PROBLEMS OF PERSONAL INCOME TAX COLLECTION

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

A tax could be defined as a compulsory payment levied on individuals by government or paying a specific percentage of their earnings or a specific amount of money in order to raise revenue for development purposes. A tax according to Agyei (1985:2) defines tax as “the transfer of resources from the private sector to the public sector in order to accomplish some of the nation’s economic and social goals”. Well, the primary economic goal of developing countries is to increase the rate of economic growth and hence the income per capitals which will lead to higher standards of living. Goals that will be achieved with the introduction of tax are the provision of additional basic government services, particularly in education, public health and transport which are imperative for the growth of the rest of the economy. Personal income tax was first introduced in Nigeria I  1904 by the late Lord Lugard when the community tax operative in Northern Nigeria. Formerly. Nigerian cheerfully paid their taxes in kind of rendering free services such as clearing the bush, digging put toilet, well, etc. for the benefit of the community as a whole failure to render such services usually resulted in the seizure of property which might be reclaimed on payment of money. In 1917, Lord Lugard made certain changes which culminated in the native Revenu ordinance, it was the (1917) ordinance that was extended to the Eastern Nigeria in 1928. the stiff expositions were also made it the end of 1939 chief Okugo of Oloko carried out the instructions laid down by the British Administrations on a new way of taxing income of individuals. This led to rumors that a new system of taxation will be introduced. Its later consequence culminated in Aba women Riot against the British Administration. Meanwhile, in the year 1799, it was introduced by the famous British king known as William and catering for government expenditure. Income tax was very effective in Northern Nigeria but finally has come to stay in Nigeria today. The Rayman fiscal commission of 1958, recommended the introduction of basic principles for taxing income of persons other than companies. This recommendation was embodied in the Nigeria constitution order in the council in (1960) and formed the basis of the income tax management Act (1961). By Untrue of Edit (6) of 1970, the Board of Internal Revenue came into being in effect, the Board became an organ charged with the responsibility of carrying out broad policies of tax administration in Anambra state.

 

1.2 STATEMENT OF THE PROBLEM

These problems hinder the provision of various services from security to economic services for the citizens. Though the funds which would have been collected are not available to the government thereby creating stability of the economy.

Some of the problems are easily enumerated as stated below.

(i) Lack of staff and inputs such as stationeries, vehicles and effective legislation to counter the tax officials.

(ii)  Lack of appropriate incentives to officials and logistics supply for effective tax drive.

(iii)  Inadequate enlightenment to taxpayers.

(iv)  Lack of adequate information on the taxpayer’s services.

(v)  Some taxpayers are not prepared to pay their tax at will unless they are caused which gives rise to their coming.

(vi)  Some taxpayers feel that the money they paid as tax is no longer used for what it is meant such as roads, water supply, electricity, bridge, etc and as a result, they feel reluctant to pay higher taxes or not paying at all.

(vii) Some tax pay is hostile to the official, for example – the Mkpume Akputakpa case in 1971 in which Mr. Njoku was brutally murdered.

(viii) Difficulty in identifying who are the taxpayers.

(ix)  failure to back up with the tax requirement.

(x)  Problems of lacking the taxpayers.

 

1.3  OBJECTIVE OF THE STUDY

The main purpose of this research work is to find out those problems hindering tax and this could be obtained by the application of the following methods.

(a)  To know whether the individuals are actually under assessed or over assessed.

(b)  To know whether the tax collectors are really collecting the much-expected revenue or not.

(c) To find out the efforts made by the board of Internal Revenue in educating people on the need to pay their taxes as and when due.

(d)  To find out why people avoid paying tax.

(e)  To know also how tax authorities are determining the tax liability (assessment individuals)

(f)  To find out whether the caliber of people recruited by the board of internal revenue as tax collectors and agents have any direct effect on the efficiency of collecting tax

(g)  To know how the board of internal revenue is making an effort to create awareness through the mass media.

(h)  To know if the introduction of a tax clearance certificate (TCC) has really improved the tax collection in the state.

 

1.4   RESEARCH QUESTIONS

The researcher tends to verify the following operations on the board of internal revenue through the research questions.

v Does the tax authority assess individuals before imposing a tax on them?

v Do these taxpayers pay their taxes as and when due?

v Are all the money collected properly accounted for?

 

1.5   RESEARCH HYPOTHESIS

i. Ho: Tax evasion or fraudulent practices of tax collection is not a problem militating against tax collection.

Hi: Tax evasion or fraudulent practices of tax collection is a problem militating against tax collection.

ii. Ho:  Under assessment is not a hindrance to enhance tax collection.

Hi, Under assessment is a hindrance to enhance tax collection.

iii.  Ho:  Avoidance of tax is not a problem of personal income tax

Hi:  Avoidance of tax is a problem of personal income tax.

 

1.6  SIGNIFICANCE OF THE STUDY

The importance of this study is to know problems of personal income tax collection in Anambra State, Now, that the nation is no longer enjoying the oil boom, there is the need for the government to find some practical ways of generating money with which they will use in financing their programs. The study of personal income tax has ways of benefiting the government and the people of the state. Solutions preferred for solving the problems of taxes, especially income tax shall be with be available to the government to finance more developmental programs. The people will then benefit indirectly from the result of this study. This case also provides reference material for educational purposes. The board of internal revenue and its different officeholders can improve upon their work by the following recommendation of this study.

 

1.7  SCOPE AND LIMITATIONS

SCOPE: This study is particularly focused on Awka South Local Government which comprises the following autonomous communities namely, Awka Town, Amowbia, Nibo Nise, Mbaukwu, ad Isiagu with their headquarters at Awka.The researcher looks at the way the tax evaders are being treated and statistical records of some taxpayers in Awka South local government within the jurisdiction of the Board of internal revenue Awka in Anambra state.

LIMITATION: As mentioned earlier, the two outstanding constraints are finance and staff not co-operating.

FINANCE: In view of the economic crunch that is passing through, it is very difficult to have enough money to achieve one’s crucial desires. Research of this nature involves money. A lot of money is required for typing, running of the questionnaire, traveling to places for the project, yet there are competing alternatives requiring money.

However, despite the impediments, the research went on fine.

It is equally necessary to mention the nonchalant attitudes of respondents. However, the above limitations did not destroy the focus of this study.

 

1.8   DEFINITION OF TERMS.

PERSONAL INCOME TAX: This is a compulsory payment levied on by the government on individuals to pay a specific amount of money which should later be used for development purposes (Agyei 1985).

TAX EVASION: This is a deliberate attempt not pay taxes, it is, therefore, an illegal act, usually the income-earner has the capacity to pay tax but ie is not willing to pay very stem laws against tax evasion should be made. Also, the cannons of taxation should be followed when making tax laws to stop tax evasion.

TAX AVOIDANCE: It refers to the use of legally provided devices to secure a maximum reduction in the amount of tax which is due from a taxable, it also an immoral means of avoiding to pay tax completely.

 

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