is to increase the rate of economic growth and hence the income per capitals which will lead to higher standards of living.
A goals which will be achieved with the introduction of tax are: provision of additional basic government services, particularly in education, public health and transport which are imperative for the growth of the rest of the economy.
Personal income tax was first introduced in Nigeria I 1904 by the late Lord Lugard, when the community tax operative in Northern Nigeria. Formerly. Nigerian cheerfully paid their taxes in kind of rendering free services such as clearing the bush, digging put toilet, well etc. for the benefit of the community as a whole failure to render such services usually resulted in seizure of property which might be reclaimed on payment of money.
In 1917, Lord Lugard made certain changes which culminated in the native Revenu ordinance, it was the (1917) ordinance that was extended to the Eastern Nigeria in 1928. the stiff expositions was also made it the end of 1939 chief Okugo of Oloko carried out the instructions laid down by the British Administrations on a new way of taxing income of individuals. This led to remour that a new system of taxation will be introduced. Its later consequence culminated to Aba women Riot against the British Administration. Meanwhile, in the year 1799 it was introduced by famous British king known as William and catering for government expenditure.
Income tax was very effective in Northern Nigeria but finally has come to stay in Nigeria today. The Raiseman fiscal commission of 1958, recommended the introduction of basic principles for taxing income of persons other than companies. This recommendation was embodied in Nigeria constitution order in council in (1960) and which formed the basis of the income tax management Act (1961).
By Untue of Edit (6) of 1970, the Board of internal Revenue came into being in effect, the Board became an organ charged with the responsibility of carrying out broad policies of tax administration in Anambra state.
1.2 STATEMENT OF THE PROBLEM
These problem hinder the provision of various services from security to economic services for the citizens. Though the funds which would have been collected are not available to the government thereby creating stability of the economy.
Some of the problems are easily enumerated as stated below.
Lack of staff and inputs such as station eries, vehicles and effective legislation to couer the tax officials.
Lack of appropriate incentives to officials and logistics supply for effective tax drive.
Inadequate enlightenment to tax payers.
Lack of adequate information to tax payers services.
Some tax payers are not prepared to pay their tax at will unless they are caused which gives rise to their coming.
Some tax payers feel that the money they paid as tax is no longer used for what it is meant such as roads, water supply, electricity, bridge etc and as a result they feel reluctant to pay higher taxes or not paying at all.
Some tax pay are hostile to the official, example – the Mkpume Akputakpa case in 1971 in which Mr. Njoku was brutally murdered.
Difficulty in identifying who are the tax payers.
failure to back up with the tax requirement.
Problems of lacking the tax payers.
OBJECTIVE OF THE STUDY
The main purpose of this research work is to find out those problems hindering tax and this could be obtained by the application of the following methods.
To know whether the individuals are actually under assessed or over assessed.
To know whether the tax collectors are really collecting the much expected revenue or not.
To find out the efforts made by the board of Internal Revenue in educating people on the need to pay their taxes as and when due.
To find out why people avoid paying tax.
To know also how tax authorities are determining the tax liability (assessment individuals)
To find out whether the caliber of people recruited by the board of internal revenue as tax collectors and agents have any direct effect on efficiency of collecting tax
To know how the board of internal revenue is making an effort to create awareness through the mass media.
To know if the introduction of tax clearance certificate (TCC) has really improved the tax collection in the state.
1.4 RESEARCH QUESTIONS
The researcher tends to verify the following operations in the board of internal revenue through the research questions.
Does the tax authority assess individuals before imposing tax on them?
Do this tax payers pay their taxes as and when due?
Are all the money collected properly accounted for?
1.5 RESEARCH HYPOTHESIS
i. Ho: Tax evasion or fraudulent practices of tax collection is not a problem militating against tax collection.
Hi: Tax evasion or fraudulent practices of tax collection is a problem militating against tax collection.
ii. Ho: Under assessment is not a hindrance to enhance tax collection.
Hi: Under assessment is a hindrance to enhance tax collection.
iii. Ho: Avoidance of tax is not a problem of personal income tax
Hi: Avoidance of tax is a problem of personal income tax.
SIGNIFICIANCE OF THE STUDY
The importance of this study is to know problems of personal income tax collection in Anambra State, Now, that the nation is no longer enjoying the oil boom, there is the need for the government to find some practical ways of generating money with which they will use in financing their programmes.
The study of personal income tax has ways of benefiting the government and the people of the state. Solutions preferred for solving the problems of taxes, especially income tax shall be with be available to the government to finance more developmental programmes. The people will then benefit indirectly from the result of this study.
This case also provides reference material for educational purpose. The board of internal revenue and its different offices holders can improve upon their work by the following recommendation of this study.
SCOPE AND LIMITATIONS
SCOPE: This study is particularly focused on Awka South Local Government which comprises the following autonomous communities namely, Awka Town, Amowbia, Nibo Nise, Mbaukwu, ad Isiagu with their headquater at Awka.
The researcher looks at the way the tax evaders are being treated and statistical records of some tax payers in Awka South local government within the Jurisdiction of the Board of internal revenue Awka in Anambra state.
LIMITATION: As mentioned earlier, the two outstanding constraints are finance and staff not co-operating.
FINANCE: In view of the economic crunch that is passing through, it is very difficult to have enough money to achieve one’s crucial desires.
A research of this nature involves money. A lot of money is require for typing, running of questionnaire, traveling to places for the project, yet there are competing alternative requiring money.
However, despite the impediments, the research went on fine.
It is equally necessary to mention the non challant attitudes of respondents. However, the above limitations did not destroy the focus of this study.
DEFINITION OF TERMS.
PERSONAL INCOME TAX: This is a compulsory payment levid on by the government on individuals to pay a specific amount of money which should later be used for development purposes (Agyei 1985).
TAX EVASION: This is a deliberate attempt not pay taxes, it is therefore a illegal act, usually the income earner has the capacity to pay tax but ie is not willing to pay very stem laws against tax evasion should be made. Also the cannons of taxation should be followed when making tax laws to stop tax evasion.
TAX AVOIDANCE: It refers to the use of legally provided device to secure a maximum reduction in the amount of tax which is due from a taxable, it also an immoral means of avoiding to pay tax completely.
REFERENCES
Agyei A.K. (1985), Principles of personal taxation in Nigeria Lagos, Academy press limited.
Stabilization of Economy through adequate fiscal policy opat (1985)
Odoh N.N. (2004), Public finance for polytechnics, Enugu J.T.C publishers.
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 DEVELOPMENT OF INCOME TAX IN NIGERIA
The literature review from an academic genius professor B.C. Osisioma in on of his write –ups said that taxation in Nigeria has been dated back as early as 18th Century, when a Fwani Jihad led by Usman Dan Fodio had between 1804 and 1810 over thrown the Feudal Hausa state of the North and established in their place, a closely knit well administered caliphate that covered virtually all of the present day Northern Nigeria and beyond.
The pronominal religion Islam, by enjoining the devout to give a portion of their income for charitable or religious purposes, provided a religious basis for taxation. The highly organized administration of the Emirs reaching down to the village level, facilitated the imposition of taxes. The tax system was developed when Lord Lugard under the British influence assumed a political Office and introduced tax in (1904) under native revenue proclamation. He had little or not problem because it had already been in existence within the Northern dominion.
In (1918), the native revenue ordinance (N.R.O) was extended to the south and it was only applicable in Benin and Abeokuta income tax was introduced in Britain in (1799) by patt with the intention that it will be a temporary levy. Consequently, it was reintroduced annually till when it was stopped in 1915. it was however resumed in 1942 and till date it is still in existence.
In (1927), Lord Lugard Succeeded in extending Native Revenue Amendment Ordinance to the area of the east of the Niger. The Aba women Riot of (1929) sparked of when they heard the rumour that women were about to pay taxes.
In 1929, a flat rate 21 total earned income and corporate profit was levied. In 1939, an ordinance was passed into Bill knows as Camapry income tax ordinance (CITO) which was meant to guide companies.
In 1931, a non – native income tax (protectorate) ordinance No. 21 was enacted for expatriates in the colony of Logos. This was repealed by the Non Natives income tax (protectorate) ordinance No 5, 1937 which outlined that a native law was first introduced in Lagos colony in 1937 by Native Direct taxation (Colony) ordinance No. 41 Between were promulgated.
In 1940, the first commissioner of taxes was appointed. It was this time that Nigeria started having tax laws.
These Jungle of tax laws came in for substantial re-arrangement in 1940. the direct taxation ordinance (DTO) No.4 and the income tax ordinance (ITO) No. 3 were promulgated repeating all previous tax laws and ordinance. The DTO repeated all preceding native ordinances and brough all natives in Nigerian culture then in the ownership of Lagos under its Jurisdiction. It used the authorities as tax collection authorities and tax collected were to be paid into the Revenue Account on other nation’s treasury with the government as the resident might direct.
The ITO (with its 1943 amendment) brought the income of the expatriates resident elsewhere in the country under the tax Jurisdiction of the colonial government. The ITO defined deduction allowed from personal income, enacted and introduced special relief in respect of wife, children and life assurance policy payment.
With the establishment of the regional activities in 1952, the responsibility for assessment and collection of tax passed to the regional government under the adaptation of law ordinance of 1954, the DTO became a federal matter.
The east was the first to introduce a comprehensive regional finance Law No.1 of 1956, the west followed soon with the income tax No. 16 (1957). The North retained the 1940 D.T.O. as amended in 1948 till 1962 when it promulgated the personal income tax law No. 6. The Federal Territory retained their (ITO) as amended in 1943 till 1957 when it reduced structural modification in the law.
The recommendations of the raise man commission of 1958 were embodied in the Nigerian constitution order in council of 1960 and formed the basis of the income tax management Act (1961) the Federal Government retained centre on the taxation of individuals on the federal Territory and companies in Nigeria while the regional government obtained their revenues from taxes or income of all persons within their regions whether native or expatriate.
Furthermore, customer duties and excise were to be collected by the Federal Government while the regional government retained export tax on motor vehicles, final revenues from EXCISE AND CUSTOM DUTIES on tobacco. This is just briefly how tax development started in Nigeria.
2.2 OBJECTIVES OF INCOME TAXATION.
In as much as income tax exist, government has different reason for imposing taxes more especially income tax. They are divided into primary and secondary reasons.
The main primary aim of imposing tax is to provide government with revenue to enable them carry out their functions apart from socio-economic policy.
Other objectives are
(1) To avoid double taxation of income by Federal and state governments.
(2) To achieve uniformity in the incidence of personal tax in Nigeria.
It will be recalled that regions were empowered to make local modifications to suit local conditions. The East enacted the 1962 finance, law, the west retained its 1957 Act and the worth then introduced the personal tax law of 1962. These laws were made to fill the gaps and cover assessment and appeal machinery for collection, rates of tax penalties for income tax defaulters and additional personal relief. There are other reasons which include.
(a) Determination of residence of tax payer.
(b) Wrong computation of income of individuals families communities, estates, trusts, partnership.
(c) The period covered by income tax law.
(d) The treatment of provident and provident fund.
(e) Income which are exempted from tax
(f) Pension Liable to income tax.
(g) Types of allowances for income tax purposes
(3) It is used in re-distribution of income. it attempts to bridge the gap between the rich and the poor, especially when using the progressive nature of tax system which states that those who earn how income should pay low tax.
(4) Income tax was also introduced for controlling initiation.
Initiation it self is a situation describe as the continuous rise in the general price level of goods and services. It can as be defined as tow much money in circulation chasing few goods. As increase in taxation without corresponding increase in government expenditure or a decrease in the spend able income of the people brings about a decrease in expenditure.
QUALITIES OF A SYSTEM OF GOOD TAXATION
The government takes in order to provide goods and services to its people.
The most widely known principles of evaluating any tax system are Adam Smith’s four cannons of taxation which are stated below.
The subjects of every state ought to contribute to the support of government as nearly as possible in proportion to their ability. That is an individual ought to be taxed in proportion to the revenue the enjoys under the protection of the state.
Certainty:- The rate of taxation which each individual is bound to pay ought to be certain and not arbitrary. In other words, the type of payment and the amount to be paid ought to be clear and plain to the tax payer.
Convenience:- Tax payment should cause the tax payer as little inconvenience as possible, both as regards the manner, the time and amount of payment. Also the method of collection should be convenient to both the collector and the contributor.
Economy:- The cost of assessing, collecting and controlling taxes should be kept to the lowest level considering other goals of taxation.
Adequacy:- A goal tax system should guarantee adequate revenue to cover the expenditure of government at all times.
Ability to pay:- The total tax burdens should be distributed among individuals according to their capacity to bear it.
Consistency:- A good tax system should be consistent with economic goals of the government, helping to increase the lever of economic activities and promoting activities, stabilities and growth.
ADMINISTRATION OF INCOME TAX IN ANAMBRA STATE.
The administrative authority referred to in the Act ac “Tax Authority” is the Board of Internal Revenue in relation to income tax are to assess, collect and account for the tax imposed by the law.
They have various other powers including power to
Authorize the communication of information contained in tax records.
Compound on offence arising from making delivery of false return of statement of records
Appoint a person or body of persons for the purposes of assessing the total income of tax payers.
Direct Payee tax collecting agents to make deductions from employment income, and appoint assessment authorities and tax collectors.
Require a bank to supply information about its customers in respect of indirect payment (credit) to those customers exceeding N30.00 in any period of twelve months.
Make refused of excess tax paid. The tax authority may require any person to produce such information as the authority may specify the information should be supplied within the stipulated time in such notices.
Appoint a person to be the agent of any person, imposing or remitting a penalty for breach of any rule which constitute offence under the income tax law.
(1) ASSESSMENT AUTHORITY:-
The Board appoints an assessment authority under section 9 (1) of the law for each administrative division in the state. He exercises other powers which mainly deal with.
(i) Notice to a tax payer to deliver statement income and particulars.
(ii) Notice to furnish other returns.
(iii) Notice to appear personally before an assessment authority and produce books and assessment.
(iv) Notice to an employer to prepare and deliver a return of his employees.
Notice that assessment have been made.
(2) ASSESSMENT COMMITTEE
Under section 9 (2) of the law, an assessment committee is appointed by the assessment authority to help in assessing tax payers with annual income not exceeding N30,000,00
The assessment made by the assessment committee are however subject to review by the assessment authority who appointed the committee. The review may arise either as a result of an objection under section 23 of the law or at the discretion of the Assessment Authority, under section 29 (2)
Summarily, the duties of Assessment committee are laid down in section a (3) of the law as follows.
(a) Assess the total income of tax payers within its specified area.
(b) Determine the amount of tax payable by them.
(c) Mention assessment records and supply such information with respect to the identity income and other particulars of these tax payers as may be specified by the Board.
(3) TAX COLLECTION
A tax collector is also appointed by the board for purpose of collecting income tax in certain areas. Now senior members of staff of the Board are also appointed as tax collectors. Meanwhile, the law laid down in section 10 (5) the duties of a tax collection.
To collect tax and account for same to the government and to supply information, he does not normally and personally perform such tasks. His actual duties are mainly legal and administrative nature except two circumstances. These are.
(a) To order a tax drive under section 34 of the law.
(b) To issue a write of attachment on the moveable property of tax defaulting agent under the income tax recovery of arrears rule,
(4) TAX COLLECTION AGENTS
They are of two types comprising of employers who are appointed by the minister of finance under section 10 (3) of the law to collect income tax from their employees (PAYE) the better known collecting agents usually called tax agents are to be appointed in the community to be collecting those taxes on income that are under 1000,00 per annum in respect of individuals in the area of authority of the council.
Every community council which is in tax collecting agent is paid.
(a) A commission of ten percent of the total income tax collecting by it.
(b) A local development grant of twenty percent of the total income tax collected in any year in the area of authority of the council.
Joint tax Board was established by section 27 under income tax management Act (ITMA). It consists of representative of out state nominating a person experienced in income tax matters with the Director of the Federal Inland Revenue as the chairman
(1) Exercising the powers and duties conferred on it by enactment of the Federal Government.
(2) Imposing tax on the income or profits of companies.
(3) Exercising any powers and duties conferred on it by any person or provision of this Act.
(4) Shall advice the government of the Federation on request in respect of double taxation, arrangement conducted, of under consideration with any country.
SECRECY:
This is an essential factor in income tax administration. Its absence will affect assessment and collection because information will be difficult to obtain and tax payers will be very unwilling to reject ultimate matters which affect them as the payers and the Revenue on the other hand.
PROBLEM OF INCOME TAX ADMINISTRATION AND COLLECTION MACHINEY
The various methods of collecting tax they can be divided as follows.
Write of Attachment
\personal Demand
Court proceedings
Agency
Writs of Attachment.
This is usually done by tax collector.
They do this by distaining the tax payer by his goods where the property is situated. The write as well be done by seizure of and sales of the moveable property of a tax defaulter. When the write is issued, the tax office is armed with authority to seize and sue, where appropriate the property of the defaulter in satisfaction of debt.
(b) PERSONAL DEMAND
This is the method used after the tax collector has published a notice under S 34(1) of the law loaring the public and stating the period during which the method will be as “tax drive”. The drive may be either at the taxpayers residence or any other place where he could be easily found. This method could be done perfectly when going along with the police, mostly very early in the morning or in the evening when the Victim could easily be found.
(c) AGENCY
These are those tax collection agents who go to those in rural area especially in the area specified to them to carry out functions like in the primary schools, market, village, chiefs place etc.
A lot of problems have been affecting personal income tax collection in Anambra State. Among them, poor collection system has become the major one. Unless the implementation and execution machineries are equally efficient, the entire system may crumble. The government of Anambra state in 1996, engaged the services of tax contractors known as tax consultants to boost states such as Enugu, River, Deter mention a few engaged the services as will but little do they know that the problems of downward trend to revenue collection are not mainly from the staff of board of internal revenue as the government though to be.
Three major factors that militated against effective tax collection in the state.
(a) Lack of educated staff
(b) Lack of logistics and infrastructure.
(c) Lack of motivation.
Some educators are the pivot in which other things linger. All things equals, educators upgrade the staff standard if such training has been given to them.
The infrastructural facilities also contribute heavily to poor collection. Anambra state are worst hit it this infrastructure.
As the duties of tax collectors are very dangerous because of lack of adequate knowledge in our societies, any have lost their lives in this exercise. In view of this, tax collectors should be encouraged through cash and kind in order to enable them execute this job.
I will say that two major problems confronting effective tax collection in Awka south and Anambra state in general are lack of logistics and infrastructure and lack of motivation and unless these issues are adequately addressed by the government the problem will continue to linger on.
Other problems are as follows:
Lack of communication facilities
Lack of means of mobility
Inadequate staffing of various tax offices and motor licensing offices.
Attitude of some public office holders.
Ignorance and high level of illiteracy in the society.
Tax evasion and tax avoidance.
Omroginwa (1982) State that whereby tax avoidance is operating in tax administration, it will lead to ineffective system, thereby suggested that aggressive means should be used.
Adebayo Adedesi (1970) State that unless tax administration has been administered without feer or favour by a staff with the authority and knowledge to do so that no tax law, no matter how sophisticated and progressive can be effective. He further said that the administration in income tax system is the major problem that faces income taxation, in Nigeria. More so, he remarked that the renormalization of income tax in Nigeria is a problem in tax administration and also gave advice that if taxation is the become important and growing source of revenue in Nigeria, then there should be need to break completely from tradition of direct taxation, reduce the number and scale of personal allowance and salaries, increase the tax and revolutionaries the administrative machinery.
Nick Keketor (1970) Stated that one of the problems that arises from tax assessment officer is knowing incomes of there with varying annual income, asserted that proper assessment of this class of income of tax payers were made complicated by lack of book-keeping and due to this, large amount of revenue are lost yearly by under declaration of income.
Olorunleke (1985) further stressed his own view in the need for proper growing of tax officers due to technical nature involved in the progress of assessment and collection. More so, he stressed that the tax assessment and collection units are characterized by high percentage of illiterate councilors and tax agents among other who multiply issues for the few illiterate officers.
Nwachukwu (1985) stressed that professionals and other business man and women hardly pay tax commensurate with their income. They usually dodg tax irrespective of their level of awareness of the necessity as a very formidable instrument for rapid development but instead they willingly left this practical philosophy of civil responsibility.
Ewujowa (1989) state that people are not interested in paying tax because of negative approach to tax collection and use of taxes towards a better social and economic goals.
Odinwa (1984) stated that the former chief of staff supreme Headquarters major General Tunde Idiagbon (Rtd) have said that the Federal Government is worried over the continuous means tax evasion which emanates mostly from the business concerns and wealthy Nigerian. The unpatriotic attitude remarked by the chief of staff is wide spread and government has lost millions of naira in both personal and company’s tax evasion. Furthermore, he stated that companies deliberately falsify their records in the completion of their tax forms to mislead the government.
Ajao (1985) quoted that the former chief of staff has said that the government has lost a big C chunks of the revenue that could have incurred to them because they operate inefficient system of tax administration.
Professor Osisioma B.C. (`1990) stated that until business man and self employed persons pay their taxes as and when due, government will not realize the full potentials from this revenue source. Osisioma father mentioned that filling false claims by tax payers in their returns contributes in no small measure to the loss of the revenue to the government.
Ewujowo (1989) pointed out the non rewarding of rural tax payers as a serious problem. Quoted one rural tax payer as having said.
“We can develop our town villages through self efforts without asking the government for assistance but due to the fact that we pay taxes with the belief that our needs will be provided by the government, hence our inability to think good of over selves towards better economic and social abilities”.
David (1970) expressed the relationship between the government expenditure and the consequent need for taxation. He said that it is probably most desirable to make clear in people’s mind the association between the tax they pay and benefit they receive from government expenditure. He remarked that more apparent this is, the greater the likelihood the people will be willing both to apy taxes thereby keeping down the cost of collection and perhaps more importantly to work harder in order earn the money to pay. This shows that people do not pay tax voluntarily until the impact of its benefits are either anticipated or felt.
Ijebi Chidi (1984) sees it as ixonical, the tax authorities pretence of ignorance of the sources of taxable income among self employed persons and he blamed the tax authorities for the situation.
Okeke (1987) Listed three cadres of skill required for effective and functional tax management in Nigeria as:
(1) Manipulative skills:
This includes honest, dedicated and skilled clerks in the tax offices.
(2) Operating Skill.
This requires enterprising, energetic, young and enduring tax experts like chattered accountants specializing in tax assessment, collection and management.
(3) Administrative skills:
This will include other officials who rose from rank and file in the tax authorities and other area. These should come mostly from such areas like Economics. Business Administration and management, public finance and public administration.
Odorunlode (1985) quoted that one time military governor of Anambra state, Navy Capt. A.A. madueke as having said that promulgation of the decree making the administration and collection of personal income taxes uniform throughout the country would be the beginning of the Journey towards effective tax administration in this country.
In Anambra state, the committee reported the following facts among other as factors militating against the maximum collection of revenue in the state they are:
(1) Lack of staff and input such as stationery, vehicles and effective legislative cover the tax officials as earlier highlight and cited Mr. Njoku’s supreme sacrifice in Mkpume died in cold blood without any compensation given to the family.
(2) Lack of appropriate incentives to tax officials. The tax officials are poorly paid if compared with their counterparts in other government establishment irrespective of the riskness of their job. If much revenue is to be expected, the tax officials should be encouraged through increase in their salaries and entitlements in order to keep abreast with the job.
(3) Inadequate public enlightenment to tax officials.
(4) Inability on the part of these entrusted with the job to perform effectively.
(5) Lack of commitment to the job
(6) Desires for self enrichment.
(7) Lack of adequate information for tax payers sources of income.
(8) Take address given by the tax payers thereby making it very difficult for the tax authority to locate the tax payer.
(9) Some tax payers are not prepared to pay their taxes at will unless they are caused to do so which gives rise to their coming.
(10) Lack of good supervision in the management system.
(11) Lack of relevant information
(12) Poor statistics of taxable adults.
(13) Economic factors, ignorance, massive incorporation of businesses and deliberate intention to cheat.
(14) Loss of revenue accountable from pools agents, licensing fees due to inability to ascertain the member or types of companies transacted by a pools agents.
(15) Many items of equipment in the survey division need re-activation and apparently, the government does not appear to show any interest in this direction.
(16) Official accommodation for the Board of internal revenue staff both local level and headquaters has been most inadequate.
(17) Establishment / Organization empowered to collect revenue for the state were neither adequately equipped nor properly funded.
(18) Some tax payers feel that money they pay for tax is no longer used for what tax is meant for, such as roads, electricity, water supply etc and as a result, they feel very non-challant and reluctant in paying higher taxes or even not paying at all.
(19) Lastly, some tax payers are hostile to tax officials.
The Board of internal Revenue, embarked on how the above listed problems should he solved. They are as follows.
(1) Using the media to educate people about the importance of conformity to the tax requirement and highlighting the consequences of tax evasion to them. This is so because if the individuals in the state know the importance of taxation, they will definitely pay their taxes.
(2) Embarking on tax drive operatives where persons who dodge tax or who migrate to other states and come briefly to Anambra state are caught and made to pay the adequate tax.
(3) Review the laws that vested power of assessment on the group of Assessment Authoiryt
(4) Enforcement of law in adequate supply information.
(5) Emphasis of seminars, training and re-training of staff
(6) Capability to be only criterion for selecting people for the post of executive secretary, tax collectors and motor licensing Authorities.
(7) Board of Internal Revenue to examine its man-power needs, and make representations to the commissioner for finance and Economic planning.
(8) Release of funds for the construction / renovation of Board of internal revenue.
(9) Purchase of office equipment in the Board of Internal Revenue.
(10) Enforcement of the law on PAYE arrears by organization of the state and local government and where still in default, recovery to be made by subvention.
(11) Installment payment of PAYE arreas by organization of the state and local government and still in default, recovery to be made by subvention.
(12) Proper identification of streets, residential and official buildings of newly designated townships.
(13) Enforcement of the law or record/account keeping
(14) Executive council directive for the posting of tax officials to ministries / departments that make use of tax clearance certificate.
(15) Advice and assistance of traditional rulers.
(16) Public enlightenment and education on the benefits of taxes.
(17) Establishment of specialized Assessment / Back duty Division in the Board of Internal Revenue as an anti tax avoidance.
(18) More positive involvement of traditional rulers
(19) Specialized / Back duty Division as reference centre for bringing to book those who did payment of taxes.
(20) Inspection of tax deduction centres and activities of sales tax officials by the Revenue inspection officers.
(21) Provision and release of funds to Board of internal revenue before the end of the fiscal year to purchase items of stationery fir the following year.
(22) Joint read checks by officials of the board of internal revenue and the police to fish out the tax defaulters.
(23) Development of more industrial layouts.
(24) Equipment reactivation and maintenance.
(25) Establishment of mobile courts to accelerate the trails of the offenders without going through normal court procedures which delays action.
(26) Provision of new layout with necessary infrastructure.
(27) Inspectorate division to check renewal of pools agent licenses.
REFERENCES
Omoriginwa P.A. (1982), Constraints in personal income tax administration and Assessment in Nigerian Business times vol. 11 No 15,
Olorunleke D.A. (1985), Tax in Nigeria prospects for reform Business times vol. 20 No5.
Odinwa O. (1984), Tax invasion Daily Star Vol. 26 No. 13.
Ewujowoh S. (1989), Better Tax Revenue through Awareness Business times vol. 16 No. 14
Ajao T. (1984), Idiagbo’s Assessment to seminars on tax Guardian Vol. 1 No. 16
Osisioma B.C. (1990), Tax implication of the Federal Budget in lecture pickhole in 1990 Federal budget Daily Times Vol. 16 No
Ijebi Chidi (1984), Potholes in our tax collection system” Daily Vol. 18 No. 6.
Ewujowoh S. (1988) Are you over taxed? Business Times Vol. 20 No 17.
Nwachukwu J.A. (1988), Why would professional and others pay less tax Nigerian Statement vol. 17 No 14.
Olorunleke D.A. (1985), Tax in Nigeria prospects for reform Business Time vol. 20 No 10.
Adebayo Adedeji (1970), Personal income tax in Nigeria for Economic Development Hutchison education Ltd.
Nick Kelctor (1970), Taxation for economic Development London Hutchison education Ltd.
Okeke W.S (1987), Income taxes and manpower constructs in Nigeria 5th Edition professional accountants.
David West (1970), Taxation for Economic Development Hartdisor Education Ltd.
CHAPTER THREE
3.0 RESEARCH DESIGN AND METHODOLOGY
3.1 RESEARCH DESIGN
Some questionnaires were administered for the purpose of this project. The Director in the Board of Internal Revenue, the tax Assessment Authorities and other staff contributed in no small measure in administering the questionnaires.
POPULATION SIZE
The population of this research study is composed of about (98) staffs of the Board of Internal Revenue Anabra State Awka.
The population size for this study is therefore ninety eight (98).
SAMPLE SIZE DETERMINATION
The sample size determined the number of questionnaires to be distributed by the researcher.
This is armed at by applying the statistical formular below.
n = N
1 + N (e)2
Where
n = sample size
N = Population size
Margin of error
Note: The researcher has assumed a margin of error of 8%
n = N
1 + N (e)2
n = N98 e = 8% or 0.08
n = 98
1 + 98 (0.08)2
= 98
1 + 98 (0.0064)
= 98
1 + 0.0064
= 98
1.06272 = 60.23
= 60.23 questionnaire
Approximately 60 (sixty) questionnaires were this distributed by the researcher.
TYPES OF DATA
It is highly imperative and pertinent researcher should make use of data in the course of carrying out this research work.
The researcher therefore made use of two (2) major types of data namely.
Primary data: This I also known as raw data: the information gets through interview questionnaires and personnel observation.
Secondary data: this is know as already existing information on the subject matter. This types of data is gotten through test books, Journals, newspapers etc.
SOURCES OF DATA
We have the primary sources and secondary sources.
Primary sources: This includes the researcher asking questions which were formulated to asking questions which were formulated to get relevant information from respondent the response were also recorded on the sport, this method become necessary as the researcher had the opportunity of explaining every thing to the respondents as well as making on the sport assessment of situation.
1. QUESTIONNAIRES
The researcher equally used this technique to obtain a lot of information firm the respondents. A questionnaire was formulated to generate relevant information for the study. The questionnaire was very helpful in sourcing information for the research study.
Validity and reliability of questionnaires :
The researcher used the test relest techniques to estimate the reliability of the questionnaires. By selecting a group of respondents who have filled the questionnaires and giving them another questionnaire to fill, it was discovered that the responses shared on appreciable degree of consistency.
2. SECONDARY SOURCE
Relevant information was also obtained from text books, Journals, magazine, published materials etc.
DATE LOCATION
The information used for this research work was collected from libraries, the libraries made use of the follows.
The institute of management and technology Enugu library.
The national library Enugu
The Enugu State univeity (ESUT) library
Central bank research unit library Enugu.
Non – Government sources:
This researcher also visited the Board of internal revenues Awka and the staff in Awka south local government Area of Anambra State. Later some relevant data for this study were collected.
METHOD OF DATA PRESENTATION
The data were presented in the following forms.
Tabular presentation
Charts – pie chart, bar chart
Percentage.
METHODS OF DATA ANALYSIS
The statistical tool used in analyzing the data are PERCENTAGE and CHI SQUARE (X2)
In employing the chi – square techniques the hypothesis to be tested will be stated as a null hypothesis (Ho) and an alternative hypothesis (Hi)
The value of the formular chi-square
X2 = E (0-E)2
E
Where
X2 = chi-square
O = Observed frequency
E = Expected frequency
0-E = Absolute value of the difference between the frequency.
(O-E)2 = The sum of the deviation square
E and weighted
REFERENCES
Madu E.N. (1997), Research Method for social and Business Students Enugu: Associate press.
Orji J. (1996), Business Research Methodology Enugu Rock Communication.
Central Bank of Nigeria (1996),Annual report and statement of account p 174.
CHAPTER FOUR
4.0 DATA PRESENTATION AND ANALYSIS
4.1 DATA ANALYSIS TECHNIQUES
In this analysis obtained from the field of investigation are presented and analyzed those are data collected through the question meires, administered and also the interviews held with source members of staff in the board of Internal Revenue.
For the analysis, hypothesis earlier formulated will be used as guide and questions relevant to those hypothesis shall be analysis with the available data.
Few other questions shall be analyzed to enable the researcher draw conclusion about certain other important aspect of the research. The answer to the research questions was analyzed using.
The calculation of the percentage and degree of responses (for pie chart) was done based on answered questions. Those that had the same opinion to each types of questions asked, were placed over the total number of respondents and multiplied by one hundred, and three hundred and sixty for percentage and sixty for percentage and degree for response respectively.
Thus we have Pr = åD x 100
TV
Dr = Fo x 360
Tr
Where pr = percentage of response
Fo = frequency of each type of opinion
Fr = total number of respondents
Dr = Degree of response.
IN THE TABLE SHOWS THE RESPONSES OF THE RESPONDENTS WHEN ASKED TO PARTICIPATION IN TAX COLLECTION.
Question: Have you been collecting taxes from individuals?
The responses of those interviewed to the above question are stated over – leaf.
Option
Responses
Percentage
Yes
435
86%
No
75
14%
Total
50
100%
From the above question on whether taxes are being collected from individuals, the responses as indicated on the table above revealed that 86% of the respondents are usually participating in collecting taxes while only 14% of the people said “No” even though they work in the board of internal revenue.
The analysis is represented with a pie chart in 4.2.1 below.
Degree of respondents
Yes 405 x 360
120 1
= 315
No 75 x 360
120 1
= 45
yes
No
4.1.2 EQUALITY OF THE EXPECTED AND ACTUAL RETURNS FROM TAX COLLECTORS
Question: Do you think that money collected by the tax collectors is up to the amount expected of them?
The responses to the above question whether they are of the opinion that the tax collectors are collecting up to the amount expected from them is presented in the table below.
TABLE 4.2 EQUALITY OF THE EXPECTED AND ACTUAL RETURNS FROM TAX COLLECTORS
Option
Responses
Percentage
Yes
50
40%
No
70
60%
Total
120
100%
From the responses, it is believed that 60% of the workers agreed while 60% of the workers said “No”. Since they are staff of the board of internal revenue, their answers are very reliable.
A bar chart is used to illustrate the analysis
70
60
50
40
30
20
10
0 Yes40% No 60%
4.3.1 HINDRANCES TO REVENUE
Question: Apart from the tax evasion what to you consider to be the greatest hindrance to improve revenue by the board of internal revenue?
TABLE 4.3 GREATEST HINDER TO REVENUE COLLECTION
Option
Responses
Percentage
Government incompetence
54 66
30%
Poor collection
66 54
120
70%
100
Total
120
100%
The above responses showed that 30% said that it is due to government incompetence that contributed to the hindrance of revenue collection while 70% are of the opinion that is poor collection machineries supplied by the government the contributed to the hindrance of the revenue collection.
The call illustrated using pied chart
True
False
Degree of response
True = 66 x 360
120 1
= 19800
False = 54 x 360
120 1
= 1620
4.1.4 TREATEMENT OF UNDER ASSESSMENT
Question: when a tax payer is under assessed how is he/she treated.
Respondents were given options out of which they were to choose one.
TABLE 4.4 TREATMENT OF UNDER ASSESSMENT
Option
Responses
Percentage
The difference of the under assessment is paid immediately.
51
90%
The difference is added to the future viability
69
10%
Total
120
100%
From the table, 90% of the respondent agree that the difference of the under assessment will be refunded while 10% of the people agreed that the difference is added to the future liability.
Degree of response
Positively 51 x 360
120 1
= 1500
Negatively 69 x 360
120 1
= 2070
Positively
Negatively
4.1.5 TRETMENT OF TAX AVOIDANCE
Question: do you think that avoidance of tax is a problem of personal income tax
Respondents were given options out of which they were to chose one
Option
Responses
Percentage
Yes
70
80%
No
50
20%
Total
120
100%
From the table, 80% of the respondents accepted that tax avoidance is a problem of the respondents accepted that tax avoidance is a problem of personal income tax while 20% said that it is not a problem.
Used to represent the analysis in table 415.
80
70
60
50
40
30
20
10
0
4.1.6 FRAUD AND DISHONESTY IN TAX ASSESSMENT
Question: Do you think that these differences contribute to fraud and dishonesty in tax collection and assessment.
TABLE FRAUD AND DISHONESTY IN TAX ASSESSMENT.
Option
Responses
Percentage
Impressive not
52
80%
No
68
20%
Total
120
100%
The table shows that 80% of the respondents agree that government lack interest is responsible while 20% agreed that embezzlement on the part of the tax collectors in tax assessment and collection contributed to the fraud and dishonesty in tax assessment and collection.
Degree of response
Positively 52 x 360
120 1
= 156
Negatively 68 x 360
120 1
= 204
Positively
Negatively
4.2 TEST OF HYPOTHESIS
This section deals with the empirical testing of the four hypothesis formulated in chapter one.
HYPOTHESIS ONE
This states that: Ho – Avoidance of tax is not a problem of personal income tax . Hi – Avoidance of tax is a problem of personal income tax.
To test the hypothesis, table will be used, TABLE 4.7
Option
Responses
Percentage
Yes
70
80%
No
50
20%
Total
120
100%
Note: That the numbers in bracket represent expected frequency (S) when expected data for each option is 120
From the table on the expected frequency is 120
2 = 60
The information represented above is arranged to observed frequency (o) Expected frequency (S) Deviation (O-E) Deviation square (O-E)2 and he Deviation squared and weighted (O-S)2 as
S
TABLE 8
Responses
O
E
O-E
(O-S)2
(O-S)2
S
Yes
70
60
10
100
0.16
No
50
60
10
100
0.16
Total
120
0.32
From this table, the calculated Chi-square (X2) is 0.32
To determine the X2 table (Chi-square table)
Degree of freedom (DIF) – (r-i) (k-i)
= (2-1) (2-1) = 1×1
= 1
Let X = level of significance
Assuming 51 level of significant (9560 confidence interval)
X2 = 0.05 at degree of freedom
= 3.841
DECISION RULE
Since form the above workings X2 calculated is greater than the critical value ie 0.32 3.841 the researcher rejected the Null hypothesis (Ho) and accepted the alternative hypothesis (Hi) and therefore concludes that tax avoidance is a problem of personal income tax.
HYPOTHESIS TWO
This states that: Ho – under assessment is not a major hindrance to collection of personal income tax.
Hi – under assessment is a major hindrance to collection of personal income tax.
TO TEST THE HYPOTHESIS
Option
Responses
Percentage
Yes
51
90%
No
69
10%
Total
120
100%
Note: that the number in bracket represent expected frequency (E) If expected data is 120 from the table above, two expected frequency
120
2 = 60
The information represented in table arranged to show observed frequency (O) Expected frequency (S) Deviation (O-E) Deviation square
(O-E)2 and Deviation square and weighed (O-E)2
S
Responses
O
E
O-E
(O-S)2
(O-S)2
S
Yes
51
60
69
81
0.15
No
69
60
9
81
0.15
Total
120
0.30
From the above table, the calculated chi-square (X2) = 0.30,
To determine the chi-square (X2) table
Degree of freedom – D/F = (r-I) (k-I)
(2-1) (2-1)
Let X = level of significance = 3.841
DECISION RULE
Since from the above workings X2 calculated 0.30, 3.841, the researcher rejected the Null hypothesis (Ho) and accepted the alternative hypothesis (Hi) and therefore concludes that under assessment is a major hindrance to collection of personal income tax.
HYPOTHESIS THREE
This states that Ho Tax evasion is not a problem
Hi – States that it is a problem.
To test the hypothesis,
TABLE 4.11
Option
Responses
Percentage
Yes
52
80%
No
68
20%
Total
120
100%
Note that the numbers in bracket represent expected frequency (S) when the expected data is 120 from the table above, expected frequency is
120
= 60
The table above is as stated in table
TABLE 4.12
Responses
O
E
O-E
(O-S)2
(O-S)2
S
Yes
52
60
-8
64
0.13
No
68
60
8
64
0.13
Total
120
0.26
From the table, the calculated chi-square (X2) 0.26
To determine the chi-square table
Degree of freedom D/F = (r-i) (k-i)
= (2-1) (2-1)
Let X = level of significant
Assuming 5% level of significance
X2 = 0.05 at degree of freedom = 3.841
DECISION RULE
Since from the above working X2 calculated is greater than the critical value ie 0.26, 3.841, the researcher rejected the null hypothesis (Ho) and accepted the alternative hypothesis (Hi) and therefore concludes that tax evasion or fraudulent practice is also a problem militating against tax collection.
HYPOTHESIS FOUR: this states that
Ho – fraudulent practice of staff is not a problem of tax collection, while Hi says that fraudulent practice of staff is problem of tax collection
To test hypothesis,
TABLE 4.13
Option
Responses
Percentage
Yes
51
90%
No
69
10%
Total
120
100%
Note that the frequency = 120
2 = 60
When the expected data is 120 numbers is bracket represent the expected frequency
TABLE 4.14
Responses
O
E
O-E
(O-S)2
(O-S)2
S
Yes
51
60
-9
81
0.15
No
69
60
9
81
0.15
Total
120
0.30
From the table, the X2 calculated is 0.30 to determine the X2 table
Degree of freedom – D/F = (r-i) (k-i) – i
= (2-1) (2-1) = 1×1 1
Assuming 5% level of significance
X2 = 0.05 at degree of freedom = 3.841
DECISION RULE
Since from the above working, X2 calculated is greater than the critical value ie 0.30, 3.841, the researcher rejected the null hypothesis (Ho) and accepted the alternative hypothesis (Hi) and therefore concludes that fraudulent practice of staff is also a problem in income tax collection.
REFERENCES
Central Bank of Nigeria (1996), Annual Report and Statement of Account p.174
Madu E.N. (1997), Research Method for social and business students Enugu. Associate press
Orjih J. (1996) Business Research Methodology Enugu: Rock Communication.
Odo, O.M. (1992), Guide to proposal writing in social and Behavioural sciences Enugu Snaap press.
CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 SUMMARY OF FINDINGS
From the study carried out, the following findings were made.
Avoidance of tax is a problem
Under assessment is a major hindrance to personal income tax collection.
Tax evasion or fraudulent practice also contributes to under collection.
Business men dodge going to tax offices for interviews, rather they send their houseboy to represent them thereby hiding vital information required for the computation of their tax.
Property owners do not disclose their property
False information and false addresses are frequently given, thereby making it difficult for the tax officials to locate the actual tax payer.
In the rural areas, the problems are the some. The tax agents appointed by the board of internal revenue to assit in the tax assessment and collection, hide their relations some went as far as embezzling the money collected on behalf of the government.
Based on the hypothesis, it was observed that the tax collectors collected the projected revenue by the government but this does not mean that the problems have been solved rather, it was due to the spirit of serious dedication to duties by the staff of the Board of internal revenue, Anambra State. This is why they were compensated by the former Anambra state commissioner for finance Mr. Toney Madueke in 1993.
Some business man convert private property to business property. In some cases the present property had been transferred their limited liability company.
RECOMMENDATION
In this part of the study, the research recommends some of the way to improve on personal income tax collections especially in Anambra State and Awka South local government Area in particular.
The recommendation are as follows.
The researcher recommends the appointment of agents for effective revision of nominal rolls and distribution of tickets on time.
These agents will be effectively monitored to avoid embezzlement of fund collector.
Government should make use of modern information system (M.F.S) to computerize the properties and their owners through ministry of land and survey form and send them to the board of internal revenue for effective utilization.
Ensure that tax assessment are done early in the year particularly for persons resident in border towns to prevent them from going to other states to pay.
Using the media to educate people about the importance of conformity to the tax requirements and highlighting the consequence of evasion to them.
To re-introduce tax drive operation which has been stopped for quite a long time. This necessary otherwise many will continue that way.
Government should ensure that any person who may want anything from her, produces tax clearance certificate which cannot that the person has paid adequately paid his/her taxes.
Use of business premises and records in assessing persons in different some of the people in the market have never paid taxes but if they are registered, it will increase the revenue projections.
CONCLUSION
Having conducted a thorough research on the problems of personal income tax collection with reference to the board of internal revenue, the researcher observed that there are a lot of problems in the system. These problems, the researcher observed emanated from the tax assessment.
Moreover, the researcher is convinced that there is a lot of loopholes in our tax laws as regards the generous capital allowances and loss relief granted to the tax payer. In view of this, efforts should be made to ensure that any defaulter caught is adequately punished.
BIBIOGRAPHY
Adakar B.P. (1933), Principles of problems of federal finance, London king and sons.
Agyei A.K. (1983), Principles of personal income taxation in Nigeria, Lagos West African Book Publishers ltd.
Ejiofor P. N.O. (1987), management in Nigeria, Onitsha African Republic
Teriba O. (1980), Certificate Economics for West African, London Longman group Ltd.
Cooper J.M. (1981), Key to income tax finance, Act London.
Olorunleke D.A. (1985), “Tax in Nigeria, prospects for Reform” Business Times Vol. 20 No 15.
Ewujowh S. (1989), “Better tax revenue through Awareness”, Business times vol. 16 No 14
Adebayo Adeaeji (1970), Income tax in Nigeria in taxation Economic Development Hutchson Education, ltd.
Odinwa O. (1984), “Tax invision”, Darly Star Vol. 28 No 13
Omoriginwa P.A. (1982)“Constraints in personal income tax administration and assessment in Nigerian Business Time Vol.11 No. 15.
Ajao T. (1984), “Idiagbo’s Assessment to seminars on Tax evasion” Guardian vol. 1 No. 16.
Ewujowo H.S. (1988), “Are you ever taxed? Business Time Vol. No. 17.
Ijebi Chidi (1984), “Potholes in our tax collection system”. Darly Times vol.18 No 12.
LAN BURUS A. (1982), Federal Tax Policy for economic growth and stability.
Ola U. (1985), Income tax law for corporate and incorporated Boidies in Nigeria Ibadan Heinmann Educational books Nigeria.
Finance Law (1962), Eastern Nigeria law No. 5
Asomugha C.N.C and Oyowako F.A. (1961), Swiss Report writing manual ABIC Onitsha.
QUESTIONNAIRE
Directions: Tick Yes or No in the box provided.
1. Are you a staff of the Board of internal Revenue?
( ) Yes or No ( )
2. Do you think that money collected are properly kept?
( ) Yes or No ( )
3. Have you been collecting tax from individuals?
( ) Yes or No ( )
4. Do you think that the tax pay contributes to the amenities provided by the government?
( ) Yes or No ( )
5. Is under assessment a major hindrance to the collection of personal income tax?
( ) Yes or No ( )
6. Do you think that avoidance of tax is a problem of personal income tax?
( ) Yes or No ( )
7. Do you think that tax evasion or fraudulent practice of tax collection is a problem?
( ) Yes or No ( )
8. Do you problem in tax collection method?
( ) Yes or No ( )
9. Does you establishment assess the artisans before imposing tax on them?
( ) Yes or No ( )
10. Does all the artisans pay their taxes as and when due?
( ) Yes or No ( )
11. Have you establishment experienced fraud in the pest years?
( ) Yes or No ( )
12. Who are those responsible for fraud the tax collector Yes ( ) The tax payer No ( )
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