EXAMINATION OF THE EFFECTIVENESS OF TAX IDENTIFICATION NUMBER (TIN) IN COMBATING TAX EVASION IN NIGERIA (A CASE STUDY OF LAGOS STATE INTERNAL REVENUE SERVICE)
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EXAMINATION
OF THE EFFECTIVENESS OF TAX IDENTIFICATION NUMBER (TIN) IN COMBATING TAX
EVASION IN NIGERIA (A CASE STUDY OF LAGOS STATE INTERNAL REVENUE SERVICE)
1.1
Background to the Study
Taxes, and
tax systems, are fundamental components of government revenue generation.
Brautigam (2008) noted that taxes underwrite the capacity of states to carry
out their goals. They form one of the central arenas for the conduct of
state-society relations, and they shape the balance between accumulation and
redistribution that gives states their social character. Thus, taxes build
capacity to provide security, meet basic needs or foster economic development
and they build legitimacy and consent, helping to create consensual,
accountable and representative government. A key component of any tax system is
the manner in which it is administered (Naiyeju, 2010). Bahi and Bird (2008)
states that no tax is better than its administration, so tax administration
matters a lot, and an essential objective of tax administration is to ensure
the maximum possible compliance by taxpayers of all types with their taxation
obligations. Unfortunately, in many countries, tax administration is usually
weak and characterized by extensive evasion, corruption and coercion.
In many cases overall tax levels are low, and
large sectors of the informal economy escape the tax net entirely (Brautigani,
Fjelftand and Moore, 2008). A nation’s tax system is often a reflection of its
communal values and the values of those in power (Ross, 2007). Thus, to create
a system of taxation, a nation must make choices regarding the distribution of
the tax burden and how the taxes collected will be spent. In democratic nations
where the public elects those in charge of establishing the tax system like
Nigeria, these choices reflect the type of community that the public or
government wish to create. Parkin (2006) states that in countries where the
public does not have a significant amount of influence over the system of
taxation, that system may be more of a reflection on the values of those in
power as governments use different kinds of taxes and vary the tax rates. This
is done to distribute the tax burden among individuals or classes of the
population involved in taxable activities, such as businesses, or to redistribute
resources between individuals or classes in the population.
Taxpayer
Identification Number (TIN) is a 10 (ten) digit number that is unique to each
taxpayer in Nigeria, for every individual and corporate organization i.e.
taxable entities that earn a steady income. The Taxpayer Identification Number
(TIN) is a platform which will harmonize taxpayer identification and
registration in Nigeria; it will create closer linkage between the various tax
authorities in Nigeria and, will aid corporation, information sharing and
increase revenue generation accruing to all tiers of the governments (JTB
Bulletin, 2011). Taxpayer Identification Number (TIN) is an initiative of the
Joint Tax Board (JTB) in collaboration with the Federal Inland Revenue Service
(FIRS) and the 36 State Boards of Internal Revenue (SBIR). It is an electronic
system of taxpayers’ registration, which would uniquely identify all taxpayers
and would be available nation wide. The Joint Tax Board (JTB) is provided with
the responsibility (as amended in section 8(q)(d) of the Personal Income Tax
Act and section 8(q) of the Federal Inland Revenue Service establishment Act
2007), to ensure collaboration in the issuance and administration of Taxpayer
Identification Number (TIN) to all taxable entities. It equally creates a
national platform for the registration and allocation of an identification
number to all taxpayers to aid effective tax administration process. However,
it is a well known fact that tax administration in Nigeria has been faced with
issues and challenges ranging from non- identification, registration and
compliance of taxpayers. This inherent problem is also associated with the
implementation of Taxpayer Identification Number (TIN) program in our tax
system.
1.2
Statement of the Problem
One of the
problems of tax administration in the three tiers of government in Nigeria is
the improper identification of tax bases by the three tiers of government. The
inability of the government to properly track all income by individuals and
corporate entities eligible to pay tax has contributed to the decrease in
revenue accruable to the government (Ross, 2004) The constitution of the
Federal Republic of Nigeria 1999 as amended 2010, provides an approved list of
taxes and levies accruable to the three ties of governments respectively, but
there are several court cases in respect of some tax bases often between the
Federal and some State governments for instance, the case between the Federal
and Lagos State government on tax consumption.
Hence, the
need arise to assess the effects of application of the taxpayer identification
number on internally generated revenue and tax payment in Lagos State.
1.3
OBJECTIVE OF THE STUDY.
The main
objective of the study is the examination of the effectiveness of tax
Identification Number in Combating tax evasion in Lagos state, Nigeria.
1.4 RESEARCH
QUESTIONS.
What is the
meaning of Tax Identification Number?
What is tax
evasion?
How
effective has Tax Identification been in Curbing tax evasion
?
What is the
effect of Tax Identification Number on Tax evasion in Nigeria?
1.5
SIGNIFICANT OF THE STUDY.
This study
will help in finding solution to the effect of Tax Identification Number on Tax
evasion in Nigeria.
1.6 SCOPE OF
THE STUDY.
The study focus
on the examination of the effectiveness of Tax Identification Number in
combating tax evasion in Lagos state, Nigeria.
REFERENCES
Baumsgaard,
T. and M. Keen, (2005), “Tax Revenue and (or?) Trade Liberalization”, IMF
Working Paper
Volume 5,
Number 112.
Brautigam,
D. (2008) “Introduction: Taxation and State-Building in Developing Countries”,
in Brautigam, D.,
O.H.
Fjeldstad, and M. Moore Eds) Taxation and State-Building in Developing
Countries: Capacity and
Consent,
Cambridge; Cambridge University Press
Brautigam,
D., OH. Fjeldstad and M. Moore, (Eds) (2008) Taxation and State-Building in
Developing Countries: 6’apacily and Consent, Cambridge; Cambridge University
Press
FGN (2009)
“National Tax Policy for Nigeria” Final Draft submitted to the Federal
Executive Council Federal Republic of Nigeria.
FGN (1993)
Personal Income Tax Decree No.104.
Naiyeju,
J.K. (2010) “Taxation: A Tool for Social Change, Tax Administration in Nigeria
and the Issue of Tax Refund” At a one day symposium As part of Nigeria’s 50th
Anniversary Celebration; Nigerians Speak On Tax By The Chartered Institute of
Taxation of Nigeria
Naiyeju,
J.K. (1996), “Improving the Nigeria tax system from Canadian Experience”,
Wordsmith Printing and Packaging ltd, pages 101-104.
National Tax
Policy (2010) Published by Federal Ministry of Finance.
Ross, M.
(2004), “Does Taxation lead to Representation?”, Minieo, University of
California, Dept of Political Science
Ross, M. L.
(2007) “Does Taxation Lead To Representation?”, UCLA Department of Political
Science, (http://ww.polisci.ulca.edu/faculty/ross/tax Retrieved 2010-0930)
Toby, R.
(1983) The Theory and Practice of Income Tax, Lagos; Macmillan Press Ltd
Toye, J. and
M. Moore (1998), “Taxation, Corruption and Reform” The European Journal of
Development Research, Volume 10, Number 1
Decree No 21
of (1998) LFN. Taxes and Levies (Approved list for Collection), available
in:http.//w.w.w.commonlii.org/ng/legis/num_act/tallfed4 9th April,2014
Decree no 21
of (1998) LFN. Taxes and Levies (Approved List for Collection).
Kogi State
Draft Budget Estimates within (2003-2012), Lokoja, Published by Ministry of
Budget and Planning
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