COMPANY INCOME TAX ADMINISTRATION IN NIGERIA, PROBLEM AND SOLUTION (A CASE STUDY OF FEDERAL INLAND REVENUE SERVICE, FIRS LAGOS STATE, IKEJA BRANCH)
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COMPANY INCOME TAX
ADMINISTRATION IN NIGERIA, PROBLEM AND SOLUTION (A CASE STUDY OF FEDERAL INLAND
REVENUE SERVICE, FIRS LAGOS STATE, IKEJA BRANCH)
ABSTRACT
Government of today has a lot of ways of generating income or
revenue to facilitate or finance its project, which may be difficult for
individuals or corporate bodies to provide .Government income, is incomplete
without sourcing from its citizen, companies and residual in its geographical
location. Taxation may be defined as a compulsory levy imposed by the
government on individual, corporate bodies, government parastatals; goods and
services to enable government provide essential services to the citizens and
also as instrument to stabilize economy.
The aim of this research project is to examine Company income
tax Administration in Nigeria problem and solution using (Federal Inland
Revenue Services as a case study).
In conducting this research work, the researcher used both
primary and secondary data to gather relevant data. Questionnaire (both opened
and closed ended questions) were administered to Federal Inland Revenue Service
in Lagos State to source for relevant information that can used to provide
solution to the problem under study. Interview was also used by the researcher
where necessary. Secondary data used for this research were gathered from
textbook, journals, handbooks and internet. Data collected was analyzed using
frequency, simple percentage and Chi-square to test the hypothesis. The
empirical result of this research project reveals that there is no effective
and good operating tax policy in company income tax administration in Nigeria
and that Taxes collected from companies are not used for economic development
of the nation (Nigeria).
TABLE OF CONTENTS
CHAPTER ONE:
INTRODUCTION
1.1 Background to
the Study
1.2 Statement of
the Problem
1.3 Objective of
the Study
1.4 Limitation of
Study
1.5 Statement of
Research questions
1.6 Research
Hypothesis
1.7 Significance of
the Study
1.8 Scope of the
Study
1.9 Definition of
Terms
References
CHAPTER TWO:
LITERATURE REVIEW
2.1 Definition of Company Income Tax
2.2 Administration of Company Income Tax
2.3 Basis of Assessment of Company Income Tax Liability
2.4 Chargeable Income and Income exempted from Tax
2.5 Tax relieves and allowances granted to Companies
2.6 Allowable and Disallowable Expenses
2~7 Companies' Profit exempted from Taxation
2.8·' Problems of Administration of Company Income Tax
2.9 Effects of the problems on Taxation in Nigeria
2.10 Strategies employed by Companies to escape Tax
References
CHAPTER FOUR:
DATA PRESENTATION AND DISCUSSION OF FINDINGS
4.1 Data Presentation
4.2 Discussion of Findings
4.3 Method of Validity and Reliability Test
CHAPTER FIVE:
SUMMARY OF FINDING, RECOMMENDATION AND CONCLUSION
5.1 Summary of Finding
5.2 Conclusion
5.3 Recommendations
Bibliography
Appendix 1
Appendix 2
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE
STUDY
It is not an overstatement that taxation plays a prominent
role in the economy of any nation as one of the major means of generating
revenue. In the past government derived more revenue from Company Income tax
compared to any other sources of revenue but now reverse is the case and this
is due to the ineffectiveness of the administrative machinery of Company Income
Tax .i.e., Federal Inland Revenue Service (FIRS), the government policy and the
conduct of the tax payers.
It was also observed by the Federal Inland Revenue Services
(FIRS) that many Companies are in the habit of evading company income tax
payment and this attitude has slowed down the growth of economy of the nation.
However, the various taxes collected by the government
particularly the company income tax are used to provide social amenities like
water, electricity, good road network, education, health care services and many
more which in tum promote the standard of living of the citizens and residents
of a nation. Without prompt payment of tax by the companies and other tax
payers, the government may not be to fully play its expected roles to the
citizens. In many of the developed and underdeveloped countries taxation has
been the major source of revenue to the government unlike Nigeria where all
attention is being concentrated on crude oil as the major source of income to
the government.
Furthermore, taxation is a yardstick by which government
regulates production and consumption of goods and this role attests to how
taxation contributes to the growth ofa national economy but the reverse is the
case in Nigeria system. The partial neglect of this source has turned the
economy of the country into mono-economy and the revenue from this source can
also be regarded to as mono-revenue.
In a tax system, the company income tax is a form of direct
tax which the taxpayer themselves bear the burden. This is the reason why some
companies try to evade the payment of such taxes compare to the indirect form
of taxes in which the burden is transferable. This means that the finalusers of
such goods bear the burden of such taxes indirectly.
Hence, many companies avoid tax or completely evade tax
thereby reducing the total revenue of the government.
1.2 STATEMENT OF THE
PROBLEM
In order for government to provide or perform its function to
the society, there must be some means of imposing levy on individual and
enthies: profit and income, and one of this is throughcompany income tax. In
view of these, many business, government and Federal Inland Revenue Service
have contributed to the problem being faced .by this source of revenue and some
of those problems are:
1. There
is no effective and good operating tax policy of company income tax
2. There
is no thorough inspection of companies on the relief to be claimed by the
Federal Inland Revenue Service.
3. There
is no effective 'Communication network between the Federal Inland Revenue
Service and Companies.
4. Government does
not show full concern to company income tax.
5. There
is no severe punishment and fine for company that fails to register, make
returns or evade tax.
6. Inconsistent
government policy on the administration of company income tax.
1.3 OBJECTIVE OF THE
STUDY
The objective of the study is to determine the problem of
company income tax administration in Nigeria and the proposed solution or way
out to such problem.
1.4 LIMITATIONS OF
STUDY
During the course of carrying out this research work,
researchers were faced with financial constraint, and this is why it was not
possible to travel to other states of the federation where offices of Federal
Inland Revenue Service are located to collect some other needed or necessary
information.
So, the findings were only restricted to the Federal Inland
Revenue Service (FIRS) Ikeja branch of Lagos State.
Also, there was problem of restricted information, because
some of the staff of the Federal Inland Revenue Service (FIRS), Ikeja was
reluctant to fill the questionnaire administered to them while some refused to
fill the questionnaire at all
1.5 STATEMENT OF
RESEARCH QUESTION
The research work will attempt to answer the following
questions:
1. Does the government show full and adequate
concern to company income tax as a source of revenue?
2. Is the federal
Inland Revenue Service (FIRS) thoroughly investigate the reliefs claiming by
the companies?
3. Is there any
form of training and seminar for the personnel of Federal Inland Revenue
Service?
4. Is the Federal
Inland Revenue Service educating and informing the companies at the appropriate
time?
5. Is there any
good communication contact between the Federal Inland Revenue Service and
Corporate Affairs Commission (CAC)?
6. Does the
Federal Inland Revenue Service and the government work hand in hands to ensure
that new companies and unregistered ones are registered?
7. Is there any
penalty or fine for any company that failed to be registered, make returns or
evade tax?
8. .Does the
Federal Inland Revenue Service ensure prompt collection of tax as at when due?
1.6 RESEARCH
HYPOTHESIS
Hypothesis I
H0 (Null hypothesis): There is no effective and good
operating tax policy of company Income Tax administration in Nigeria.
Hi (Alternative Hypothesis): There is an effective and good
operating tax policy of company income tax administration in Nigeria.
Hypothesis II
Ho(Null hypothesis): Taxes collected from companies are not
used for economic development of the nation.
H1 (Alterative Hypothesis): Taxes collected from companies
are used for economic development of the nation.
Hypothesis III
Ho(Null hypothesis): FIRS and government does not work hand
in hands to ensure that new companies and unregistered ones are dully
registered with FIRS for tax purpose.
H (Alternative Hypothesis): FIRS and government work hand in
hands to ensure that new companies and unregistered ones are dully registered
with FIRS for tax purpose.
1. 7 SIGNIFICANCE OF THE STUDY
Since this study shed light on the administration of company
income tax in Nigeria, the author humbly believes that the study will be of
immense benefits to the government and administrative machinery (Federal Inland
Revenue Service) in reforming the tax policy.
It would also enable the various companies who are paying
company income tax to get good orientation on the importance of taxation and
thereby stop evading tax.
1.8 SCOPE OF THE
STUDY
This study looks at the administration of company income tax
in Nigeria. In the light of this, the study will focus on companies within
Lagos State. The companies and individual to be covered in this research work
include:
i. Tax Authority
(Federal Inland Revenue Service Ikeja Office, Lagos)
ii. Tax payers
(Companies)
iii. Tax Consultants
1.9 DEFINITION OF
TERMS
Tax: It can be defined as money or charged compulsory levied
or imposed by a public authority on the income of individuals and companies as
stipulated by the government decrees, acts, or case law irrespective of the
exact amount of service rendered to payer in return.
Taxation: This is the process or method of calculating and
assessing an individual and companies as to the amount to be paid as tax
liability.
Administration: This is the part of management which is
concerned with the installation and carrying out the procedure by which, the
programme is laid down and progress of activities is regulated and checked
against plan.
Objective: Objective is an offspring of the mission statement
of an organization which entails the breakdown of attainable goals a firm seek
to attain and constitute the principal reason for a finn's existence.
Direct Tax: This is a form of tax levied by government on the
income and revenue of individuals and companies in which the burden is not
transferable. Examples are Personal income tax, Pool betting tax, Capital gain
tax, Companies' income tax, Education tax, Withholding tax and Petroleum profit
tax.
Indirect Tax: This is a form of tax imposed by the government
on the value of goods and services. The incidence of payment falls on the tax
payer while the real burden is shifted to the final consumer. Indirect taxes
are only payable on consumption e.g. Value Added Tax (VAT), Import and Export
duties, Custom duties, e.t.c,
Tax Evasion: This is a deliberate act on the part of the
taxpayer not to pay tax due. It is a criminal act under the tax law because it
is illegal.
Tax Avoidance: This refers to the legal means by which the
taxpayers minimized their tax liabilities by taking the advantages of the
loopholes in tax laws and regulation.
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