1.0 Introduction
An important sacrifice one makes towards the upliftment of one's country is the payment of tax. Revenue accrued from taxes are used by government to discharge its enormous responsibilities.
Therefore, we can say that taxation is the process or machinery by which communities or groups of persons are made to contribute part of their income in some agreed quantum and methods for the purpose of administration and development of the society.
It is a levy imposes by the government against the income, profit or wealth of individual, partnership and corporate organization. This is why it is often referred to as a civil obligation.
In Nigeria, there are other forms of taxation. Dating back to the days of our great grand fathers where by communities taxed themselves through communal labour to execute community projects or to help the community. This is still practiced in various parts of the country today. In that concept the basis and objectives of taxation are so laudable and acceptable.
It is surprising that people still want to evade it or avoid it completely perhaps; it is the entire system that gives room for evasion, avoidance and other problem of taxation or may be the societal ills and failure that makes people want to evade it. Let us therefore now look at the structure and system of taxation in Imo state and appraise the effectiveness or otherwise and its problem.
1.1 Background of the Study
The Nigeria tax system is basically structured as a tool for revenue collection; this is a legacy from the per-independence government. Base on 1948 British tax laws and have been static since enactment. The need to tax personal income through out the country prompted the income management Act (ITMA) of 1961 in Nigeria personal income tax (PIT) for salaried employment is based on a pay as you earn to the 1961 ITMA Act
Federal board of Inland revenue was established in Imo state after the creation of the state in 1976. The major purpose of establishing this board was for collection and administration of tax system in the state and ensure that the revenue generated from tax are paid in the federal government account. As this board is been instituted in every states in Nigeria (i.e. 36 states) is to ensure successful implementation of economic policies and tax policies on collection procedures and also to made payment of tax easy for tax payers in the state but still it have not been easy to collect taxes. To many, tax payers do not declare actual income especially self-employed persons.
As the concept of taxation, the basis and objectives are so laudable and acceptable by every citizen of the state yet it is surprising that people still want to evade tax. Tax as we all know is levy imposed by the federal government against income, profit or wealth of individual, partnership and corporate organizations. This is why it is often referred to as an obligation.
1.2 Statements of Problems
Taxation as one of the major source if revenue to the nation has suffered a lot of set back due to the unsuccessful implementation of economic policies on collection procedures for the government.
A lot of problems where inherent with tax collection system in Nigeria which will be highlighted below and this research intended to solve problems and make suggestion on how to improve on the present collection system.
- Assessment of self-employed person is one of the major problems because self-employed people don't declare their actual income so that the government won't tax them much.
- Most tax payers in Nigeria falsify their records so as not to declare high profit and pay high tax.
- Most of the tax payers money cannot be accounted for.
- At times when taxes are paid, the tax officers don't give the government all the money but reserve some for them.
1.3 Objective of the Study
This project was aimed at identifying the following objectives.
- To critically analyzed the assessment and collection procedures.
- To identify the problem militating against assessments and collection.
- To know the possible effects of imposing assessment and collection of taxes in Imo state.
- To make recommendations for an effective and efficient means of assessment and collection in Imo state.
- To make useful suggestion and advise to the government base on the findings.
- To make useful of the revenue generated to provide social services.
- Tax can be sued to encourage or discourage import, export, production and consumption by varying its rate.
- Tax and government expenditure can be used to counter inflation or reflect the economy.
1.4 Research Questions
For the purpose of this study, all the analysis shall be utilized to test the formulated hypothesis both primary and secondary data.
- Is the present tax collection system efficient?
- Do you subscribe to the fact that the present tax collection system should be reviewed?
- Do you encounter problems in the course of your tax drive to evade the rural areas?
- Does lack of manpower affect tax collection?
- Have you in any way been over taxed?
- Do you disclose tax information to the tax officials?
- Are you satisfied with what the government is doing with the tax you pay?
- So you know how much you pay as tax?
- Do you declare true income to tax authorities?
1.5 Statement of Hypothesis
This study is aimed at analyzing the assessment and collection system and the factors aiding and militating against them.
Hypothesis
- Null hypothesis (Ho): tax assessment and collection in Nigeria system is not effective.
- Alternative hypothesis (Hi): Tax assessment and collection in Nigeria system is effective.
- Null hypothesis (Ho): the response of taxpayers in Nigeria is not encouraging.
- Alternative hypothesis (H1): the response of taxpayers in Nigerian is encouraging.
- Null hypothesis (Ho): Tax Payers in Nigeria Don't Connive with the Tax Officials to Evade Tax
- Alternative hypothesis (H1): Tax Payers in Nigeria Connive with the Tax Officials to Evade Tax.
- Null hypothesis (Ho): tax payers in Nigeria are not satisfied with what the government does with revenue generated from tax.
- Alternative hypothesis (H1): tax payers in Nigeria are satisfied with what the government does with revenue generated from tax.
1.6 Significant of the Study
Tax plays an important role in the country i.e. Nigeria society. A lot of benefits are derived from taxes. It is an essentials feature of government structure and component of fiscal policy. some of the benefits are:
- To generate revenue for the provision of essential service such as maintenance of law and order, roads, and construction of bridges, education, health care and public utilities.
- To redistribute income: this is achieved by the use of revenue accruing from taxation in providing social services which benefit the poor than the rich and by imposition of tax a certain goods enjoyed more by the rich.
- To stabilize the economy: tax can be used to encourage or discourage import; export production and consumption by varying it rate lower rates are use for encouragement and vice versa.
- To discourage consumption of certain goods; also this is a function of the weight of the tax burden.
- To control the economy, tax and government expenditure can be sued to counter inflation or deflate the economy.
1.7 Scope of the Study
The scope of this study is intended to cover only Imo state; the tax law in Imo state and the various type of tax in operation, although tax is a nationwide phenomenon.
1.8 Limitation of the Study
This study will confirm itself to how effective the system has been, the problem associated with the assessment and collection of taxes. Due to the lack of time and financial constraints, federal Inland Revenue services in Imo state was chosen as a case study.
The researchers answer affected by Luke Warm attitude of some tax officials and tax payers who don't want to assist researchers.
Researchers were not conveniently to access the forms and financial records.
1.9 Definitions of Terms
Tax:
tax is a term that is being defined by various people according to their view or perception to the subject matter.
According to Huge (1987), tax is defined as a compulsory contribution imposes by a public authority irrespective of the exact amount of service rendered to the payer in return.
Agyei (1985) defined taxation a the transfer of resources from private sector to the public sector in order to accomplish some of the nations' economic and social goals.
Tax Inflation:
this is the person or body of persons responsible under a law of a territory imposing tax on the income of individuals, for the administration of that law.
Personal income tax:
according to Ola (1987) personal income tax is tax levied on employees' income record by individual in Nigeria. It is regulated by income tax management (ITMA) 1961 as amended.
Companies income tax:
according to Ola (1987) companies income tax levied on profit made by companies excluding companies engage on petroleum activities. It is governed by the companies' income tax (CITA) 1979 and amended.
Tax Evasion:
this may be defined as the illegal method practiced by tax payer's to reduce his/her tax liability.
Tax Avoidance:
this is permissible at law; it can be defined as deliberate legal action on the part of the tax payers to pay less than he/she should have paid.
Provisional tax assessment:
this type of assessment is raised at the beginning of the year. It is not based on the audited report of the company but rather on the exact amount the company paid in the immediate past year. It is a collection procedure to raise fund for the government prior to the announcement of the annual budget.
Boj Assessment:
as the name goes, it is not based on the audited account of the company but on the best of judgments of the assessing officers which is guided by some rules.
Self assessment:
this is collection procedure whereby a company is allowed to assess itself based on their audited reported and pay whatever he gets.
Government assessment:
this is a system whereby the assessing officer uses the audited account of the company to assess them to tax in accordance with the law.
