EFFECT OF TAX ADMINISTRATION ON REVENUE GENERATION IN ENUGU STATE (A Case Study Of The State Board Of Internal Revenue Enugu State)
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EFFECT OF TAX ADMINISTRATION ON
REVENUE GENERATION IN ENUGU STATE (A Case Study Of The State Board Of Internal
Revenue Enugu State)
ABSTRACT
The level of
revenue generated in the state has been in a declining form due to poor
administration and collections of taxes and lack of proper return of accounts.
These are the negative effects that affect government revenue generation which
are targeted to meet her basic functions like provision of basic amenities for
her citizenry in the state. The aim of this research study is to evaluate the
effect of tax administration on revenue generation to the Enugu state
government. The research design adopted in this study was survey research
method. Primary and secondary sources of data were used in collecting information
which was analyzed using simple percentages and hypothesis tested using chi –
square statistical method at 0.05 level of significant for validity and to make
decisions. Findings show that there was rampant incidence of tax evasion and
avoidance in the state, and the tax administration in Enugu state is
inadequate, not effective and not efficiently managed thus: inadequate staff
and facilities also hinder tax administration and collection. The researcher,
in the final analysis drew a lasting conclusion, some of which are:- the apathy
of Enugu state people towards payment of tax could be reduced by involving them
in the decision making of tax administration, collection and utilization of the
tax revenue. The environment should be made better by both the government and
its agencies. The staff of the SBIR Enugu should be well remunerated and ensure
adequate administration of tax laws in accordance with the laid down rules and
regulations.
TABLE OF
CONTENT
Cover Page
Title Page
Approval
Page
Dedication
Acknowledgement
Abstract
Table Of
Content
CHAPTER ONE:
1.0
INTRODUCTION
1.1
Background Of The Study
1.2
Statement Of The Problem
1.3
Objective Of The Study
1.4 Research
Question
1.5
Statement Of Hypothesis
1.6
Significance Of The Study
1.7 Scope Of
The Study
1.8
Limitation Of The Study
1.9
Definition Of Terms
CHAPTER TWO:
2.0 REVIEW
OF RELATED LITERATURE
2.1 General
Overview About The Study
2.2 Origin
Of Taxation
2.3 Tax
Administration
2.4 Purpose
Of Taxation
2.5
Qualities Of A Good Tax System
2.6
Classification Of Taxes
2.7
Enugustate Board Of Internal Revenue
2.8 The
Revenue Generation In Enugu Through Tax
2.9
Inadequate Staff And Facilities Hinder Tax Generated Revenue In Enugu State
2.10
Incidences Of Tax Evasion And Avoidance In Enugu State
2.11 Efforts
Made By Enugu State Board Of Internal Revenue To Improve Revenue Generation
Reference
CHAPTER
THREE:
3.0 RESEARCH
METHODOLOGY
3.1
Introduction
3.2 Research
Design
3.3 Area Of
The Study
3.4
Population Of The Study
3.5 Sources
Of Data Collection
3.6
Determination Of Sample Size
3.7 Method
Of Data Analysis
3.8 Validity
Test
3.9
Reliability Test
Reference
CHAPTER
FOUR:
4.0
PRESENTATION, INTERPRETATION AND ANALYSIS OF DATE
4.1 Data
Presentation
4.2 Data
Analysis
4.3 Test Of
Hypothesis
CHAPTER
FIVE:
5.0 SUMMARY
OF FINDINGS , CONCLUSION AND RECOMMENDATION
5.1 Summary
Of Findings
5.2
Conclusion
5.3
Recommendation
Bibliography
Appendices
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF STUDY
In all
generation, the problems of personal income tax generation and administration
continues to surface in one form or another in virtually every society,
especially in this part of the world. It is important to point out that the
federal government has taken adequate steps in effective tax administration.
This failure
on the part of the federal government is responsible for poor financial
positions of both the state and local government. Besides, this inadequate
planning and absolute laws governing taxation, evaluation and collection is
characterized by chaos.
This chaotic
nature of the system can be appreciated by political influence or interferences
in the process of taxation during the civilian administration in the country
which gave rise to untrained and inexperienced personal being entrusted with
the work of collection and administration of personal income tax.
The
important of these issues to tax administration in the developing countries
like. Nigeria, can be seen from the following extract from tax
administration
in under developed countries. The tax administration finds himself working with
a staff which is inefficient in experienced, and poorly paid.
BOARD OF
INTERNAL REVENUE ENUGU
The board of
internal revenue Enugu was established to administer income tax in Enugu state
just as there are likely to states of the federation.
Income tax
was first introduced in Nigeria in 1904 by late Lord Lugard. The introduction
of Native Revenue ordinance of 1927 was most difficult in the Eastern areas of
the country, due mainly to absence of recognized central Authority Resistance
to this form of direct taxation in such that it result to riots notably in
calabar, Owerri and the famous, Aba women Riot of 1929 which was so severe that
it attracted a probe. Beside, the Native Revenue ordinance were also Native
direct taxation ordinance for the colony and the Native income tax ordinance.
These
ordinance were late modified and incorporated into the Direct taxation
ordinance No 29 of 1940, cap 54 and the income tax ordinance No 29 of 1943
respectively.
The direct
taxation ordinance 1940 empowered native authorities to tax Africans in their
areas of jurisdiction while the income tax ordinance 1943
was for the
taxation of non-Africans in companies. The two ordinances were the foundation
of our modern taxation which necessitated establishment of board of internal
revenue in each of the states of the federation which Enugu Board of internal
Revenue is one of them.
ADMINISTRATIVE
STUCTURE OF THE BOARD OF INTERNAL REVENUE IN ENUGU STATE
The chain of
administration in the state board of internal revenue
SECREATARY
TO THE BOARD BOARD OF INTERNAL REVENUE
THE
EXECUTIVE CHAIRMAN
SPECIAL
ASSESSMENT UNIT LEGAL UNIT INFORMATION UNIT
ADMINISTRATION
PRS DEPT ASSEMBLY COLLECTION INSPECTORATE FINANCE
& SUPPLY
DEPT PLANNING RESEARCH % STATISTICS DEPT DEPT DEPT ACCT DEPT
DATA BASE
INVESTIGATION UNIT
ACHIVING
UNIT
COLLATION
UNIT PAYE
TAX CGT & TAX AUDIT UNIT
SECTION
OTHER TAX
CASH
PAY ROLL
OPEN
REGISTRY ASSEMENT MOTOR LICENSING STROG ROOM
CONFIDENCIAL
REGISTRY AUTHORITIES AUTHORITIES INTERNAL AUDIT
STORES OTHER
CHARGES
TRAINNING
RECONCILIATION
APD
The zonal
tax Authority which Enugu North Board of internal Revenue belongs to the Enugu
Zonal Authority. The highest authority in the Area is the Assessment Authority.
THE
ASSESSMENT AUTHORITY
The
assessment officer is the head of the board of internal Revenue in the area. He
is appointed by the Board of internal Revenue, Enugu State. He is responsible
for the assessment of tax and its collection and as well as accounting for it.
He carries out the duty with the help of collection, Assessment and
Administrative officers. He is directly in change of assessment and
administration. He has the power to issue notice to tax payers to deliver
statement of incomes or to finish further returns.
Where there
is suspected doubts as to geniuses of returns, he might ask the tax payer to
produce before assessment Authority books and documents of the tax payer
covered by pay as you earn (PAYE).
The
Assessment Authority could ask an employer to prepare and deliver a return on
his employees. After assessment and responsibility of collection of this
assessed income rests on the tax collector. He makes use of tax agents, tax
drivers or the workers of the board and other processes which may be applied
from time to time to generate tax in the area.
ADMINISTRATIVE
FRAMEWORK
The
structural administration of personal income tax is rested in the joint tax
Board (JTB) under the income tax management Act 1961.
The board is
made up the chairman who is appointed by federal Board of internal Revenue
(FBIR) which is the federal body. The personal must be experienced in tax
matters. Also, a secretary and a legal adviser are appointed, some of their
functions are:
To exercise
the powers or duties conferred upon them by any express provision of the Act,
and any other power and duties arising under the Act which may be agreed by the
board.
To exercise
the powers and duties conferred on them by any enactment of the Federal
Government imposing tax on the income or properties of companies or which may
be agreed by the Federal Board of internal Revenue.
STATE
INTERNAL REVENUE BOARD
The
administration of the income tax in each states its collection and
administration is vested on the state Board of internal Revenue.
It is headed
by a chairman with the Director of Revenue as his Deputy Chairman and the chief
executive of the board. Other members of the board
include
representative of specified ministries and from field economics, accountancy
and legal professions.
Their major
function includes, to see the retrieval of the revenue collected by various tax
officers in all local government head quarters and forward it to state
government for disbursement.
INSPECTOR OF
TAXES
Inspector of
taxes are controlled by the Board. They have variety of duties covering all
aspects of taxation some of their duties are:
a. Receipt
and examination of tax returns and other information from tax payers.
b. Preparing
and issuance of assessment based on the returns on which tax is payable.
c. They also
employ the best of judgment guesses, if returns were not received or there is
evidence of false information.
TAX
COLLECTORS
They are
concerned with the service of
i. Returns
of income forms
ii. Notice
of assessment
iii.
Summonses and affidavits and other sources of information.
1.2
STATEMENT OF THE PROBLEMS
It is true
that problem of tax collection and administration is universal but the third
world countries of which Nigeria is one, seem to be more plagued and inflicted
both in weight and magnitude than the developed nations of the world.
The research
work primarily involves identifying the problems of the personal income tax
generation and administration in Nigeria taking a case study of Board of
Internal Revenue, Enugu state. The specific problems of this research are as
follows:
1. Improper
system of keeping accounts and records in the internal Revenue office, which
was seen to be quite mechanical and out dated.
2. Lack of
staff and inadequate training of the available tax collectors.
3. No
enlightenment on the part of tax payers as regards the importance of taxation
is another problem of tax generation and administration in Enugu state.
4. Tax
collection and administration in Enugu state is not efficient and efficiently
managed.
5. Also
corrupt alliance of tax collectors with tax payers to avoid tax for them (tax
collectors) to make fast money.
Thus lack of
enforcement power on the board makes tax laws useless and not serious to tax
offenders /defaulters.
1.3
OBJECTIVES OF THE STUDY
The general
objective of the study is to asertain the effect of tax administration on
revenue generation in Enugu state, using the state board of internal revenue as
a case study.
The specific
objectives of the research work is to
1. To
examine if the use of mechanical and outdated system in recording and keeping
accounts affect tax administration on revenue generation in Enugu state.
2. To
ascertain whether lack of adequate staff in the SBIR affect tax administration
on revenue generation in Enugu state .
3. To
examine if enlightening the tax payers on the importance of taxation affect tax
administration in the state.
4. To
determine if the effectiveness and efficiency of personal income tax collection
and administration in the state is properly manage.
5. To
ascertain whether they are corrupt alliance of tax collectors with tax payers
to avoid tax for them ( tax collector) to make fast money.
1.4 RESEARCH
QUESTIONS
Upon the
following research questions, hypothesis where formulated.
1. To what
extent has the use of mechanical and outdated system of keeping and recording
accounts affect tax administration on revenue generation in Enugu state.
2. To what
extent does lack of sufficient staff and inadequate training of the available
tax collectors affected tax administration on revenue generation in Enugu
state.
3. To what
extent has lack of improper enlightening of tax payers has affected tax
administration on revenue generation in Enugu state.
4. To what
extent has tax administration in Enugu state been effective and efficiently
manage.
Owing to
flexibility of tax laws in Nigeria and attitude of government toward the local
government level in the area of administration and collection of personal
income tax. It is pertinent to make some assumption that will guide the work
for an opinion to be expressed.
1.5 RESEARCH
HYPOTHESIS
HYPOTHESIS
ONE:
Ho: The use
of machnical and oudated system does not affect tax administration and
collection in Enugu State.
Hi: The use
of mechnical and outdated system affects tax administration and collection in
Enugu State.
HYPOTHESIS
TWO
Ho2:
Inadequate staff and training of the available tax collector does not affects
tax administration and collection.
Hi2:
Inadequate staff and training of the available tax collector affects tax
administration and collection.
HYPOTHESIS
THREE
Ho3:
Enlightening the tax payers on the important of tax payment does not affect tax
administration in Enugu state.
Hi3:
Enlightening the tax payers on the important of tax payments affects tax
administration in Enugu state.
HYPOTHESIS
FOUR
Ho4: Tax
collection and administration in Enugu state is effective and efficiently
managed.
Hi4: Tax
collection and administration in Enugu state is not effective and efficiently
managed.
1.6
SIGNIFICANT OF THE STUDY
The
researcher is motivated to study the ways through which internally generated
revenue in Enugu state could be enhanced.
The
information contained here will benefit the society at large as it will expose
the society to the need to pay tax and consequence of failure to pay tax.
The study
will no doubt charge the aggressive attitude of an average Enugu man towards
the payment of tax and collectors of taxes who were hitherto regarded as
enemies.
Owing to the
present steps taking by federal government in re – branding the economy
activities, the research work will recommend measure that will be taken by the
state Board of internal Revenue, Federal Inland
Revenue
Services, budget and Planning department and other government decision – making
bodies ways to enhance effective administration of her services and achieve
immensely her stated objectives, especially in the area of tax administration
on revenue generation.
The study
will also unleash problems affecting tax effectiveness, which if appropriate
corrective measures taken will go a long way in improving the state internally
generated revenue machineries of the government.
1.7 SCOPE OF
THE STUDY
The research
will focus on:
Reasons
why tax payers avoid or evade tax.
How tax
evasion and avoidance are carried out.
The rate
of revenue generation.
The manner
of sourcing for tax in Enugu state government for the past few years.
What are
responsible for poor tax collection in the state.
1.8
LIMITATION OF THE STUDY
The study
will cover the capital city of Enugu and the remaining two senatorial zones of
the state.
This study
would have been extended to the entire South East states of the Federation but
for limitation of resources and time.
Inadequate
time due to the combination of class schedule and project work.
Uncooperative attitude of some employees that were approached.
Exeat :
restriction to go out and source for materials.
Insecurity
as a result of bombings in most states in Nigeria during the period which this
work is carried out also limits the study.
Financial
constrains
Despite all
this limitations mentioned above and hindrances, the research study no doubt
turned out to be successful.
1.9
DEFINATION OF TERMS
Words that
are frequently used in this research work are short listed here and briefly
discussed to enable the reader get equipped with their meaning. Some which are:
Tax: This
can be defined as a compulsory transfer of resources and Income from the
private sector in order to achieve some of the nation “economic goals Okpe
(1998: 109)
Tax Evasion:
Here, the tax payer adopts illegal means so as to pay less than he should
ordinarily pay. “It is also involves an unlawful refusal or neglect by a tax
payer to pay the tax due.” J.C Aroh & E.O Nwadialor (2009: 352)
Tax
Avoidance : This is a means where by the tax payer arranges his affairs legally
so that he pays less tax than he should otherwise pay.
Revenue
Generation: This is systematic gathering / collection of income revenue.
Revenue:
This could be described as an income accruable to person(s), government and
organization.
Statutes:
This is a legal frame work upon which actions/ inaction are based.
Tax
Jurisdiction: This refers to an area where one tier of government has power to
collect tax.
Tax
Allowance: This refers to the proportion of income exempted from tax.
Tax Holiday:
This is a period of grace granted to a company during which it’s income is not
subjected to tax.
Taxable
Income: This refers to that proportion of income that is liable to tax.
P.A.Y.E (Pay
As You Earn) is one of the systems of personal income tax based on the
proportion of the income usually deducted at source.
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