CHAPTER ONE
1.1
BACKGROUND OF THE STUDY
Tax is a major source of government
revenue. The tax system of any country usually has two component. Those are the
law and it administration.
The tax laws are used to
determine the liability of tax payers, the tax rate and the tax base. Tax
administration whether effective or not used to determine the success or
failure of any tax system. Different tax law (regulation, decrees etc) have been
enacted in order to regulate the tax system. The success of any tax system of
any country can only be anchored on effective tax administration for example
when a tax payer has been assessed to tax and the amount of tax to be paid has
been determined, the tax is to be
collected at a minimum collection cost and because an effective tax administration
ensures accountability of the government to the tax payers the amount so collected
should be used to provide basic infrastructure that will be of benefit to the
same tax payers on the other hands, if the administration is defective, there
will be non- accountability, high collection cost, high rate of tax evasion and
tax avoidance (the twin devils) corruption and so on.
Tax is the surest form of
revenue among the source of receive to government because the citizen will always be there even when other source of revenue fail. For example, land
might 80 barren, the oil wells might dry up, corporation might no longer be
profitable but the citizen will always be there to be taxed.
Taxation can also be
measured in terms of effectiveness as a fiscal policy tools.
Ordinary, taxation is
used to correct any imbalances in the economy in order to achieve economic goal
and development. The major objectives of taxation as a fiscal policy tool
includes:
1)
It is used to redistribute income or wealth
2)
It is used to protect infant industries
3)
It is also used to discourage the consumption of goods
4)
It is also used to allocate resources
Therefore, taxation,
whether as a source of revenue or as fiscal policy tool cannot succeed of its
administration is defective or weak. As Tanzi (1980) has pointed out, tax
administration plays a crucial role in determining the real or effective tax
system, as opposed to statutory. Tax system Bird (1991) says “Tax policy change
without administrative change is nothing”.
Considering the
importance of effective tax administration, it is importance to establish a
long-range vision for effective and suitable tax administration in Nigeria going by the present state of the tax
administration in .
The purpose of this research is to consider the present tax administration in with
the aim of proffering feasibly solution to its shortcomings.
1.2
STATEMENT OF THE PROBLEM
Tax administration in is the
focal point of this study. Obviously there are some recognized problems
confronting effective tax administration in . These problems need to be
recognized and solutions have to be proffered to them. Such problems include:
1)
Inconsistency of tax policies
2)
Poor legal structure
3)
Lack of qualified tax personnel and officers
4)
Poor information or data Bank and non-computerization of the tax system
etc
These
and other problems shall be looked into in this research work
1.3
OBJECTIVE OF THE STUDY
This
study will be centered on the following:
1)
Analysis of the problems related to the administration of the tax in by
attempting to identify observable problems which make tax administration
ineffective.
2)
Also to seek explanation to the inhibiting factors in the tax
administration.
3)
Why are the punitive measure put in place by the government has not been
effective and efficiently carried out
4)
Lastly, to form a basis for making suffusions towards reforming the tax
administration in
Also, we will look into
how taxation as a fiscal policy can be effective in order to achieve the
desired goal of economic stability.
1.4
RESEARCH QUESTIONS
Research questions can be
defined as the specific purpose of the study stated in form of questions put
forward in order to discover facts. Some important questions relevant to this
research are as follows:
a)
Has taxation as a fiscal policy took been effective in achieving the
stabilization objectives of the economy.
b)
Why do tax payers evade tax? Or why is there no voluntary tax compliance
among tax payers?
c)
Has the introduction of tax clearance certificate helped to reduce the
high rate of tax evasion?
d)
Can a tax payer reduce his tax liabilities without necessary evading
tax?
e)
With the employment of qualified personnel or training of existing
officers improve tax collection?
1.5
RESEARCH HYPOTHESIS
Hypothesis can be defined
as a conjectural or tentative statement on the relationship between two or more
variables.
Hypothesis is usually
means to an end for the purpose of this research; the following hypothesis will
be tested for acceptance or rejection.
(1) Ho: Tax administration/management is not
effective in Nigeria.
H i: Tax administration/management is effective in
(2) Ho: Tax clearance certificate is not an
effective tool to check tax evasion
Hi: Tax clearance certificate is not an effective
tool to check tax evasion.
1.6
SIGNIFICANCE OF THE STUDY
It helped that this
research work will be of great benefit to the government, tax consultants,
policy makers, researchers that might be interested in making research on this
topic, tax administrator’s students of public finance and taxation and the
general public at large.
1.7
SCOPE OF THE STUDY
This is to appraise how
the count could have an effective tax administration. The appraisal of taxes
will be under the direct and indirect tax system acts have been enacted to
regulate the administration has been shared between the federal, state and
local governments.
The result of the
appraisal of the strength and weakness of the present tax system will help in
proffering workable solutions as the way forward.
1.8
LIMITATION OR STUDY CONSTRAINTS
The study obviously
cannot cover all the geographical area of the country, hence, the Federal Board
of Inland Revenue (FBIR) is used as the case study. Data collection is also
limited to twenty (20) Because of these. The study will only limit to Federal
Board Inland Revenue (FBIR) , .
1.9
DEFINITION OF TERMS
1)
Direct Tax: this is a tax that is levied on the income, profits and
gains of individuals and companies. In a direct tax system, the person who pays
the tax bears the tax burden. Example includes personal income tax, companies
income tax, petroleum profit tax.
2)
Fiscal Policy: This is a part of government activities that deals with
revenue generation and expenditure in an economy that is the policies that
regulate such activities.
3)
Indirect tax: This tax is levied on goods and services produced, under
indirect tax system, the tax burden is usually shifted to the final consumer of
goods and services. Examples include import duty, excise duty, value added tax
e.t.c
4)
Relevant Tax Authority: The relevant tax authority is a body responsible
under law of a territory to impose tax on incomes or profits of individuals and
companies.
5)
Tax: This is a compulsory levy imposed on income of individuals and
companies by the government.
6)
Taxation: This is a system or the process of levying and collection of
money by taxes.
7)
Tax Avoidance: This occurs where a tax payer arranges his financial
affair in such away as to reduce his tax liability such as capitalizing on the
loopholes in tax laws to his own advantage.
8)
Tax Clearance: This is a document issued to a tax payer after the tax
authority is of the opinion that tax assessed on the income of a person for the
three years immediately proceeding the current year of assessment has been
fully paid or that no tax is due on such income.
9)
Tax Evasion: This is a dishonest means whereby the tax payer try to
reduce his tax liability through the use
of illegal means such as omission of source(s) of income of a tax payer from
his returns etc
10)
Taxpayer: This is any individual, corporation sole, trustee or executor,
having any income, which is chargeable to the tax under the provision of the
act.