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 of a 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 final users 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:
There is no effective and good operating
tax policy of company income tax
There is no thorough inspection of
companies on the relief to be claimed by the Federal Inland Revenue Service.
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.
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:
Does the government show full and adequate
concern to company income tax as a source of revenue?
Is the federal Inland Revenue Service
(FIRS) thoroughly investigate the reliefs claiming by the companies?
Is there any form of training and seminar
for the personnel of Federal Inland Revenue Service?
Is the Federal Inland Revenue Service
educating and informing the companies at the appropriate time?
Is there any good communication contact
between the Federal Inland Revenue Service and Corporate Affairs Commission
(CAC)?
Does the Federal Inland Revenue Service
and the government work hand in hands to ensure that new companies and
unregistered ones are registered?
Is there any penalty or fine for any
company that failed to be registered, make returns or evade tax?
.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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