1.0 Introduction
1.1 Background Of The Study
Personal income tax is the most important component of direct taxes. The issue of personal income tax evasion has been canker work that has eaten deep into states. The rate at which tax evasion has been taking place is alarming.
Here in Nigeria, personal income tax evasion is over 50% compared with about 14% in the United Kingdom (Omorogawu, 1982). To minimize tax evasion, several measures has been introduced in Nigeria, such as operation show tax clearance before one could be given contract, register business firm, enroll his/her children in public schools. This has given administration much concern. Various conferences have been held by tax assessors on how to improve tax administration.
This research has therefore been undertaken to study the causes and effects of personal income tax evasion on the infrastructural development of Imo State in particular and Nigeria with a view to finding solution to it.
1.2 Statement Of The Problem
The essence of every research undertaking is to solve teething and novel problems posing serious threats to the life success and survival of any organization. Revenue is important to government in order to carry out its development project. In every year, the government published its estimated revenue and expenditure in its budgets. These budgets send out the target for governments overall objectives.
Personal income tax is the major source of revenue to Owerri Municipal government. Its problems include:
- No eligible tax payer is prepared to pay tax and this is the major problem.
- Lack of basic infrastructure due to insufficient revenue collection.
- Lack of maintenance culture on government owned infrastructural development.
- Delay in salary payment of civil servants.
1.3 Objectives Of The Study
In order to achieve the course of this research, the researcher wishes to carry out the research with the following guidelines:
- To determine the extent to which tax evasion of the citizenry in Owerri Municipal affect the development of basic infrastructure.
- To ascertain the extent tax evasion has affects the infrastructure of the government in Imo State owned government infrastructure.
- To ascertain the tax evasion percentage among the population in Owerri Municipal L.G.A.
1.4 Research Questions
The followings are the research question of this research project.
- To what extent does tax evasion affect the development of basic infrastructure in Owerri Municipal?
- To what extent does tax evasion affect the government maintenance culture in Owerri Municipal?
- To what extent does tax evasion ascertain the tax evasion percentage among populations in Owerri Municipal?
- To what extent does tax evasion evades tax in Owerri municipal?
1.5 Significance Of The Study
This work is beneficial to the following:
- Local government.
- Board of internal revenue.
- Researchers.
- To state government
1.6 Scope/Delimitation Of The Study
This study covers personal income tax evasion in Imo State of which I limited the scope of this work to Owerri Municipal.
1.7 Limitation Of The Study
We were faced with so many limitations. The study demands that a lot of resources, time energy, intellectual ability and carefulness be deployed. Thus these no doubt erupted limitations, since it is very difficult to actualize them as supposed.
However, the most difficult or limitation is the time factor, inspite of the length period allowed, the researcher find it difficult to cope with since he is doing the study and at the same time still have lectures to attend to. Additionally, is the cost to execute the study which also no doubt poses a threat.
1.8 Definition Of Terms
Tax Evasion:
This implies a willful act on the part of the taxable person or entity to disclose his taxable income for the purpose of tax assessment and thereby escaping completely from tax liabilities.
Tax Avoidance:
This refers to the parastatals of using legal device or means by a tax payer to secure a maximum reduction in the tax which is due from him.
Taxation:
This can be generally defined as a compulsory contribution from a person to the government for the amount of expenses incurred bys the government in common interest of all without reference to any special benefits being conferred on the person who made the compulsory contribution.
Tax Imposition:
The imposition of any tax involves using a pre-determined procedure, which are sometimes to the knowledge of the paying public. The process of tax imposition and collection is called taxation. The government’s right to levy taxes for the support of those functions designed to safeguard and improve health, welfare, learn education and morality of its citizen is of great important of government growth and strength is dependent upon the power of tax and upon its ability to tax wisely.
Tax Base:
This is the object being taxed, there are general tax base that government can utilize for imposing real proper taxes. These are:
- Income produced and received.
- Expenditure (consumption) as people use income borrowed funds and proceeds from other savings and other sources.
- Wealth or Property or Capital: This applies to stock of building. Technically, the assessed value (capital or rentals) of proper form the tax base upon which amount of tax (i.e. tax liability) is determined. Examples of tax base are: company’s profit, capital rental, value of landed property, goods for sale, income/salary imported goods.
Tax Rate:
This is the amount of the tax based to be paid in tax to the appropriate taxing authority. Examples of this are the five percent (5%) of the value of goods and professional fee paid for services rendered as value added tax in Nigeria.
The Impact of Taxation:
This refers to the economic and social change that have resulted from the implementation of a given tax police. Every tax imposition has some objectives. All the change and activities, social and economic advantages and disadvantages, all constitute the impact to the system of the imposition of the tax in question.
The Effect of Tax:
The effect of taxation means the impact which a tax imposition makes in a given system. Some of the economic effect of taxation includes its deterrence to work, saving and enterprise. Its encouragement of inflation and its diversion of economic resources from high taxed area to less taxed areas.
Tax Incidence:
It refers to the effect of tax and was the burden of it finally rest i.e. The effect of the tax to be paid on the individuals paying it. It is a person who pays it which in the case of real property base tax is the owner and the occupier of a property tax incidence comes in two parts namely formal and effective incidence.
National Tax:
This is a tax levied by the federal government and it is applied in all the states of the federation. This includes value added tax, company income tax, petroleum profit tax and education tax among others.
State Tax:
These are tax levied by the state, which include personal income tax (paye), stamp duties, development charges etc.
Local Rate and Tax:
These are tax levied at the local government levels, which include tenement rates, TV radio and advertisement a rate among others.
Tax Administration:
Tax administration could be divided into three main types.
i. Tax Assessment:
It is the act of determining the exact amount subject to taxation under a given status. In the words of Ifediora (1998) assessment involves the process and procedures for determining the taxable value of property in which the tax burden is calculated in accordance.
ii. Tax Computation:
It involves calculating the amount payable as tax i.e. tax liability. Tax liability is imputed computed applying the appropriate tax rate on the taxable amount determined through the assessment process. It is an easy process once the tax rates are known and the income cleared for assessment is authentic.
iii. Collection and Payment of Tax:
The next vital stage in taxation process after tax assessment and computation is collection assessment and payment of the tax so charged. The tax authority assesses and collects tax on all incomes.
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