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EFFECTIVENESS AND EFFICIENCY OF TAX MANAGEMENT IN NIGERIA (A CASE STUDY OF FEDERAL BOARD OF INLAND REVENUE)

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EFFECTIVENESS AND EFFICIENCY OF TAX MANAGEMENT IN NIGERIA (A CASE STUDY OF FEDERAL BOARD OF INLAND REVENUE)


ABSTRACT

The primary purpose of this study is to examine the effectiveness and efficiency of tax management in Nigeria.  It focuses mainly on the Federal Board of Inland Revenue and other related parties namely auditors and corporate tax payers. The project made use of primary data and secondary data. Primary data was generated through the administration of 65 questionnaires and 50 out of the 65 questionnaires were returned. Secondary data was collected from journals and records. Responses from the questionnaires were classified accordingly. Frequency and contingency tables were constructed and the two hypotheses were tested using chi square statistics. The study reveals that there is relationship between effective, efficient tax management and tax fraud.  The significance of the study is that the outcome of the research will serve as a useful guideline to tax administrators, government and also to tax payers, financial analysts, auditors and company executives who pay taxes.

TABLE OF CONTENT

TITLE                                                                                    PAGE

Certification                                                                                      i

Dedication                                                                               ii

Acknowledgement                                                                             iii

Abstract                                                                                  iv              

Table of content                                                             v

CHAPTER ONE

INTRODUCTION

1.1  Background to the study                                                   1

1.2 Statements of the problems                                                        2

1.3 Purpose of the study                                                                   3

1.4 Significance of the study                                                   3

1.5 Research questions                                                            4               

1.6 Hypotheses                                                                       4

1.7 Scope of the study                                                            5

1.8 Limitation on the study                                                     5

1.9 Definition of terms                                                            6

CHAPTER TWO

LITERATURE REVIEW

2.1 History and functions of Federal Board of Inland Revenue         8

2.2 Constitution of the board                                                  9

2.3 Power and duties of FBIR                                                 10

2.4 Federal Inland Revenue Department                                 11

2.5 Functions of Tax Management                                          14

2.6  Sources of taxation in Nigeria                                           28

2.7  Other Forms Of Tax                                                          29

2.8 Principles of a good tax system                                         32

2.9 Objective of an efficient tax administration                       33

2.10 Problems encountered in the management of tax            33

CHAPTER THREE

RESEARCH METHODOLOGY AND DESIGN

3.1 Introduction                                                                      35

3.2. Restatement of research questions                                             36

3.3 Restatement of research hypothesis                                  37

3.4 The study population                                                                 38

3.5 Sampling technique and size                                             38

3.6 Research instrument                                                                   39

3.7 Method of data collection                                                  40

3.8 Method of data analysis                                                    41

CHAPTER FOUR

PRESENTATION AND ANALYSIS OF DATA

4.1     Introduction                                                                            42

4.2     Analysis of data                                                             42

4.3     Test of hypotheses                                                                  63

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1     Introduction                                                                            72

5.2     Summary                                                                       72

5.3     Conclusion                                                                     73

5.4     Recommendations                                                                   74

REFERENCES                                                                      75

APENDIX                                                                               77

CHAPTER ONE

INTRODUCTION

1.2  BACKGROUND TO THE STUDY

Ta x is a compulsory payment made on different bases and rates by citizens

(Corporate bodies and individual s) to government, non negotiably but obligatorily.

This payment is not on the basis of direct exchange for the payment for goods and services. It is non negotiable because none of the citizens has any direct contribution to the composition of the bases and rates of payment. Government only classifies the items on which the tax is t o be paid, and the category of citizens that should be subjected to the payment (Ariwodola, 2005). The decision is however, based on the cost of the projects or programmesgovernment intends to execute, which is the principal determinant of the budget size. Government also judges the basis, rates, the category of citizens, and the time period to pay the t ax, on the direction of the economy desired and government’s perception of t he standard ofliving of the citizens. This is why tax is defined as a tool for government revenue and fiscal policy tool for directing the economy. Taxes are not paid directly on the basis of exchange of contract like any other payment except subsidies paid ny the government. It is paid by any citizen whether or not the citizen benefit from the government projects or programmes financed by the taxes (Rosen 2004).

Consequently, the usefulness (effectiveness and/or efficiency) of taxes can be measured by several parameters, some which are its revenue generating capacity and its impact on the consumption and savings patterns in the economy. Even if the totality of tax systems cannot be comprehensively measured, the various types of tax can be subjected to this measurement in Nigeria, there are at least three types of taxes that are commonly applied to qualifying citizens and items. These are the personal income tax, the company income tax, and the value added tax. The assessment of these forms of tax independently or otherwise becomes more necessary given the multiplicity of taxes in Nigeria, together with the problems of tax evasion and avoidance. It is against thisbackground that this study is initiated.

1.2STATEMENT OF THE PROBLEMS                                         

1.     Many people are not aware of the existence and importance of the FIRS in Nigeria. The research work intends to identify the various taxes being managed by the FIRS and to see how the body is able to accomplish its objectives through emphasis on human resources development, staff motivations, professionalism, dedication and loyalty, accountability and transparency, excellent human relations, information and effective communication.

2.     Question klike “what type of tax do we adopt and what purpose”, “what benefit  are we to expect from it” the identification of this problem will help to recognize causes, understand how the situation has come about and what the tax authority should do for deciding alternative course of action.
1.3 PURPOSE OF THE STUDY

The primary purpose of this study is to examine the effectiveness and efficiency of tax management in Nigeria.Other purposes however includes the following:

1.     To appraise the problems, achievement and the impact of tax revenue yield for an individual and the government.

2.     To identify problems experienced which has led to low revenue from tax

3.     To identify ways to these problems and

4.     To identify new polices and strategies adopted by the government which lead to increased revenue generation through taxes.

1.4 SIGNIFICANCE OF THE STUDY

1.     The significance of the study is that the outcome of the research will serve as a useful guideline to tax administrators and the government.

2.     The research work will also be of immense benefit to tax payers, financial analysts, auditors and company executives who pay taxes.

3.     The research also tends to identify problems experiences by tax payers which have led to low revenue from tax and provide possible solutions through polices and strategies that will be adopted by the government in order to increase revene generation through taxes.

1.5 RESEARCH QUESTIONS

The following research questions will guide the study:

1.     What is the system in use for the collection of tax revenue by tax revenue authorities

2.     Is there any form of receipt issued to the tax payer after payment

3.     Are adequate records and books kept for the purpose of tax computation?

4.     Can tax fraud be committed by the officer or the board in collusion with tax payer?

5.     Is there need for enlightenment programme to be embarked upon by the revenue authorities to make tax payers aware of their duties to pay regularly and promptly?

1.6 HYPOTHESES

The following hypotheses are tested in the course of the study:

Hypothesis one

H0: There is no significant relationship between filling of tax reforms, payment of tax and effectiveness, efficiency of tax management.

 H1:  There is significant relationship between filling of tax returns, payment of tax and effectiveness, efficiency of tax management.

Hypothesis two

H0: There is no significant relationship between effective, efficient tax management and tax fraud

H1:  There is significant relationship between effective, efficient tax management and tax fraud

1.7SCOPE OF THE STUDY

The scope of this reaseach work covers the effectiveness and efficiency of tax mananement in Nigeruia. It also cover the administration and tax management system in Nigeria. For the purpose of this study, federal board of inland revenue is used for the generalization of this study.

1.8 LIMITATION ON THE STUDY

The limitations on the study include the following:

1.     Revenue officers were reluctant to giveneeded information when spoken to; some even remain anonymous complaining that the research work and research topic is a sensitive issue.

2.     Income earners and tax payers were reluctant a giving information as some of them suspected us to be agent to the government. Hence attitude of these respondents to some extent affected the information collection procedure.

3.     Restriction on the subject matter tax management in Nigeria an area with title and in adequate literature in the form of textbooks and articles.

4.     Also data statistical compilation in the country is nothing to write home about.

1.9 DEFINITION OF TERMS

In the write up are some terms used which are known to only the economist students therefore, there is need to explain such terms which include the following:

TAX:A tax is a compulsory levy on economic and commodities by the government of a particular country through its authorized agencies for the purpose of earning revenue, which shall be used to meet commitment towards satisfying the populace.

COMPULSORY LEVY

This means that all the citizens of the country are bound to pay tax imposed on them by the state.

REVENUE

Revenue to individual is benefits within an accounting period e.g. wages, rents and so on which taxes are levied by the government of that state where those individual resides.

Generally revenue can be defined as the amount of money raised by a state from various sources in order to enable it carry out the various functions it is called for.

FEES

A fee like a tax is a compulsory contribution but unlike tax, it is charged for a specific service. There are different types like court fees, entrance fees. When someone pays a fee he gets service in return.

TAX EFFECT

This refers to the resultant responses and changes in the economy after imposition on collection of a particular tax.

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