Evaluation Of Taxation As A Source Of Government Revenue; A Case Study Of The State Board Of Internal Revenue
The Nigeria tax system had its share in terms of being adequately mobilized for increased revenue and fiscal actions. The State tax revenue is no exemption or Exception to the fact that the revenue generating ability is grossly inadequate to meet up its government functions. Taxation which is seen as compulsory payment made by the citizens of an entity (country) to the government is mis-constructed in terms, of what the government tax Agencies actually realizes from it. The term “Taxation” as a source of Government revenue with special reference on the state’s tax revenue sources, is seen in this study as a lopsided mobilization effort in some states, used as a case study. The research carried out, using the ratio analysis and the difference equation evidently pointed out the fact that some states likes Lagos, Anambra etc. is able to mobilized. A sizeable pool of revenue with recourse to depending on the federal government.
1.1 Background of the Study
Taxation can simply be seen as a compulsory transfer or payment (or occasionally of goods and service) from private individuals, Institutions or groups to the government, Anyanwu, (1998). It is a burden which every citizen must bear to sustain his or her government. Another perspective of the definition has it that, taxation is the compulsory payment levied by the government on its citizens to generate revenue and control economic activities, hence it is backed by law. Taxation has not only influenced the economy, it has also become an important instrument of economic policy.Thus its importance lies primarily in its ability to raise capital formation of the public sector for the development and growth of the economy. Its regulatory roles of consumption and hence of stabilization as well as of income redistribution are accordingly derivatives of the primary to provide service for the community, whether to the individuals families or the wider community. Additional to their service role, however, most public service organizations under the State Government can that including seeking a profit or contribution on that trade, and or they can make charge for some or all of their services. But since profit is not the main essence of these (corporations) establishments, taxation happens to be one of the avenue through which these corporations make up for administration expenses and revenue. The government has certain functions to perform for the benefits of those, it governs. The scope of these functions will depend, among other things, on the particular and economic orientation of the members of a particular society at a given point in time, Their needs and aspirations and their willingness and ability to pay tax. As the functions of the government increase, the revenue of financing those functions must necessarily increase. Nigeria operates a federal system of government which allows the division of powers among different (3) tiers of government which includes the federal, State and Local Government.In all the ability to differentiate or divide the taxing power of these tiers seems simple enough when it comes to the terms of starting the various types of taxes that are available within this various tiers. But for the course of this study the various types of taxes levies collected by the State Government includes:
- Federal allocation
- Income from sale of crude oil
- Mining and royalties
- Renting of government properties
- Profit from government investments
- Fees and specific charges, etc.
Hence, both tax and non-tax sources of government revenue listed above will be discussed in detail in the next chapter.
1.2 Statement of the Problem
The administration of tax as a major source of government revenue in every country, especially in Enugu State by the State Board of Internal Revenue faces a lot of challenges such as administrative problem like poor management, lack of adequate financing to meet up with the administrative costs, lack of adequate tax machinery, employment of inexperienced and unskilled personnel, embezzlement of generated revenue by the tax collector, authority of the government which discourages people from paying tax. Another problem is the problem of tax evasion and avoidance by the public especially, self employed individuals. According to Jude (2005) self-employed people do not comply with tax matters. They avoid and evade tax. Consequently, enough tax revenue is not generated from them. One of the major causes of tax evasion by the self-employed people is the high rate of personnel income tax
1.3 Objective of the Study
The following are the objectives of this research work:
- To determine and analyze various taxes that is charged in Enugu State from 1994 to 2012.
- To ascertain the total value of taxes collected during the period, year by year.
- To exhaust other revenue sources available to the State government through which more tax revenue would be generated.
- To determine other sources of revenue available to the State, apart from taxand how to improve.
- To make suggestion on ways of revenue improvement accruing to the State from both taxes and non-tax
- To examine and evaluate tax collection machinery of the State, its effectiveness and ways of making improvement.
- To ascertain the category of person taxable in the State and the extent of their compliance.
1.4 Research Hypotheses
For the successful completion of the study, the following research hypotheses were formulated by the researcher;
- H0: there are no various taxes that are charged in Enugu State from 1994 to 2012.
H1: there are various taxes that are charged in Enugu State from 1994 to 2012.
- H02: there are no other sources of revenue available to the State, apart from taxand how to improve.
H2: there are other sources of revenue available to the State, apart from taxand how to improve
1.5 Significance of the Study
The aim of the study is to evaluate the tax revenue generation in Enugu State of Nigeria and assess the tax collection machinery set in motion by the State. It will also evaluate other sources of revenue available to the State to know how much the government is exploiting these sources. Also, the work will examine how far the government implements tax policies, whether the tax administration machinery is efficient and if not how to improve it. The study will find out much of revenue generated by the State government comes from taxes and ways of improving it to increase the State government tax revenue generated.However, there is also the need to compare the tax generated from that of other States with that of Enugu State. This will help to evaluate the performance of Enugu State more and better tax revenue generation of the strategies with suggested improving tax revenue generated of the State so that funds will be available, provision of infrastructural facilities to the people when there is economic growth. The standard of living of the entire citizen of the State would be greatly improved.
1.6 Scope and Limitation of the Study
This research study is limited to the taxes under the administration of the State government using Enugu State government Board of Internal Revenue as the case study. It will evaluate the performance of the board with respect of taxadministration in the State. Other nontax revenue sources available to the State government will be looked into and suggestions towards tax and non-tax revenueadministration in the State will also be made. The researcher encounters some constrain which limited the scope of the study;
a) Availability of Research Material:
The research material available to the researcher is insufficient, thereby limiting the study
The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
c) Organizational Privacy:
Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.
1.7 Definition of Terms
Tax is a charge by government units against the income or wealth of person or organization for the common benefit of all.
Taxable income is income subject to tax by any government authority.
Taxable profit amount of profit as computed under the provision of a particular tax law or revenue act upon which an income tax is levied.
Revenue (Government Accounting) is the gross receipts and receivable of a government unit derived from taxes custom and other sources, but excluding appropriation and allocation.
It is the obligation of evidencing good management, control or other performance imposed by law, agreement or regulation as corporate executive trustees on public official and other persons controlling the financial policy of an organization or State.
An executor is the person appointed in accordance with the provisions of the relevant law to administer the estate of deceased person.
In government and institutional accounting fund is a sum of money often created and maintained for particular purpose and having transaction subjection to legal or administration restrictions. Its double accounts are self-balancing and from their balance sheet and operating statement may be prepared. A separate budget is prepared for each fund.
This is an act which deals with illegal means of avoiding payment of tax. In other words, it is a deliberate refusal of tax payment by the tax payer.
This is a legal means of avoiding payment of tax by the taxpayer.
1.8 Organization of the Study
This research work is organized in five chapters, for easy understanding, as follows.
- Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
- Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
- Chapter three deals on the research design and methodology adopted in the study.
- Chapter four concentrate on the data collection and analysis and presentation of finding.
- Chapter five gives summary, conclusion, and recommendations made of the study
Summary, Conclusion and Recommendation
It is important to ascertain that the objective of this study was to ascertain evaluation of taxation as a source of government revenue. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of evaluation of taxation as a source of government revenue
This study was on evaluation of taxation as a source of government revenue. Seven objectives were raised which include:To determine and analyze various taxes that is charged in Enugu State from 1994 to 2012, to ascertain the total value of taxes collected during the period, year by year, to exhaust other revenue sources available to the State government through which more tax revenue would be generated, to determine other sources of revenue available to the State, apart from taxand how to improve, to make suggestion on ways of revenue improvement accruing to the State from both taxes and non-tax, to examine and evaluate tax collection machinery of the State, its effectiveness and ways of making improvement, to ascertain the category of person taxable in the State and the extent of their compliance.In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staffof the state board of internal revenue Enugu state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made of directors of tax, assistant directors of tax, senior staffand junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
In this study, effort has been made to analyze taxation as a tool for revenue generation in Nigeria in the three tiers of government namely: Federal, State and Local Governments for structural and economic developments. In this study, issues relating to taxation as a tool for wealth creation and employments, the role of taxation in wealth creation and employment, the role of taxation on economic and social development sustainability and government revenue generation were considered. This study also considered the two major categories of tax which are direct and indirect taxes, and the study focused on the various types of taxes collected by the Federal, state and Local Governments. Furthermore, the study considered other problems militating against effective tax administration in Nigeria such as identification of the person to be assessed, identifying income for tax purpose, personnel problem and low image of tax officials in the eyes of the public, attitudinal problem and cumbersome process of payment. Finally, the study concludes that taxation has significantly impacted on revenue generation in Nigeria.
The following recommendations are made:
- There is an urgent need for all state governments to clearly state the basic objectives of its tax system and the relationship between these objectives. This will assist to give the tax administrators a sense of direction and make the tax payer see clearly the reasons he/she should pay his/her tax as at when due.
- The tax collection mechanism used by tax officials must be free from corruption and embezzlement. If this is not done the revenue collected many not reach the desired point.
- The Federal Government, state governments and local governments should urgently fully modernize and automate all its tax system, improve tax payer convenience in the assessment and payment process whilst at the same time entrenching effective and modern human resource management practices in the tax authorities.
- Judicious use of tax payers money should be made and be seen to have been properly utilized. This will encourage tax payers to continue to pay taxes.
- Effort should be made by the Federal State and Local Government to diversify the main revenue source from oil to other sectors of the economy such as agriculture, extractive industries in order to attract direct and indirect taxes.
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