1.1 Introduction
A tax is a compulsory levy (by the government through an appropriate agency usually the inland or board of internal revenue department) on the income of an individual or any legal entity it is an amount paid on account of the fact that the tax payer has income of a minimum amount for certain tangible and intangible economic activities which have been chosen for taxation. Government tax revenue refers to the revenue received by a government to finance its operations and development projects. It is an important tool of the fiscal policy of the government as it facilitates government spending (OECD, 2008b). Governments need to perform various functions in the field of political, social and economic activities to maximize social and economic welfare. The revenue mobilizing processes in terms of long-term impact on the economy of Greece and the euro zone.
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, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.
1.2 Background of Study
Government as an economic unit needs financial for its continuous existence the finance or revenue comes from different sources of which taxation is one of the major source. Taxation is a prominent source of fund to the government and as such calls for adequate system and control. Hence there are laws guiding the administration of tax, assessment of tax legality collection and accountability of the tax collectible. It may be noted however that a public receipt having an element of compulsion does not automatically become a tax.
Public authority could distribute certain goods services of which payment from the beneficence are compulsory. This has not qualified it to become tax, it has direct benefit, thus before a payment could be regarded as tax there are four essential elements which must be observed, which are; the art of compulsion. It must be levied by the public authority it is not fine and it must not have any direct guide.
Taxation no matter how it is obtained is precisely a liability on individual’s income. Tax has its influence on the economy either by discouraging or encouraging economic activities; in fact it has been an effective tool in the hands of any government and economic planners to control the economy, in a depressed economy. The government can reduce the tax rate to stimulate the economy, thereby increasing disposable income of the people which however reflect in increased investment. The government on the other hand during inflation increases the tax rate to mop up the excess money in circulation. Thereby leaving the tax payer with little income to spend and these affect investments in the private sector.
Furthermore, taxation is used to avoid the consumption of harmful goods and their importation of commodities made locally and importation of ostentation goods. Also it is effective fiscal tools for redistribution of income in the economy.
1.2.1 Board of internal revenue Abakaliki Ebonyi State
Ebonyi state was created on the October 1,1996 where then military head of state under the late General Sani Abacha announced the creation of new state . it is made up of 13 local government areas.
Afikpo North, Afoikpo South, ohaozara, Ezza North, Ezza South, Izzi, Abakaliki ikwo ivo, Onite ha, Ohaukwu, Ishielu and Ebonyi. Local government. The capital is Abakaliki. The present day Ebonyi start at different times belong to Ogoja province eastern region, eastern central state, Anambara and Imo simultaneously,Enugu, Abia state. There were also Abakaliki province which comprises of both non-Igbo speaking communities whose relationship was only to suit political and administration convenience.
Ebonyi state is richly blessed with natural resources blessed with abundant mineral resources across the local government areas. At Ebonyi is Zine and Tead at Uburu in Ohaozara local government is natural salt water, this served the people of Nigeria during the Nigeria civil war at Ivo local government are blessed with Marbles quarry rock etc.
Ebonyi state is the salt of the nation and its blessed with fertile farmland. The major occupation of the people of Ebonyi state is farming. The farmers are mostly peasant, one who grows cassava, yam rice, maize, and vegetable. In terms of political cultural and social life the is people of Ebonyi state are not behind Nigeria is made up of many ethnic groups with different cultures. In Afikpo we have the Ogo society with many other culture which is the highest society in Afikpo, in Ohaozara we have Enyibe and the traditional head in each village called the Igwe and Eze who co-ordinates and represents the people in every issue that concerns them.
The first milltary government to take the oathnary general captain wealter her Feghabor followed by the assistant inspector general of police simion oduoye after him was the indigenous civilian governor DR. SAM OMINIYI EGWU after him is our present Governor MARTIN ELECHI EGWU who is now piloting the seat of the government.
Furthermore Ebonyi state has a common boundary with the people of Ohafia local government in Enugu state and the people of Idoma in Benue state. The problems of this Young state are lack of good infrastructure facilities such as a good road, electricity and pipe-borne water. The consequence of this is that the people are infected with the guinea worm disease due to ugly situation of the road the farmers are left with their farm products without attracting foreign investors who would have use those products for production. This will encourage our economy through the revenue that would have been generated imposition of taxes. Even the tax officials could not have access to some of the interior communities due to poor bridge network and road.
This hampers the effect of Nigeria tax system which also will affect government revenue. Abakaliki board of internal revenue was created; the board of internal revenue was created. The board is responsible for the collection of taxes within Ebonyi state and also for the administration of the state tax matter; it was established by PITA NO 104 OF 1993.
1.3 Statement of Problems
Investigation revealed that taxation being a major source of revenue to the government of the notion has to be adequately managed. In addition, taxation is been as an economic factor amongst others determining the tempo of investment and other economic activities. These call for effective management of tax. In the Nigerian tax system, the actual result is far below the expectation. Critical analysis of both state and federal budget has reveled out to be revenue from tax but the actual realization is usually in each case below the estimated amount.
It has been argued that with taxation, depressed economy would be stimulated and the consumption of harmful and ostentation goods will be checked. But for some years our economy has been in a mess and the consumption of harmful goods has instead been on the increase.
These and many other short comings are due to;
- The inability to enforce the tax law
- Lack of adequate knowledge to tackle tax issues.
- Little or non-existence of adequate follow up of earning.
- In adequate staff and employment of unqualified staff
- False declaration of assets
- Fraudulent behavior of some tax efficacious.
- The problem of tax evasion.
- Lack of reliable statistical figure on the population of the taxable individuals of the state.
There has been the public outcry by the rural dwellers “no development no tax” concerning development neglect of their area by the government yet they pay tax. This discourages them from paying tax pay. This discourages them from paying tax hence results to much tax evasion in rural areas. This problem is similar to America before their independence in 1776 with their slogan “No representation to taxation.
1.3.1 Problem Analysis of the Study
Government needs revenue to carry out its budgeted projects. There is no other means which this project could be executed when taxes are not administered properly in the state. This is the problem of Nigeria tax system, poor economic improvement and that people evade or run a very for paying tax without being noticed. These are various causes of poor tax system in Ebonyi state. They include the following:
- Poor tax information and accounting record;
- Corrupt officials of tax agencies;
- Where income and poor fits of the tax payer are not;
- Accurately rendered to tax collection; and
- Where tax are not collected from that tax payer as at when due.
If this problem should continue, government may not afford to pay their staffs, provide the necessary social amenities such as good road, pipe born water and electricity, it may also lead the state into borrowing both internal in order to meet up their budgeted expenditure. The problem remains that people who are suppose to pay tax are by making collection of tax so difficult. They also obtain tax clearance through wrong channel, forgery thereby reducing government estimated revenue, all this problem contributes to the poor tax system in Ebonyi state Abakaliki.
1.4 Aim and Objectives of Study
The aim of the study is to appraise the Tax System in Abakaliki, Ebonyi State. In achieving this aim, the following specific objectives were laid out as follows:
- To determine and identify the impact of tax on improving government revenue;
- To highlight the need for tax in Nigeria; and
- To suggest and recommend solution that will help improve tax system in Ebonyi state Abakaliki.
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:
- What do you understand by Tax System?
- What is the need for tax in Nigeria?
- What is the impact of tax on improving government revenue?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant different between Revenue Generation and Tax System of the Ebonyi State.
- H1: There is significant different between Revenue Generation and Tax System of the Ebonyi State.
1.7 Significance of Study
This research would be significant in these aspects;
- To consider the appropriate measures necessary for effective tax system in Ebonyi state.
- To enumerate and identify persons organization and properly liable to tax.
- To create awareness to the Ebonyi state government and the general public about the positive effect of an appraisal of Nigeria tax system on improving government revenue.
Finally, the findings of this study will also be important to policy makers especially on matters concerning taxation and budgeting so as to have manageable budgetary deficits.
1.8 Scope of Study
The scope of the research is focused on the Appraisal of Tax System in Abakaliki Ebonyi State using Board of Internal Revenue Abakaliki, Ebonyi State as a case study.
1.9 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.
- Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
- 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, questionnaire and interview).
1.10 Definition of Terms
In this research study, certain terms / concepts are used for the purpose of proper understanding are clearing, the unfamiliar term used are defined as follows:
Tax: This is a compulsory levy imposed by the government on the citizens of the state.
Taxation: This is a way or method of generating revenue through taxes by the government.
Tax Base: This refers to the items to be taxed.
Tax Rate: This is the object taxed.
State Board of Internal Revenue: This is the board in the state level charged with their possibility of tax collection.
Revenue: This is an income i.e. The total annual income of the state.
Computer: A computer is a processor of information of data.
Government Revenue: It refers to the revenue received by a government to finance its operations and development projects. It is an important tool of the fiscal policy of the government as it facilitates government spending (OECD, 2008b).
1.11 Administration of the Study
The Ebonyi state Abakaliki board of internal revenue is one of the parastatal in collection of all taxes, which is charged with the responsibility of all tax revenue due to the state government it is headed by the executive chairman. There are presently four departments being operated by the board.
- Assessment department
- Collection department administration department
- Planning research and statistical department.
The finance and supply section under the administration department and the state motor registry is under the collection department. The board of internal revenue operates two major offices in which of the 13 old local government area. The offices are tax offices and motor license offices.
The tax offices is headed by the tax assessment authority with a tax collector responsible for collection of all road taxes such as vehicle licenses, driving licenses, change of ownership, prove of ownership driving test, vehicle test, conductors badge etc. But the tax officer collects personal income tax through direct assessment of normal nite assessment for instance PAYE withholding tax, hackney permit, development levies etc.
Furthermore each of the departments is headed by a head of department (HOD) experienced in that department while the secretary heads the police section and coordinates the activities of other department. The chairman heads the police section and coordinates the activities of other departments. All those taxes are collected by the field official and are paid into the state government account in designated banks. The tellers of the lodgment are presented to the treasury along with the copies of the revenue cash book where the collection was entered to show evident of the judgment.
The sub-treasury issues such officer with the treasury book 6 (six) with which the officer renders returns of collection of the headquarters. The returns of collection are collection from different officers totaled and presented to the government on monthly bases as the internal revenue monthly collection.
1.12 Assumption of Study
It is assuming that;
The respondent at Abakaliki and Afikpo North local government board of internal revenue will co-operate with the researcher and complete the questionnaire and grant audience for intervenes.
The supervisor will give the researcher all the necessary guidance and direction for the completion of the study.
The researcher will be alive to see the end of the study.
