EXAMINATION OF THE EFFECTIVENESS OF VOLUNTARY ASSETS AND INCOME DECLARATION SCHEME (VAIDS) IN CURBING TAX EVASION IN NIGERIA (A CASE STUDY OF SELECT RESIDENTS IN OTA, OGUN STATE)
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EXAMINATION OF THE EFFECTIVENESS OF
VOLUNTARY ASSETS AND INCOME DECLARATION SCHEME (VAIDS) IN CURBING TAX EVASION
IN NIGERIA (A CASE STUDY OF SELECT RESIDENTS IN OTA, OGUN STATE)
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The issue of
tax evasion and avoidance have generated a considerable interest and concern to
the governments and finance experts recently; this is because of their
socio-economic implications and the effects on government revenues and fiscal
viability in the long run. Asada (1997) in Bassey (2014) expressed that the
issue of personal tax in Nigeria is being handled with levity hand and it is
very disappointing and problematic of all the taxes in the tax system today. In
spite of the fact that tax is now being considered as a huge source of
generating revenue for government in the place of dwindling oil prices in the
international market. A well organized society, say a country or state
government owes some fundamental obligations to the people it governs, these
obligations are in the forms of provisions of basic social amenities such as
good roads, health, security of lives and properties, shelter, good water and
others, the citizens on their own part are expected by the government to make
equitable contribution in the form of tax. It is against these background that
government levy taxes on its citizenry to pursue the above stated objectives it
owns to the people.
The claim
above suggests that tax payers over the years have demonstrated unpatriotic act
through such means as concealment of profit and inference with revenue agents
through corrupt practices, therefore, personal income taxation in Nigeria
requires proper handling of the taxation system to ensure that everyone pays
his/her tax as at when due. Taxes have period because there is no choice
(consider the pay as- you-earn PAYE), due to the requirements of tax clearance
certificates and, in most cases because of coercion by the government (use of
task force and personnel), as a condition for recurring public sector benefits
or social services rendered by the government even before attempting to contest
elections, therefore, the desires to uplift one's society is the first desire
of every patriotic citizen, the patristic citizen, however, pay taxes because
it is a civic responsibility and for others because they want the government to
succeed. This is perhaps due to the fact that the pace of development and
growth in any economy is closely tie to taxes compliance rate. Tax payment is a
civic responsibility everyone must perform to ensure that government finance or
run public utilities as well as perform other social responsibilities. Taxes,
thus constitutes the principal sources of government revenue, an effective tax
system ought to satisfy the twin purpose of raising maximum revenue and at the
same time encourage production. In an effectively managed tax system, the two
purposes are not inconceivable provided the beneficial effect of government
expenditure and incentives for production exceed the unfavourable effect of
taxation. Adenkrah (2011) posited that an effective tax system aside from
maximizing revenue for development, ought, if well structured and managed elicit
a feeling of common purpose, joint responsibility or obligation amongst the
taxable persons in a state or a country.
However, it
has been observed that one of the greatest challenges facing the Nigerian tax
system is the problem of tax evasion and avoidance, while tax evasions is the
unlawful and deliberate violation of the law in order to escape payment of tax
which is unquestionably imposed by law of the tax jurisdictions, tax avoidance
is the native means by which the taxpayer seeks to reduce or revenue altogether
his ability to tax without actually breaking the law. This “Twin devils' have
created a great gulf between actual and potential revenue, the government has
for the umpteenth time complained to the widespread incidence of tax avoidance
and evasion in the country as companies and other taxable persons employ
various tax avoidance devices to escape or minimize their taxes or deliberately
employ fraudulent ways and means of evading tax altogether sometimes with the
active connivance of the tax officials as pointed out by Likita (2013), since
tax is a principal sources of government revenue, if persons are able to escape
by legal or illegal means the tax to which they should logical be subject under
the general scope of the tax, the theoretical equity of the tax to a long
measure is lost. Tax evasion and avoidance is undoubtedly denying the
government the tax revenue, which result in huge difference between potential
and actual tax collection, the major challenge borders on the collection of taxes
particularly from the government officials who always believe they are above
the law, and also to the businessmen, contractors, professional practitioners
like lawyers, Doctors, Accountants, Architects down to traders. Hence, the
poser raise is on the efficiency and effectives of Voluntary Assets and Income
Declaration Scheme in ensuring effective and appropriate tax payment in
Nigeria.
1.2 Statement of the Problem
Nigeria due
to her natural endowment in area of crude oil is generally regarded as an “oil
rich” nation and everything seems to revolve around it, with national budgets
inclusive. This image of being oil rich has made those at the helm of affairs
focus on sharing the little national cake rather than focusing on how to bake a
bigger one. This result of this is that the tax system has not been working
well which makes oil revenue to be the only source of revenue for the
government. Take for example Nigeria is produced just over 2 Mbpd as against
the United States of America’s over 9 Mbpd. With this, the US do not herself to
be an “oil rich” country – this is because, the economy runs on tax revenue,
not oil.
In the year
2016, South Africa total tax revenue was about N27 trillion as compared to that
of Nigeria which was about N6 trillion total tax collected by all levels of
government. Altogether with oil revenue, Nigeria generates about N10 trillion
(circa $33B). Even without corruption, this amount is barely enough to fund
transportation alone (roads, rail, water and air travel infrastructure and
maintenance). So, more than anything else, the problem is that not many of us
pay the right amount of tax as required by law. Government upon learning this,
they resolve to curb the issue of tax evasion and avoidance. It therefore, came
up with what is called Voluntary Assets and Income Declaration Scheme.
1.3 Research Objectives
The general
objective or main objective of this study is to examine the effectiveness of
Voluntary Assets and Income Declaration Scheme (VAIDS) in curbing tax evasion
in Nigeria by using some selected residents in Ota, Ogun State, Nigeria, as a
case study. The specific objectives are:
i) To investigate how Voluntary
Assets and Income Declaration Scheme (VAIDS) has contributed to effective tax
collection in Nigeria
ii) To examine the reasons for the
establishment of Voluntary Assets and Income Declaration Scheme (VAIDS) in
Nigeria
iii) To identify the benefits of
Voluntary Assets and Income Declaration Scheme (VAIDS) to Nigerian government
1.4 Research Questions
The
following are some of the questions which this study intends to answer:
i) In what ways have Voluntary
Assets and Income Declaration Scheme (VAIDS) has contributed to effective tax
collection in Nigeria?
ii) What are the reasons for the
establishment of Voluntary Assets and Income Declaration Scheme (VAIDS) in
Nigeria?
iii) What are the benefits of
Voluntary Assets and Income Declaration Scheme (VAIDS) to Nigerian government?
1.5
Hypothesis of the Study
Ho: VAIDS
has not been effective in Curbing Tax Evasion in Nigeria
Hi: VAIDS
has been effective in Curbing Tax Evasion in Nigeria
1.6 Significance of the Study
It is vital
to know that this research work will generally find solution to the existing
and anticipated problem tax evasion in Ogun state and Nigeria at large. It will
help the Ogun state government in collecting tax with ease and the taxpayer
benefiting from it through provision of social facilities and infrastructures
for the state. It will enhance the taxpayers’ understanding that tax payment is
a civil duty and is being paid by a patriotic citizen of the state.
1.7 Scope of the Study
This study is
designed to examine the effectiveness of Voluntary Assets and Income
Declaration Scheme (VAIDS) in curbing tax evasion in Nigeria by using some
selected residents in Ota, Ogun State, Nigeria, as a case study. The study will
therefore be carried out among the residents of Ota, Ogun State, Nigeria.
1.8 Limitation of the Study
The
limitations in this study are the difficulties encountered during the research
work. In some cases, the researcher was mistaken for agent gathering
information for one panel of inquiry or the other. Also, some members of staff
of internal revenue of Ogun State that saw the need for this research and
attended to this researcher’s data need do not have access to tax payers’ files
and records. The issue of tax causes a lot of friction and reaction from the
taxpayer, therefore many of them turn down being interviewed or filling of
questionnaire. Some that responded were not educated; therefore there is a need
for translation and interpreting of questionnaire to their native dialect
before they could respond.
1.9 Definition of Terms
The
following terms were used in the course of this study:
Tax evasion:
is the use of illegal means to avoid paying your taxes. Tax evasion occurs when
the taxpayer either evades assessment or evades payment.
Tax
compliance: means making tax payments and producing and submitting information
to the tax authorities on time and in the required formats.
Voluntary
Assets and Income Declaration Scheme: an initiative designed to encourage
voluntary disclosure of previously undisclosed assets and income for the
purpose of payment of all outstanding tax liabilities.
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