Evaluation Of Pay-As-You Earn (PAYE) Administration System In Revenue Services

Pay-as-you-earn (PAYE) as method of deducting tax at source from employment income such as salaries, wages, bonuses, directors fees, commission and any other income accruing from employment constitutes a major source of internal revenue to any state even Kaduna state. The research is therefore concerned with the evaluation of pay-As-You-Earn administration system in Nigeria with special reference to Kadune state Board of Internal Revenue Services. The paper presents a case study of pay as you earn system in the state board of internal revenues and where weaknesses are found suggest recommendation for their remedies is help that the research work will remind the tat payers, the employees and the board of the state of the importance of the contribution of the funds raised from the scheme to state development programme in the provision of social and basic amenities to the resident of the State. This research work is of great significance not only to the Board of internal Revenue but also to its likes all over the other state of Nigeria and at the federal and local government level.

Introduction

1.1 Background of the Study

A tax could be defined as the transfer of resource from the private to the public sector in order to accomplish some of a nation"s economic and social goals.

The primary economic goal of developing countries a is to increase the rate of economic growth and hence the per capital income which will lead to pre capital income which will lead to higher standard of living. If due recognize two major accomplishment as requirement for the attainment of this goals.

Provision of additional basic government services, particularly in education, public health and transport, which are important for the growth of remainder of the economy.

A higher rate of capital formation in production facilities, whether understand in the government or private sector. The specific goal, is of course , not the highest rate that will permit the maximum rate of growth in GNP regarded as feasible under the circumstance. Broadly, it could be said that there are three main method of financing expenditure open to most developing countries: -

Taxes and other current receipts such as the profit of public enterprises.

Loans and

Grants

of these source, taxation is perhaps the most important since that level of government expenditure is to a great dependent on the ability of the tax system to place the requirement revenue at the disposal of government.

Thus, Chelliah (1960) asset, taxation might be used to accomplished the following objectives:

Increasing the incentive to save and invest

Transferring resources from hand of public to the hand of the state to make possible public investment.

Modifying the pattern of investment

Mitigating economic inequalities

Restraining or curtailing consumption and transferring resources from consumption of investment.

These objectives are relates to the ultimate goals of increase in national income and of the direction of economic development.

The various form of taxation could be classified under two headings - indirect and direct.

Indirect taxes are those types of taxes are levied against goods and services e.g of indirect in Nigeria are custom duties and excise duties.

Direct taxes are those types of taxes levied on factors of production. In Nigeria, direct taxes consists of personal income tax, company income tax, petroleum profit, capital gains tax and capital transfer tax.

The administration of the income tax laws in each of the federation is vested in the state board of interval revenue services. Prior to 1993 the composition of the board could vary from state to state effective fraud 1993, the composition is now uniform throughout the country.

1.2 Statement of Research Problem

Every research work start with the statement problems which the research work intends to paid solution to the work tilted "the problem and prospects of pay as you earn administration system in Nigeria. A case study of the board of internal revenue, Kaduna. The following are some of the problems to be looked into:

What are the various sources of fund that are made available to the state.

How responsible is the board in revenue generation in the state?

What is relationship between the board and tax payers.

What enlightenment for the tax pa tax payers towards of the boards objectives.

How effective and efficient is the board in revenue identification and collection.

What is the projected of revenue generation in the state.

1.3 Aims and Objectives of the Study

The aims and objectives of this study are: -

To examine the entire machinery of pay-as-you-earn collection in Kaduna state.

To enlighten the taxpayers of the usefulness of the revenue derived from the system.

To enlighten readers of the categories of income liable to the system.

To demonstrate the procedure law down in the computation and treatment of the system.

To study, evaluate and to make possible recommendation o f improving the machinery of pay as you earn in Kaduna state

1.4 Significance of the Study

This research work is of great significance not only to the Board of internal revenue, Kaduna but also to its likes all over the other state of the Nigeria and at the federal and local government level. It will greatly aid in enlightening the government and operations of the board with the analysis and knowledge of pay as-you-earn ways of over coming these problems of identified will be of great significance to the board. They will also richly benefit for revenue source analysis to discover how best they can be exploited.

To the general public and other organization, this work will give the needed knowledge about the revenue generation machinery so as to erase any possibility of ignorance. For student and researchers, it is an educational material that creates an issue for further research and reference. Thus, the significance of this work cannot be under estimated.

1.5 Research Questions

Is there any relationship between government policies and pay-as-you-earn.

Is shortage of manpower a problem for effectives administration of pay as-you-earn to the board?

Is the organizational structure of the board consistent with accepted principles?

Has the board succeeded in facilitating in any way, the collection of pay as you earn tax in Kaduna state?

What are the factors responsively for the development of any tax system?

1.6 Scope of the Study

This research work is reduced in scope to Kaduna state which is one of the 36 states of Nigeria. Within Kaduna state not all the activities, the scope of this study is therefore limited to the revenue generation activities of the board of internal revenue, Kaduna.

1.7 Limitation of the Study

This research is hampered most especially by time constraints. A near accurate research work demands a very long term of study so as to generate enough data and make enough analysis and verification of data and the analysis.

Unfortunately, the period within which this work should be completed is short and shaved between many other things to do. Also there is a shortage of relevant texts and documents either by their non availability, unaffordable cost of procurement or confidentially. These are vital data source that their absence with hamper on the claimed validity of any work.

Finally, the uncooperative attitudes of some staffs of the board has its on negative effect on this work because their attitude has been a discouragement which reduce the zeal to unique more.

1.8 Definition of Terms

PAYE:

The term pay as you earn (PAYE) is used to described the system where by the employee pay tax on what ever income he earns from his employment in any particular mouth at the end of that month.

Tax Authority:

The person or body of person responsible under income tax decree No 104 of 1993 to impose compute, collect and administer tax legislation.

Free Pay Allowance:

Employees entitlement under the personal income tax such as: children, dependent allowance etc.

Return Form:

Is form use to declared employees income and claims the allowance entitlement to.

Tax Refund:

Is the amount refunded to an employee if he is over assessed after claming free pay allowance.

Total Pay:

Is the sum of all payable to employees during any remuneration period including all allowance, bonuses, acting allowance, commission etc.

Monthly Remittance:

Is the total tax collected during the mouth from pay of employees. Which is payable to the board of internal revenue service after lessing tax refund if any.

Directed Employer:

The person/organization directed by tax authority on prescribed form to operate PAYE on the emolument of his employee.

GDP:

Gross Domestic Product.

DNP:

Gross National Product

Summary. Recommendation and Conclusion

5.1 Summary

Pay-as-you-earn (PAYE) as method of deducting tax at source from employment income such as salaries, wages, bonuses, directors fees, commission and any other income accruing from employment constitute a major source of internal revenue to any state even Kaduna state, the research is therefore concern with the evaluation of pay-as-you-earn administration system in Nigeria with special reference to Kaduna state board of internal revenue service.

The mechanism of tax collection like any other work of tax on companies profits and partnership or private organizations has its own problems. This include ignorance of the system by the employer s and employee as to its feature, administration and importance of the funds generated there from to the state within which they operate their business and earn income for their living respectively.

On the other hand, the lack interest revenue service in ascertained the accuracy of remittance and timing their collections one of major concern taking into consideration. The number of organization and their labour force and funds expected to be generate from the system.

This virtually result into lost of funds from the scheme. In view of the above problems the research intends to study the system as its applied in Kaduna state board of internal revenue services and where weaknesses are found suggest recommendation for their remedies is help that the research work will remind the tat payers, the employees and the board of the importance of the contribution of the funds raised from the scheme to state development programme in the provision of social and basic amenities to the resident of the state.
In chapter two general overview of the concept of pay-as-you-earn has been discusses with reference to the works of authorities/authors in the field.

The collection of the tax however depend upon the direction to operate pay-as-you-earn by their payroll ten (10) employees or five (5) employees are directed to operate pay-as-you-earn your earn on the income of their employees.

In collection of data for this project the research adopt the personal interview method, use of documentary sources, kept by the board and observation of board of internal revenue service.

5.2 Conclusion

The research evaluation of pay-as-you-earn administration system in Nigeria a case study of kaduna state board of internal revenue services, have it that the pay-as-you-earn (PAYE) system seem to be the most effective way of enforcing payment of tax from employment. Since tax is deducted at sources, the question of tax evasion is comely out in respect of an employment income derived from employment.

Similarly, where the pay-as-you-earn system applied, tax is paid in installments deducted by the employer from salary payments if at the end of a tax has been made, this is easily, put right by a simple adjustment, which will be reflected in a diminished or increase by "pay-pocket" on the next "pay day" an adjustment in the code number.

Employers are required to make regular return to the tax authorities in there areas. These return are usually monthly and should show the number of employees during the month, the total tax deducted and the total deduction paid into a government treason.

According, the income tax legislation provides that very taxable person. When required to do so by notice in writing from a tax authority, shall make a return for each year of assessment showing the amount of income receive from al sources during the year in question. The taxpayer must also furnish in his return particulars necessary to establish his right to any person allowances claimed. Thus, if no return is made the right to personal relief will be lost.

Where taxpayers fails to make the return an assessment will be made on the total income, which the taxing authorities to the best of its judgment, considers was receive by the taxpayer during the year. Such as assessment will tend inevitably to be arbitrary but that is fault of the taxpayer. Similarly action is taking where a return is not accepted to current.

Addition assessments may be made in respect of un-assessed profits provide that the revenue Act within six (6) years of the year of assessment in question. Although where the failure to assess occurred as a result of the fraud will fill default or neglect of taxpayer an addition assessment maybe made at anytime.

Finally, it should be added that pay-as-you-earn does not have a monopoly of convenience to the taxpayers as indirect taxes more or less automatically meet this criterion.

5.3 Recommendation

It is obvious that the state government depend to some extend on revenue derived from the taxation and other sources to meet its statutory responsibilities to the people past and present state government derive the major revenue from two source namely the federal government statutory allocation and the internally generate revenue through pay-as-you-earn scheme as an example of internally generated revenue through the state taxation system. pay-as-you-earn collection in addition to the federal government budget allocation assists government in carrying out its development activities. pay-as-you-earn, therefore, a part from being a major source of revenue for any government is also as instrument of social policy.

Taking in to consideration the problems inherent in pay-as-you-earn scheme in Kaduna state board of internal revenue. It is the opinion of the research that if the following step are taken, the funds will be generated from the scheme in the state in the present and future time.

Therefore, the Kaduna state board of interval revenue service should consider the following:

A filling system which facilitates easy tracing of pay-as-you-earn records in the records in the section should be introduced so as to facilitate quick treatment of pay-as-you-earn earn cases and there by reducing the problem of late remittance by employers.

Publicity campaigns on the importance of paying tax generally and partially pay-as-you-earn should be undertaken. Unless people known what is expected of them in the form of tax contribution. What such contribution will be used for, and how their obligations are to be discharged, much money will be cost from the scheme.

The pay-as-you-earn section should be provided with adequate and comfortable office accommodation, furniture for its staff and filling of tax records.

On the aspect of staffing, competent hands and qualified personnel should be employed and also the board encourage/approved at intervals their staff to go for training at various institution so that they can obtain professional experience on their job and they should be adequate remunerated. This will bring about a mere funds will be generated.

The board of internal revenue from pay-as-you-earn at a period. This could b achieved by making an incentive for the accurate number of organization in the state and their respective staff strength.

There should be an intensive tax drive periodically regularizes with extensive scouting of tax records at such period.

The state government should continue to encourage the establishment of both public and private organizations in the state so that more people will be employed and thereby making it possible to generate more funds to the state government as a result of pay-as-you-earn (PAYE) collections from the employed persons .

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