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THE ROLE OF AN EFFICIENT AND EFFECTIVE TAX SYSTEM IN THE ATTAINMENT OF MILLENIUM DEVELOPMENT GOALS (MDGS)
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 role of an efficient and effective tax system in the attainment of millennium development goals in kogi state. 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 kogi 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 kogi 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 kogi should be well remunerated and ensure adequate administration of tax laws in accordance with the laid down rules and regulations.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
Tax is a compulsory payment made on different bases and rates by citizens (Corporate bodies and individual s) to government, non-negotiable but obligatorily. This payment is not on the basis of direct exchange for the payment for goods and services. It is non negotiable because none of the citizens has any direct contribution to the composition of the bases and rates of payment. Government only classifies the items on which the tax is to be paid, and the category of citizens that should be subjected to the payment (Ariwodola, 2005). The decision is however, based on the cost of the projects or programmes government intends to execute, which is the principal determinant of the budget size. Government also judges the basis, rates, the category of citizens, and the time period to pay the t ax, on the direction of the economy desired and government’s perception of the standard of living of the citizens. This is why tax is defined as a tool for government revenue and fiscal policy tool for directing the economy. Taxes are not paid directly on the basis of exchange of contract like any other payment except subsidies paid by the government. It is paid by any citizen whether or not the citizen benefit from the government projects or programmes financed by the taxes (Rosen 2004).
Consequently, the usefulness (effectiveness and/or efficiency) of taxes can be measured by several parameters, some which are its revenue generating capacity and its impact on the consumption and savings patterns in the economy. Even if the totality of tax systems cannot be comprehensively measured, the various types of tax can be subjected to this measurement in Nigeria, there are at least three types of taxes that are commonly applied to qualifying citizens and items. These are the personal income tax, the company income tax, and the value added tax. The assessment of these forms of tax independently or otherwise becomes more necessary given the multiplicity of taxes in Nigeria, together with the problems of tax evasion and avoidance. It is against this background that this study is initiated.
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 whichis inefficient in experienced, and poorly paid.
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 role of an efficient and effective tax system in the attainment of millennium development goal takingkogi state board of internal revenue office, lokoja as a case study. The specific problems of this research are as follows:
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 ascertain 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
1.4 RESEARCH QUESTIONS
Upon the following research questions, hypothesis where formulated.
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 mechanical and outdated system does not affect tax administration and collection in Kogi State.
Hi: The use of mechanical and outdated system affects tax administration and collection in kogi 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 Kogi State.
Hi3: Enlightening the tax payers on the important of tax payments affects tax administration in ankpa in Kogi State.
HYPOTHESIS FOUR
Ho4: Tax collection and administration in ankpa in Kogi State is effective and efficiently managed.
Hi4: Tax collection and administration in ankpa in Kogi State is not effective and efficiently managed.
1.6 SIGNIFICANCE OF THE STUDY
The researcher is motivated to study the ways through which internally generated revenue in Kogi 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:
1.8 LIMITATION OF THE STUDY
The study will cover the capital city of ankpa in Kogi State 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.
Despite all this limitations mentioned above and hindrances, the research study no doubt turned out to be successful.
1.9 DEFINITION 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.
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 role of an efficient and effective tax system in the attainment of millennium development goals in kogi state. 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 kogi 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 kogi 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 kogi should be well remunerated and ensure adequate administration of tax laws in accordance with the laid down rules and regulations.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
Tax is a compulsory payment made on different bases and rates by citizens (Corporate bodies and individual s) to government, non-negotiable but obligatorily. This payment is not on the basis of direct exchange for the payment for goods and services. It is non negotiable because none of the citizens has any direct contribution to the composition of the bases and rates of payment. Government only classifies the items on which the tax is to be paid, and the category of citizens that should be subjected to the payment (Ariwodola, 2005). The decision is however, based on the cost of the projects or programmes government intends to execute, which is the principal determinant of the budget size. Government also judges the basis, rates, the category of citizens, and the time period to pay the t ax, on the direction of the economy desired and government’s perception of the standard of living of the citizens. This is why tax is defined as a tool for government revenue and fiscal policy tool for directing the economy. Taxes are not paid directly on the basis of exchange of contract like any other payment except subsidies paid by the government. It is paid by any citizen whether or not the citizen benefit from the government projects or programmes financed by the taxes (Rosen 2004).
Consequently, the usefulness (effectiveness and/or efficiency) of taxes can be measured by several parameters, some which are its revenue generating capacity and its impact on the consumption and savings patterns in the economy. Even if the totality of tax systems cannot be comprehensively measured, the various types of tax can be subjected to this measurement in Nigeria, there are at least three types of taxes that are commonly applied to qualifying citizens and items. These are the personal income tax, the company income tax, and the value added tax. The assessment of these forms of tax independently or otherwise becomes more necessary given the multiplicity of taxes in Nigeria, together with the problems of tax evasion and avoidance. It is against this background that this study is initiated.
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 whichis inefficient in experienced, and poorly paid.
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 role of an efficient and effective tax system in the attainment of millennium development goal takingkogi state board of internal revenue office, lokoja as a case study. The specific problems of this research are as follows:
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 ascertain 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
1.4 RESEARCH QUESTIONS
Upon the following research questions, hypothesis where formulated.
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 mechanical and outdated system does not affect tax administration and collection in Kogi State.
Hi: The use of mechanical and outdated system affects tax administration and collection in kogi 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 Kogi State.
Hi3: Enlightening the tax payers on the important of tax payments affects tax administration in ankpa in Kogi State.
HYPOTHESIS FOUR
Ho4: Tax collection and administration in ankpa in Kogi State is effective and efficiently managed.
Hi4: Tax collection and administration in ankpa in Kogi State is not effective and efficiently managed.
1.6 SIGNIFICANCE OF THE STUDY
The researcher is motivated to study the ways through which internally generated revenue in Kogi 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:
1.8 LIMITATION OF THE STUDY
The study will cover the capital city of ankpa in Kogi State 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.
Despite all this limitations mentioned above and hindrances, the research study no doubt turned out to be successful.
1.9 DEFINITION 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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