Problems Of Personal Income Tax Administration
(A Case Study Of Ministry Of Education, Enugu)
Administering personal income tax presents a myriad of complexities and hurdles for tax authorities worldwide. One of the primary challenges revolves around tax compliance, where individuals often engage in tax evasion or avoidance strategies, leading to revenue losses for governments. Additionally, the intricate nature of tax laws and regulations complicates the filing process, creating confusion and errors among taxpayers. Moreover, the dynamic nature of employment patterns and the rise of gig economy platforms further blur traditional income categorizations, making it challenging to accurately assess and tax various income streams. Another significant issue is the lack of resources and technology infrastructure, hindering tax authorities’ ability to effectively monitor compliance and enforce tax laws. Furthermore, disparities in income levels and the availability of tax incentives exacerbate fairness concerns, as high-income earners may exploit loopholes to reduce their tax burden unfairly. Addressing these challenges requires comprehensive reforms, including simplifying tax laws, investing in technology for better enforcement, and promoting transparency to enhance taxpayer trust and compliance.
The topic of this research work is the Problem of Nigerian Personal Income Tax Administration with particular reference to Ministry of Education Enugu.
The main objective of the study include:
To find out the extent to which the resources of the board are adequate for its management.
To ascertain the extent to which the objectives of the board are being achieved.
Finally to appraise the extent of attainment of the boards target in the priority areas of personal Income tax administration.
Some related literatures were reviewed while chapter three contained the methodology of this study; The population of the study which was made up of 800 people and the sample size was 100 using simple random sampling technique. Chapter four presented the analysis of the data generated from questionnaires.
In the concluding chapter which comprises among other things the research findings which include in adequacy of resources, low achievement of objectives, Ignorance of tax benefits and poor attainment of targets in the priority areas. However, recommendations are made based on findings. Such recommendation includes: Recruitment of more staff for the board and allocation of more funds for collection activities in both headquarters and branch offices.
Finally, the researcher beliefs that if these recommendations are applied religiously, the problem of Nigerian Personal Income Tax Administration and collection will be a thing of the past in Nigeria as a whole.
Title page
Approval page
Dedication
Acknowledgement
Abstract
List of tables
Table of content
CHAPTER ONE
Introduction
1.1 Background of the study
1.2 Statement of problems
1.3 Research Questions / Hypothesis
1.4 Hypothesis
1.5 Purpose of the study
1.6 Significance of the study
1.7 Scope of the study
CHAPTER TWO
Review of literatures
2.1 Fundamental concept of Nigeria Taxation
2.1.1 History of Nigeria Taxation
2.1.2 Laws governing Income tax in Nigeria
2.1.3 Importance of Taxation
2.1.4 Categories of Taxes
2.2 Basis of tax Imposition (major provisions)
2.2.1 A review of major assessment provision
2.2.2 Relevant tax authorities
2.3 Problems of tax collection..
2.3.1 In adequate qualified man power, poor motivation and corruption
2.3.2 Poor attitude to tax generation and usage
2.3.3 Lack of management audit and unrealistic budgeting
CHAPTER THREE
Research methodology
3.1 Design of the study
3.2 Area of the study
3.3 Population
3.4 Sample size
3.5 Sampling techniques
3.6 Instrument of data collection
3.7 Validity and reliability of instrument
3.8 Techniques for data analysis
CHAPTER FOUR
Data presentation and Analysis
CHAPTER FIVE
5.1 Discussion of the study
5.2 Summary of findings
5.3 Implication of the research
5.4 Limitation of the study
5.5 Suggestion for further study
5.6 Conclusion
5.7 Recommendation
Bibliography
Questionnaire
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Tax is an important factor in economic planning and development of a nation and I is an important agent of social change, (Ola 1985:109). Tax according to Agysi (1983:174) the transfer of resources from private sector to the public sector in order to accomplish some of the nations economic and social goals. Furthermore, tax is a compulsory levy imposed on the payer by a legal authority or recipient public authority. Throughout the history of mankind, the right to raise tax has been one of the principal features of political authority.
Tax is an instrument of fiscal policy, which plays a leading role in every organized society irrespective of the political or constitutional structure. Once a society becomes stabilized, civilized or law abiding the function of government becomes enormous resulting in heavy expenditure and necessitating tax payment by its subjects.
For a developing country like Nigeria, the primary economic goal is to increase the rate of economic growth and hence the per capital income which will lead to higher standard of living
Three main method of financing economic expenditure in most developing economics include taxes and other current receipts such as the profit of public enterprises, loans and grants. Of these sources, tax is perhaps the most important since the level of government expenditure is to a great extent dependent on the ability of the tax system to place the required revenue at the disposal of government. Hence, Samuelson (1980:92) wrote that “in deciding to tax people, the people are really deciding how resources needed for social wants shall be taken from all various families and from the enterprises they own and made available for the provision of social goals and services”.
Again since market system proves inadequate for ensuring stable price and steady growth, tax has to be used to bring about employment, stable price and steady growth. In addition, tax is meant to ensure, at times, a transfer of resources from the hand of the private to public or government for investment, modification of patterns of investment and mitigating economic inequalities.
Allas, these aims are far from being achieved in Nigerian society. The tax system is failing in almost all the above respect. Therefore, there must be crucial problems militating against efficient and effective tax administration in Nigeria.
There have been discussions on the problems posed by the dwindling fortune in the oil economy. This problem is acute because of the undue reliance on federal government for the bulk of the operating revenue in the state. All the states of the federation are now required to intensify effort toward the internally generated revenue to make up allocation from the federation account. Unfortunately the problem engendered in the internally generated revenue is more acute in newly created states. Before being carved out, these states were doing fairly well with what they collected within their confines.
In Enugu state, the problem of inefficient tax collection is highly pronounced. Due to lack of fund the state been unable to fulfill its obligations to the citizenry. The present emphasis on rural development has subdued the state with the problems of socio-economic development of the rural communities. Beside political duties, it is expected to provide good roads, health services, primary and secondary education, good environmental sanitation among others, to her people. As a result of the government inability to meet with its obligations the people have resorted to self help projects in most communities.
Observation has shown that the number of self help projects in most communities outnumbers the government projects therein. These failures are attributed to the numerous problems militating against efficient tax collection in the state as shown by this project.
Inspite of the broad nature of taxes, the tax payers are usually on the look out for loopholes which they could exploit and less tax to the government. Besides the corrupt tax officials, evidence abound that there is high incidence of tax avoidance (refusing to pay tax entirely) and evasion (act by which the amount of tax payable is dishonestly reduced) in Enugu state.
As a result of the role and importance of tax as an instrument of fiscal policy, the vital sources of government revenue, taxation becomes an important area of study. But because of the failure of taxation to effectively collate resources, secure equitable income distribution and properly regulate the econo-colateral function of a good tax system and above all provide the government with the much needed revenue to meet its various obligations, it is strongly convinced that there must be some crucial problems militating against effective and efficient tax administration in Enugu state and Nigeria as a whole. Hence a study of problems of tax administration and collection with particular reference to Enugu state is hereby being undertaken to x-ray with a view of finding these problems, their degree of impediment, the likely prospect and proffering recommendations of actions that will ensure effective and efficient tax administration and collection mechanism in Enugu state in particular and Nigeria in general.
1.2 STATEMENT OF PROBLEM
There have been a heart provoking outcry by various state government in Nigeria over their poor financial base. The situation is becoming even more compounded by the obvious dwindling feature of our oil economy. Moreover, inspite of the broadness and the comprehensive nature of our tax system, tax avoidance and evasion are on the increase. This ugly development has placed most state government in a situation where they can not cope with their civic responsibilities to their citizen, hence a compelling need to put an end to this unwholesome circumstances through proper problem identification;
(1) It has been a problem to understand the extent to which resources, human / material are adequate for the management of Enugu State Board of Internal Revenue. (ESBIR).
(2) The extent to which the objectives of the organizations are being achieved.
(3) Also, it is a problem to determine the relationship between the ignorance of tax benefits and the unwillingness of tax payers to pay their taxes and so fulfill their civic obligation.
(4) It is difficult to ascertain the extent to which ESBIR has realized its targets on priority areas of personal income tax administration.
1.3 RESEARCH QUESTION / HYPOTHESIS
Below are research questions to which the study would be based.
(1) To what extent is the resources (human / material) adequate for the management of ESBIR (Enugu state board of internal revenue)?
(2) To what extent have the objectives of the organization been achieved in recent past?
(3) What is the relationship between the ignorance of tax benefits and the unwillingness of tax payers to fulfill their tax obligation?
(4) To what extent has the board realized its targets on priority areas of personal income tax administration.
1.4 HYPOTHESIS
There will be no significant difference at 0.05 between the perception of senior and junior staff with regard to assure adequacy
There is no significant relationship between proper staff training scheme and objective assessment and collection of personal Income tax. There is no significant relationship between adequate public enlightenment campaign on tax policies and tax payer’s benefit or knowledge on tax benefit
There is no significant difference at 0.05 between the perception of junior and senior staff regarding the attainment of target in priority areas of tax revenue administration.
1.5 PURPOSE OF THE STUDY.
(1) To ascertain the extent to which the resources (human / material) are adequate for the management of the organization (ESBIR).
(2) To find out the extent to which the objectives of the organization (ESBIR) are being achieved in recent years.
(3) To determine the relationship between Ignorance of tax benefits and the unwillingness of tax payers to fulfill their tax obligation.
(4) To evaluate the ethical validity and the basis of personal Income tax assessment and collection in Enugu state
1.6 SIGNIFICANCE OF THE STUDY.
This research work is being undertaken to identify the problems hindering personal income tax administration and collection in Enugu state. It is my hope that this study will help to correct the deficiency in the personal income tax generation machinery in Enugu state.
Again, there is practically no detailed study devoted to the problems of personal income tax collection in recent years. Therefore, the study will adequately fill up the gap. Thus, a research work that focuses on this topic is timely and very necessary in providing lasting solution to the incessant and unhealthy problem of waste of revenue through ineffective personal income tax administration and collection in Enugu state.
1.7 SCOPE OF THE STUDY.
The topic of this thesis is “The problems of personal Income Tax Administration and collection in Nigeria with particular reference to Enugu State Board of Internal Revenue”.
The main objectives of the study are
• To find out the extent to which the resources of the organization are adequate for its management
• To ascertain the extent to which the objectives of the organization are being achieved.
• To determine the relationship between Ignorance of tax payers and the unwillingness to fulfill their tax obligation
Finally, to evaluate the ethical validity and basis of assessment of collection of personal Income tax in Enugu State.
Problems Of Personal Income Tax Administration:
Personal income tax administration can be complex and can present various challenges for both taxpayers and tax authorities. Some of the common problems associated with personal income tax administration include:
Complexity of Tax Laws: Tax codes and regulations can be complex and subject to frequent changes. Understanding and complying with these laws can be challenging for taxpayers, leading to errors and misunderstandings.
Tax Evasion and Fraud: Some individuals may engage in tax evasion or fraud by underreporting income, inflating deductions, or hiding assets offshore. This can lead to significant revenue losses for the government.
Compliance Costs: Taxpayers may incur significant costs in terms of time and money to prepare and file their tax returns. This can be particularly burdensome for low-income individuals and small businesses.
Tax Avoidance: While tax avoidance is legal, it can reduce tax revenue. High-income individuals and corporations often use legal loopholes, deductions, and credits to minimize their tax liability.
Administrative Burden: Tax authorities must allocate resources to enforce tax laws, conduct audits, and collect taxes. This can be resource-intensive and may divert resources from other government priorities.
Tax Evasion Detection: Detecting tax evasion can be challenging for tax authorities, as individuals and businesses may use sophisticated methods to hide income and assets.
Compliance and Reporting Errors: Taxpayers may make unintentional errors on their tax returns due to the complexity of tax laws and forms. These errors can result in underpayment or overpayment of taxes.
Tax Gap: The tax gap represents the difference between the amount of taxes owed and the amount collected. A large tax gap can result from underreporting of income, tax evasion, and tax avoidance.
Taxpayer Education: Many taxpayers may not fully understand the tax code or their tax obligations. Lack of education and awareness can lead to noncompliance and mistakes.
Burden on Tax Authorities: Tax authorities must effectively manage and process a large volume of tax returns and taxpayer data. This requires efficient systems and resources.
Equity and Fairness: Ensuring that the tax burden is distributed fairly among taxpayers is a challenge. High-income individuals and corporations often have more opportunities to reduce their tax liability.
Tax Planning Strategies: Sophisticated tax planning strategies can be used to minimize tax liability legally. These strategies can be seen as exploiting gaps or inconsistencies in tax laws.
Enforcement and Collection: Enforcing tax laws and collecting taxes from noncompliant taxpayers can be difficult and costly. Tax authorities may need to resort to legal actions, such as liens and levies.
Changing Workforce Dynamics: The rise of gig economy jobs and remote work can complicate tax administration, as income sources and locations become more diverse.
Technological Challenges: Tax authorities need to adapt to technological advancements for efficient data processing and fraud detection, which can be resource-intensive and require significant investment.
Addressing these challenges often requires a combination of improved tax legislation, enhanced taxpayer education, effective enforcement measures, and technological innovations to streamline tax administration processes and reduce tax evasion and noncompliance.