1.1 Introduction
The tax policy reviews of 1991 and 2003, as well as the yearly amendments given in the annual budget, were geared towards addressing this issue. But not much has been achieved. Perhaps to understand the importance of tax policy reforms, one needs to appreciate the urgency for such reforms. First, there is a compelling need to diversify the revenue portfolio for the country in order to safeguard against the volatility of crude oil prices and to promote fiscal sustainability and economic viability at lower tiers of government. Second, Nigeria operates on a cash budget system, where proposals for expenditure are always anchored to revenue projections.
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Limitations of the Study and Definition of technical terms.
1.2 Background of Study
Taxes are known to be levies paid by citizens of a community for the services provided such as town halls, markets, roads, electricity e.t.c. Taxes have existed since in the ancient communities where people pay either tribute or sweat tax to the local chiefs. Since the discovery of crude oil in the early 1960’s in Nigeria, the government has depended on it as the main source of revenue thus over looking other sources such as agriculture and taxation. Of recent the Nigerian government has turned its attention towards intensive revenue generation through taxation; which in other nations proves to be a major source of revenue, and this includes property taxation which is said to be one of the most stable forms of taxation.
Property tax which is a form of tax chargeable by government was defined as “a tax imposed by municipalities upon owners of real property within their jurisdiction based on the value of such property” (Wikipedia, 2008). The Food and Agriculture Organisation (FAO) (2002) defines property tax as an annual tax imposed on real property usually by reference to an advalorem tax base (i.e., the tax is calculated according to the value of the property). Such taxes have been in existence for millennia and their benefits are well known. They are transparent, cheap to administer, efficient to collect and well understood by the taxpaying public. They are administratively feasible in virtually any circumstances and, being locationally fixed, are particularly suitable as a source of locally generated revenue for local governments. Although the very transparency of a property tax can make it unpopular, well administered property taxes have the potential to generate significant revenue and reduce opportunities for corruption. Tomori (n.d) however reports that at present, yields of urban property taxes in developing countries are extremely low. Its contribution to total public sector tax revenues is negligible, and its share of municipal revenues is typically less than 30 percent.
In Nigeria, property taxation has limited revenue potential firstly because the nation places higher priority on oil revenue and secondly because in many cases it has proven difficult to administer. To ensure effective utilisation of property tax policies in Nigeria, the government needs to adopt a vibrant legal and administrative structure that will hasten documentation of land transactions so as to assist the government in implementation towards sound revenue mobilisation for municipal development. The only fully appropriate tax base for local government would appear to be property tax. Since proper and effective administration of property taxation is perceived to contain the potentials of poverty eradication, the proper authority must take more than a casual stride to ensure its success (Aliyu, 2008).
The rationale for administering property tax is to stop the degeneration of immediate local environments. The environments where people live should be habitable, comfortable, neat, serviceable, sustainable, and conducive to their survival. It should be free from disease attracting or death causing situations. All services needed for the survival of life and properties should be made available, and such facilities provided should be made present on a regular or predictable basis. The equipment for sustaining or maintaining the facilities should also be made available. The basic services/facilities to be provided include road networks, market places, motor parks, abattoirs, street lights and drainage lines (Oyegbile, 1996).
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to examine the Legal and Institutional Framework for Property Tax in the FCT.
1.3 Statement of Problems
Investigation revealed that most urban centres of Nigeria facilities are either lacking or have deteriorated beyond repair and the governments are yet to correct these anomalies. Over the years, facilities in FCT town have degenerated to a great extent. Road networks in some parts of the town have developed potholes and in some areas access roads are lacking. Some quarters of the town lack pipe borne water, insufficient health care centres, and poor drainages among others. With a source of revenue such as this at the disposal of the state and local government a lot of these problems facing the town can be taken care of if the tax is implemented and properly administered. In this paper the prospects of administering property tax in FCT is examined.
1.4 Aim and Objectives of Study
The aim of the study is to examine the Legal and Institutional Framework for Property Tax in the FCT. In achieving this aim, the following specific objectives were laid out as follows:
- To investigate the fairness of Legal and Institutional Framework for Property Tax in the FCT
- To evaluate the adequacy of government revenues for property tax in the FCT
- To find out whether the tax can be efficiently administered properties in the FCT
- To determine the effect of tax on landed properties in the FCT.
- To assess the redistribution of income in the taxing and spending policies of government.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- Is legal and institutional framework fair towards Property Tax in the FCT?
- Are government revenues adequate for property tax in the FCT?
- Can tax be efficiently administered to landed properties in the FCT?
- What is the effect of tax on landed properties in the FCT?
- What is the redistribution of income in the taxing and spending policies of government?
1.6 Significance of Study
This study will continue to be of interest to majorly the governments, civil servants, government establishment, agencies, parastatals, and other public corporation in the public sectors. It will also be of great importance to various management of companies, tax administrators, revenue collector, and tax officials and other users of laws and policy; It will also give them general insight on the challenges affecting effective tax reforms and administration in Nigeria.
This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.
1.7 Scope of Study
The study focuses on the Examination of Legal and Institutional Framework for Property Tax in the FCT.
1.8 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Research material: availability of research material is a major setback to the scope of the study.
- Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet).
1.9 Definition of Terms
Tax: Tax is a compulsory levy payable by individual economic units or corporate bodies to government without any direct quid pro quo from the government.
Tax administration: According to Dale , implies tax policy making and execution. That is, it involves planning, organization, commanding, coordination and control.
Non-Compliance: Can be defined as the failure on the part of a taxpayer to correctly file returns, report actual income, claim the correct deductions, reliefs and rebates and remit the actual amount of tax payable to the authority on time.
Taxation: Is defined by Ogundele (1999) as the process or machinery by which individuals, groups, or communities are made to contribute in some agreed quantum and method for the purposes of the administration and general development of the society they belong.
