INCOME TAX ADMINISTRATION IN ABIA STATE. A CRITICAL EVALUATION OF PROBLEMS AND PROSPECTS. (A CASE STUDY OF BOARD OF INTERNAL REVENUE UMUAHIA)
INCOME TAX ADMINISTRATION IN ABIA STATE.
A CRITICAL EVALUATION OF PROBLEMS AND PROSPECTS.
(A CASE STUDY OF BOARD OF INTERNAL REVENUE UMUAHIA)
The policy of tax administration and implementation have been a great problem to the third world countries. This research work on “Income tax administration in Abia state a critical evaluation of the problem and prospects” aim at suggesting ways of minimizing, the effect of problems which militate against government revenue base which affects its capital expenditure adversely.
To enable the researcher find solution to the problem of this study some question inform of hypothesis will be develop. Data will be collected through primary and secondary sources. In order to carry this work the researcher will face some constraints like bureaucracy among the staffs of board of internal revenue unavailability of secondary data for the literature review, time and financial constraints. The test statistic that will be used in analyzing data is chi-square. This work will be beneficial to corporate organization, individuals, and traders. It will make them to under stand and appreciate the need for them to pay their income taxes. Some recommendations would be made on previous research on this topic, which are government should provide conductive working environment for the tax authorities and also adequate funding and provision of operational facilities.
Tax policy administration and implementation have been a great problem to the third world countries, which Nigeria is one. This research work, “income tax administration in Abia State, a critical evaluation of the problems and prospects. Thereafter, suggests ways of minimizing the effects of the following problems. Avoidance and evasion of tax, waiting the taxpayers, initial tax payer compliance, resolution of controversies between tax payer and tax officials and collecting of taxes etc.
These problems have affect on the income tax revenue base of the government, which will in its totality have adverse effect on its capital expenditure. To enable the researcher find solution to the problem of this study, some questions were raised in form of hypothesis, which was developed into null and alternative hypothesis.
H0: There is no relationship between income tax revenue and government capital expenditure.
H1: There is a relationship between revenue from income tax and government capital expenditure.
H0: No relationship exists between revenue generated from income tax and the government recurrent expenditure.
H1: There exist a relationship between revenue generated from income tax and the recurrent expenditure of the government.
H0: There is no problem confronting tax administration.
H1: There are problems confronting tax administration.
As a result of detailed analysis, the study has revealed so many important phenomena in revenue generation in this state which in-adequacy of staff, inefficiency and ineffectiveness of tax assessment authorities due to heavy work load, miss appropriation of collected funds just to mentions but a few.
The method of data collection was through primary and secondary sources. The secondary source, which involves the analysis of vital documentations available at the state library ministry of finance and board of internal revenue. Data collected were analyzed by simple Pearson’s correlation co-efficient and chi-square.
With respect to the research findings, the following recommendation are made to a successful use of improved income tax administrations to enhance development.
Table 1: Abia State income tax revenue with capital and recurrent expenditure 1993 – 2003.
Table 2: Date for proper accounting date for provision of adequate working condition.
Table 3: Response from problem facing tax administration in Abia State.
Table 4: Response from attitude of tax payers
Table 5: Data for the level of communication between your staff and taxpayers.
Table 6: Response from factors affecting level of communication between your staff and taxpayers.
Table 7: Response from the rate of tax evasion and avoidance in Abia State.
Table 8: Response from the quality staffs in state board of internal revenue
Table 9: Response from problem of locality the tax payers
Table 10: Response from how to notify the public on the importance of taxation.
Table 11: Correlation test between capital expenditure and income revenue.
Table 12: Correlation test between recurrent expenditure and income revenue.
Table 13. Computation of chi-square test statistics of problem facing tax administration.
Figure I: Organization chart of the board of internal revenue Abia State.
Figure II: Testing for if there is any problem facing tax administration at 5% level of significance with 4 degree of freedom.
CHAPTER ONE:
INTRODUCTION
CHAPTER FOUR:
PRESENTATION ANALYSIS AND INTERPRETATION OF DATA
CHAPTER FIVE:
SUMMARY, CONCLUSION AND RECOMMENDATION
Bibliography
Appendices
Appendix A: Letter of introduction
B: Letter to the respondents questionnaire
C: Statistical computation.
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The tax system is often identified as one of the most powerful levers available to the government to move their economic state from a pitiable condition to a happier position. According to Anyanwu (1999) taxation can simply be seen as “a compulsory transfer of money from private individuals, institution or groups to the government”. On another note Agolu (2001) says “taxation may be defined as a compulsory levy by the government through its various agencies in the income capital or consumption of its subjects. These levies are made on personal income such as salaries business profits, interest, dividends commission royalties or rests. It may also be levied on capital gains and petroleum profits. All of the above are taxes levied on income”. Income tax is one levied on the income after allowances have been granted what remains taxable.
The questions then arises as how efficient is the administration of income tax in Nigeria and Abia State in particular. This is the questions this research work tries to provide an answer to. It is important to note that during colonial period, income tax administration was placed on the shoulders of colonial masters according to the orders of the governor general. After independence, the government of Nigeria took over administration of taxes, especially, income tax.
Consequently, board of internal revenue were established in the different regions and states of the federation. These states were charged with responsibility of income tax administration.
Section 85A of PITD provided for the establishment of a state board of internal revenue to be known as “the state service” to comprise of:
It is the duty of the secretary to summon the meetings of the board whenever any matter necessitating the attention of the board so requires or upon the request of any member of the board. A majority decision of the board obtained by written correspondence shall have the effect of a resolution, unless any member has requested for the submission of such matter to a formal meeting.
This board is charged with carrying out the broad-based policies of tax administration in Abia state. They were formerly with the ministry of fiancé but now they are autonomous on certain issues like recruitment of staff, payment of their staff and sundry salaries and claims and also administration of the office.
The general overview of the Abia State board of internal revenue structure could be illustrated in the diagram/organigram overleaf. From the diagram, the commissioner of finance is in charge of the treasury and finance office. He gives and directs orders how it should be implement. He sees to the good administration of the internal revenue. He is embedded with his three members as the chief executives.
The directors of internal revenue issues administrative orders and inspects duty/work done in various sectors. He also inspects work brought from outside.
ORGANIZATIONAL CHART OF BOARD OF INTERNAL REVENUE ABIA
Staff requests are presented to the government by the Director who also receives order from the higher authority of his office.
THE FINANCE AND SUPPLY (F & S): Are responsible for supplying the board with adequate funds when needed. Efforts are made to ensure that there is no misappropriate of fund or embezzlement and any officer found guilty of such offence is discharged from the duty part.
ASSESSMENT: They are the main body of this board whose duty is to assess individual according to their taxes due to make them know when to pay it.
COLLECTION: This is the body that is responsible for collecting taxes due or paid from individuals. There are different means of collecting this tax, which include PAYE
PLAN, RESEARCH AND STATISTICS (PRS): They receive from personnel department requests from outside offices. When the requests are being received, it is made known to PRS. The information also feed the Assessment sector. They inform the assessment officers about the information collected PRS informs the finance and supply department about availability of fund.
MOTOR LICENSING OFFICES: They help in registration of new vehicle renewal of driving licensing or vehicle insurance, changing ownership of cars bought, second new and also issuing learners permit.
TAX OFFICES OUTSIDE STATION: These offices are responsible for assessment of individual in zones. These bodies issues orders to assessment authorities and motor licensing authorities and even tax collectors when needed. They receive orders from directors and convey them to assessment authorities for implementation. Finally, they reverse assessment when necessary.
SECTIONAL HEADS: Are responsible for issuing administrative order to other staff. Finally, other staff the implements orders from the above authorities.
To meet the increasing population of local government many subtaxes offices have been created over years. This according to the assessment authorities of the state government is to maximize the revenue collection for the government.
Presently, Enugu State is constituted of seventeen (17) local government areas and all have for easy assessment and collection of taxes, autonomy. It is important to note that no local government is responsible for assessing taxpayers, rather, they determine the local government rate e.g. development rate which every person pays and it is N50.00. Other charges are property, water rate, sanitation rte and so on.
By section 85B, the state board shall be responsible for:
Ensuring the effective and optimum collections of all taxes and penalties due to the government under the relevant laws. Doing all such things as may be deemed necessary and expedient for the assessment and collection of taxes and shall account for the amount collected in the prescribed manner to the state commissioner for finance. Making recommendations, as is appropriate to the joint tax board on tax policy, tax reform, tax legislaties, tax treaties and exemptions from tax as may be required from time to time.
Generally, controlling the management of the services of the law setting up the state board. Appointing, promoting, transferring and imposing discipline on employees of the state service or in writing authorize any person to:
Section 85C, provides for the establishment of a technical committee to consist of
The chairman
The directors within the state services
The legal adviser to the board
The secretary to the board
The technical committee has the power to co-opt any staff from within the service to discharge its responsibilities viz: consider all matters requiring professional and technical expertise and make recommendations to the state board.
Advise the state bard on all its powers and duties specifically mentioned in section 85B. Attend to such other matters as may from time to time the referred to its by the board. These levies are made on personal income such as salaries, business profits, interests, dividends, discounts and royalties. It as also levies against company profit, petroleum profits capital gains and capital transfers, though the capital transfer tax decree was abrogated affective from January 1996.
Income tax administration has witnessed a recession as the economy experienced boom from petroleum. This dwindling fortune from oil sector, states are moving with highly machinery towards revitalization of income tax administrative to enhance their revenue base. This study tries to have a general view of the difficulty, amendment and exploration of income t x in Abia state with all focus towards enhancing economic well being.
This work is organized in five chapters, chapter one is an introduction to the study covering such issues as:
Chapter two presents the related literature review of the study which covers the development of income taxation, tax administration and policy, income tax administration, prospects of income tax in Abia state, income tax administration revenue yield and economic development in Abia State and fiscal policy in general. Chapter three presents the research design and methodology of the study. The sources of data collected for analysis method of data analysis and problems encountered during data collections were also discoursed. Chapter four contains the core of the research presentation. This is where data collected were examined and analyzed in detail to help draw conclusion and make recommendation. The summary of the research, recommendations and conclusion are discussed in chapter five.
2.3 STATEMENT OF PROBLEM
Year ago, income tax administration was not of much concern to the government. But in recent times, this has been identified to be a major problem facing the state. Once would not hesitate to only why the sudden redirected interest to income tax administration. The answer is far fetch.
Abia Stat a typical government organization to meet up with the increased demand to enhance life standard for its citizenry, it exploring numerous ways through which revenue can be increasingly generated.
The government has taken a stride to revitalize the state ministries and the board of internal revenue to ensure steady public spending in vital programmes.
1.4 PURPOSE OF THE STUDY
As money is the pivot on which the wheel of any administrative revolves, the state government in its administration are no exception to this axiom. The success and failure of any administration depends to a great extent on the source of revenue available to administration and the various efforts made harness it. The objective of this study is to look into the impacts of the state government on revenue generation.
This study goes further to examine the fiscal policies in Nigeria, as a whole and a proper understanding of the concept of taxation and income tax administration.
1.5 RESEARCH QUESTION
Inspite of all the encouragement from seminars, workshops, interactive conference and forum between taxpayer and revenue officer they still complain that there seem to be no effective communication between the two on relationship between income tax revenue generated and government capital expenditure. The question that calls to mind is how can effective communication within their two groups be achieved? What are the efficient channels to achieve this? What are the militating factors that surrounds the efficiency in achieving effective communication among the groups (fax payers and personnel)
1.6 HYPOTHESIS
H0: There is no relationship between income tax revenue and government capital expenditure.
H1: There is a relationship between income tax revenue and government capital expenditure
H0: No relationship exists between revenue generated from income tax and government recurrent expenditure.
H1: There exist a relationship between revenue generated from income tax and the recurrent expenditure of the government.
H0: There is no problem confronting tax administration
H1: There are problem s confronting tax administration
1.7 SCOPE AND LIMITATION OF STUDY
This research work is restricted to the analysis of income tax administration in Abia state with particular reference to government revenue as embodied in the annual budgets and records available with state board of internal revenue.
The limitations of this study are mostly the funding and the time limit given for completion of the study.
1.8 SIGNIFICANCE OF THE STUDY
The study will be of greater help/importance to the branch of government that are charged with revenue generation and administration, the management and staff of board of internal revenue Abia in particular and the entire revenue collectors of both Federal Inland Revenue, Board of Internal Revenue and the Local Government in General. And the researcher who is a student of Accountancy to know the causes and reasons for tax generation problem in Nigeria together with its administration from the knowledge of the factors responsible, take the necessary actions and create a good tax generation and administration mechanism in the country – Nigeria.
This study will also act as a guide to policy makers in the restructuring of the tax generation and administration policy. The educators who are educating students in business management studies will also benefit from this study since it will expose them to other areas of generating tax.
The colleagues of the researcher will benefit from the study since it will expand their knowledge and scope. The study will in no small way enhance the knowledge of both tax generation and its administration in Nigeria. Abia state being a state with low industrial activities and highly engaged in rendering civil services this study would in its little way give proper solution towards improved revenue generation that would help to finance capital projects. All these are aimed at enhancing the economic growth and stability of the state.
1.9 DEFINITION OF TERMS
The following definition were used in this study:
B.I.R (Board of Internal Revenue): This is the state government agency that is charged with the responsibility of tax collection and administration in the state.
Taxation: This is a compulsory transfer of money from individual institution or groups to government. It may be levied upon wealth or income or in the form of surcharge on prices.
Income Tax: Tax levied on an individuals income which he earned during a certain period of time usually a year.
Capital Expenditure: Capital expenditure deals with government spending on capital projects
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A CRITICAL EVALUATION OF PROBLEMS AND PROSPECTS.
(A CASE STUDY OF BOARD OF INTERNAL REVENUE UMUAHIA)
PROPOSAL
The policy of tax administration and implementation have been a great problem to the third world countries. This research work on “Income tax administration in Abia state a critical evaluation of the problem and prospects” aim at suggesting ways of minimizing, the effect of problems which militate against government revenue base which affects its capital expenditure adversely.
To enable the researcher find solution to the problem of this study some question inform of hypothesis will be develop. Data will be collected through primary and secondary sources. In order to carry this work the researcher will face some constraints like bureaucracy among the staffs of board of internal revenue unavailability of secondary data for the literature review, time and financial constraints. The test statistic that will be used in analyzing data is chi-square. This work will be beneficial to corporate organization, individuals, and traders. It will make them to under stand and appreciate the need for them to pay their income taxes. Some recommendations would be made on previous research on this topic, which are government should provide conductive working environment for the tax authorities and also adequate funding and provision of operational facilities.
ABSTRACT
Tax policy administration and implementation have been a great problem to the third world countries, which Nigeria is one. This research work, “income tax administration in Abia State, a critical evaluation of the problems and prospects. Thereafter, suggests ways of minimizing the effects of the following problems. Avoidance and evasion of tax, waiting the taxpayers, initial tax payer compliance, resolution of controversies between tax payer and tax officials and collecting of taxes etc.
These problems have affect on the income tax revenue base of the government, which will in its totality have adverse effect on its capital expenditure. To enable the researcher find solution to the problem of this study, some questions were raised in form of hypothesis, which was developed into null and alternative hypothesis.
H0: There is no relationship between income tax revenue and government capital expenditure.
H1: There is a relationship between revenue from income tax and government capital expenditure.
H0: No relationship exists between revenue generated from income tax and the government recurrent expenditure.
H1: There exist a relationship between revenue generated from income tax and the recurrent expenditure of the government.
H0: There is no problem confronting tax administration.
H1: There are problems confronting tax administration.
As a result of detailed analysis, the study has revealed so many important phenomena in revenue generation in this state which in-adequacy of staff, inefficiency and ineffectiveness of tax assessment authorities due to heavy work load, miss appropriation of collected funds just to mentions but a few.
The method of data collection was through primary and secondary sources. The secondary source, which involves the analysis of vital documentations available at the state library ministry of finance and board of internal revenue. Data collected were analyzed by simple Pearson’s correlation co-efficient and chi-square.
With respect to the research findings, the following recommendation are made to a successful use of improved income tax administrations to enhance development.
- Government should provide conductive working environment for the tax authorities and also adequate funding and provision of operational facilities.
- A high standard of literacy among taxpayers.
- The absence of political influence to tax measures.
- Prevalence of accounting records honestly and reliably maintained.
LIST OF TABLES
Table 1: Abia State income tax revenue with capital and recurrent expenditure 1993 – 2003.
Table 2: Date for proper accounting date for provision of adequate working condition.
Table 3: Response from problem facing tax administration in Abia State.
Table 4: Response from attitude of tax payers
Table 5: Data for the level of communication between your staff and taxpayers.
Table 6: Response from factors affecting level of communication between your staff and taxpayers.
Table 7: Response from the rate of tax evasion and avoidance in Abia State.
Table 8: Response from the quality staffs in state board of internal revenue
Table 9: Response from problem of locality the tax payers
Table 10: Response from how to notify the public on the importance of taxation.
Table 11: Correlation test between capital expenditure and income revenue.
Table 12: Correlation test between recurrent expenditure and income revenue.
Table 13. Computation of chi-square test statistics of problem facing tax administration.
Figure I: Organization chart of the board of internal revenue Abia State.
Figure II: Testing for if there is any problem facing tax administration at 5% level of significance with 4 degree of freedom.
CHAPTER ONE:
INTRODUCTION
- Background of the study
- Organization of the study
- Statement of the problem
- Purpose of the study
- Research question
- Research hypothesis
- Scope and limitation of the study
- Significance of the study
- Definition of terms
CHAPTER TWO:
LITERATURE REVIEW
- Development of income taxation in Nigeria
- Taxation
- Tax administration and policy in Nigeria
- Income tax administration in Abia State
- The problem of income tax administration in Abia State
- Income tax policy and administration
- Prospects of income tax administration in Abia State
- Income tax administration, revenue yield and economic development in Abia State.
- Objective of income taxation
- Qualities of a good system of taxation
- Effect of taxation
- Classification of taxes
- Why tax
- Fiscal policy
- The instruments of fiscal policy
- The goals of fiscal policy
- Types of fiscal policy
- Techniques of fiscal policy
CHAPTER THREE:
RESEARCH METHODOLOGY
- Research design
- Selection of data
- Collection of data
- Sampling design
- Data analysis techniques
- Problem of data collection
CHAPTER FOUR:
PRESENTATION ANALYSIS AND INTERPRETATION OF DATA
- Presentation and analysis of data
- Analysis of data
- Testing and proving of hypothesis
CHAPTER FIVE:
SUMMARY, CONCLUSION AND RECOMMENDATION
- Summary
- Conclusion
- Suggestions of further research
Bibliography
Appendices
Appendix A: Letter of introduction
B: Letter to the respondents questionnaire
C: Statistical computation.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The tax system is often identified as one of the most powerful levers available to the government to move their economic state from a pitiable condition to a happier position. According to Anyanwu (1999) taxation can simply be seen as “a compulsory transfer of money from private individuals, institution or groups to the government”. On another note Agolu (2001) says “taxation may be defined as a compulsory levy by the government through its various agencies in the income capital or consumption of its subjects. These levies are made on personal income such as salaries business profits, interest, dividends commission royalties or rests. It may also be levied on capital gains and petroleum profits. All of the above are taxes levied on income”. Income tax is one levied on the income after allowances have been granted what remains taxable.
The questions then arises as how efficient is the administration of income tax in Nigeria and Abia State in particular. This is the questions this research work tries to provide an answer to. It is important to note that during colonial period, income tax administration was placed on the shoulders of colonial masters according to the orders of the governor general. After independence, the government of Nigeria took over administration of taxes, especially, income tax.
Consequently, board of internal revenue were established in the different regions and states of the federation. These states were charged with responsibility of income tax administration.
THE BACKGROUND OF BOARD OF INTERNAL REVENUE
Section 85A of PITD provided for the establishment of a state board of internal revenue to be known as “the state service” to comprise of:
- The executive head of the state board as chairman who shall be a person experienced in taxation and appointed by the governor of the state from within the state service.
- The other members to be nominated on their personal merit by the commissioner in the state responsible for finance.
- The directors and heads of departments within the services
- A director from the state ministry of finance.
- Any five members of whom one shall be the chairman may form a quorum. The board may appoint any one from within the service to be the secretary to the board.
- The legal adviser to the state board, not withstanding that he may at any time be a member of the board, may represent the board in his professional capacity in any proceedings in which the state board may be a party. In such circumstances the legal adviser shall not give evidence on behalf of the board.
It is the duty of the secretary to summon the meetings of the board whenever any matter necessitating the attention of the board so requires or upon the request of any member of the board. A majority decision of the board obtained by written correspondence shall have the effect of a resolution, unless any member has requested for the submission of such matter to a formal meeting.
This board is charged with carrying out the broad-based policies of tax administration in Abia state. They were formerly with the ministry of fiancé but now they are autonomous on certain issues like recruitment of staff, payment of their staff and sundry salaries and claims and also administration of the office.
The general overview of the Abia State board of internal revenue structure could be illustrated in the diagram/organigram overleaf. From the diagram, the commissioner of finance is in charge of the treasury and finance office. He gives and directs orders how it should be implement. He sees to the good administration of the internal revenue. He is embedded with his three members as the chief executives.
The directors of internal revenue issues administrative orders and inspects duty/work done in various sectors. He also inspects work brought from outside.
|
ORGANIZATIONAL CHART OF BOARD OF INTERNAL REVENUE ABIA
Staff requests are presented to the government by the Director who also receives order from the higher authority of his office.
THE FINANCE AND SUPPLY (F & S): Are responsible for supplying the board with adequate funds when needed. Efforts are made to ensure that there is no misappropriate of fund or embezzlement and any officer found guilty of such offence is discharged from the duty part.
INFORMATION INSPECTORATE AND PROCUREMENT: Are bodies responsible for gathering information both externally and internally. They inspect such information procured and they implement them accordingly.
PERSONNEL DEPARTMENT: Is in charge of dealing with individual employees, maintain relationship between them and solve their problems and grievances.
ASSESSMENT: They are the main body of this board whose duty is to assess individual according to their taxes due to make them know when to pay it.
COLLECTION: This is the body that is responsible for collecting taxes due or paid from individuals. There are different means of collecting this tax, which include PAYE
PLAN, RESEARCH AND STATISTICS (PRS): They receive from personnel department requests from outside offices. When the requests are being received, it is made known to PRS. The information also feed the Assessment sector. They inform the assessment officers about the information collected PRS informs the finance and supply department about availability of fund.
MOTOR LICENSING OFFICES: They help in registration of new vehicle renewal of driving licensing or vehicle insurance, changing ownership of cars bought, second new and also issuing learners permit.
TAX OFFICES OUTSIDE STATION: These offices are responsible for assessment of individual in zones. These bodies issues orders to assessment authorities and motor licensing authorities and even tax collectors when needed. They receive orders from directors and convey them to assessment authorities for implementation. Finally, they reverse assessment when necessary.
SECTIONAL HEADS: Are responsible for issuing administrative order to other staff. Finally, other staff the implements orders from the above authorities.
To meet the increasing population of local government many subtaxes offices have been created over years. This according to the assessment authorities of the state government is to maximize the revenue collection for the government.
Presently, Enugu State is constituted of seventeen (17) local government areas and all have for easy assessment and collection of taxes, autonomy. It is important to note that no local government is responsible for assessing taxpayers, rather, they determine the local government rate e.g. development rate which every person pays and it is N50.00. Other charges are property, water rate, sanitation rte and so on.
THE RESPONSIBILITIES OF STATE BOARD
By section 85B, the state board shall be responsible for:
Ensuring the effective and optimum collections of all taxes and penalties due to the government under the relevant laws. Doing all such things as may be deemed necessary and expedient for the assessment and collection of taxes and shall account for the amount collected in the prescribed manner to the state commissioner for finance. Making recommendations, as is appropriate to the joint tax board on tax policy, tax reform, tax legislaties, tax treaties and exemptions from tax as may be required from time to time.
Generally, controlling the management of the services of the law setting up the state board. Appointing, promoting, transferring and imposing discipline on employees of the state service or in writing authorize any person to:
- Perform or exercise on behalf of the state board, any functional duty or power conferred on the state board.
- Receive any notice or other document to gives or delivered to it or in consequence of the decree and any subsidiary legislation made under it.
TECHNICAL COMMITTEE
Section 85C, provides for the establishment of a technical committee to consist of
The chairman
The directors within the state services
The legal adviser to the board
The secretary to the board
The technical committee has the power to co-opt any staff from within the service to discharge its responsibilities viz: consider all matters requiring professional and technical expertise and make recommendations to the state board.
Advise the state bard on all its powers and duties specifically mentioned in section 85B. Attend to such other matters as may from time to time the referred to its by the board. These levies are made on personal income such as salaries, business profits, interests, dividends, discounts and royalties. It as also levies against company profit, petroleum profits capital gains and capital transfers, though the capital transfer tax decree was abrogated affective from January 1996.
Income tax administration has witnessed a recession as the economy experienced boom from petroleum. This dwindling fortune from oil sector, states are moving with highly machinery towards revitalization of income tax administrative to enhance their revenue base. This study tries to have a general view of the difficulty, amendment and exploration of income t x in Abia state with all focus towards enhancing economic well being.
1.2 ORGANIZATIONAL OF THE STUDY
This work is organized in five chapters, chapter one is an introduction to the study covering such issues as:
- Background of the study
- Organization of the study
- Statement of problem
- Purpose of the study
- Research question
- Research hypothesis
- Scope and limitation of the study
- Significance of the study
- Definition of terms
Chapter two presents the related literature review of the study which covers the development of income taxation, tax administration and policy, income tax administration, prospects of income tax in Abia state, income tax administration revenue yield and economic development in Abia State and fiscal policy in general. Chapter three presents the research design and methodology of the study. The sources of data collected for analysis method of data analysis and problems encountered during data collections were also discoursed. Chapter four contains the core of the research presentation. This is where data collected were examined and analyzed in detail to help draw conclusion and make recommendation. The summary of the research, recommendations and conclusion are discussed in chapter five.
2.3 STATEMENT OF PROBLEM
Year ago, income tax administration was not of much concern to the government. But in recent times, this has been identified to be a major problem facing the state. Once would not hesitate to only why the sudden redirected interest to income tax administration. The answer is far fetch.
Abia Stat a typical government organization to meet up with the increased demand to enhance life standard for its citizenry, it exploring numerous ways through which revenue can be increasingly generated.
The government has taken a stride to revitalize the state ministries and the board of internal revenue to ensure steady public spending in vital programmes.
1.4 PURPOSE OF THE STUDY
As money is the pivot on which the wheel of any administrative revolves, the state government in its administration are no exception to this axiom. The success and failure of any administration depends to a great extent on the source of revenue available to administration and the various efforts made harness it. The objective of this study is to look into the impacts of the state government on revenue generation.
- To know whether the taxpayers are actually under assessed or over assessed.
- To find out the efforts made by board of internal revenue (B.I.R) in educating the people on the need to pay the taxes.
- To critically research into the problem and prospects of income tax administration in Abia State, with a view of finding a remedy.
- To find out people avoid paying taxes.
This study goes further to examine the fiscal policies in Nigeria, as a whole and a proper understanding of the concept of taxation and income tax administration.
1.5 RESEARCH QUESTION
Inspite of all the encouragement from seminars, workshops, interactive conference and forum between taxpayer and revenue officer they still complain that there seem to be no effective communication between the two on relationship between income tax revenue generated and government capital expenditure. The question that calls to mind is how can effective communication within their two groups be achieved? What are the efficient channels to achieve this? What are the militating factors that surrounds the efficiency in achieving effective communication among the groups (fax payers and personnel)
1.6 HYPOTHESIS
H0: There is no relationship between income tax revenue and government capital expenditure.
H1: There is a relationship between income tax revenue and government capital expenditure
H0: No relationship exists between revenue generated from income tax and government recurrent expenditure.
H1: There exist a relationship between revenue generated from income tax and the recurrent expenditure of the government.
H0: There is no problem confronting tax administration
H1: There are problem s confronting tax administration
1.7 SCOPE AND LIMITATION OF STUDY
This research work is restricted to the analysis of income tax administration in Abia state with particular reference to government revenue as embodied in the annual budgets and records available with state board of internal revenue.
The limitations of this study are mostly the funding and the time limit given for completion of the study.
1.8 SIGNIFICANCE OF THE STUDY
The study will be of greater help/importance to the branch of government that are charged with revenue generation and administration, the management and staff of board of internal revenue Abia in particular and the entire revenue collectors of both Federal Inland Revenue, Board of Internal Revenue and the Local Government in General. And the researcher who is a student of Accountancy to know the causes and reasons for tax generation problem in Nigeria together with its administration from the knowledge of the factors responsible, take the necessary actions and create a good tax generation and administration mechanism in the country – Nigeria.
This study will also act as a guide to policy makers in the restructuring of the tax generation and administration policy. The educators who are educating students in business management studies will also benefit from this study since it will expose them to other areas of generating tax.
The colleagues of the researcher will benefit from the study since it will expand their knowledge and scope. The study will in no small way enhance the knowledge of both tax generation and its administration in Nigeria. Abia state being a state with low industrial activities and highly engaged in rendering civil services this study would in its little way give proper solution towards improved revenue generation that would help to finance capital projects. All these are aimed at enhancing the economic growth and stability of the state.
1.9 DEFINITION OF TERMS
The following definition were used in this study:
B.I.R (Board of Internal Revenue): This is the state government agency that is charged with the responsibility of tax collection and administration in the state.
Taxation: This is a compulsory transfer of money from individual institution or groups to government. It may be levied upon wealth or income or in the form of surcharge on prices.
Income Tax: Tax levied on an individuals income which he earned during a certain period of time usually a year.
Capital Expenditure: Capital expenditure deals with government spending on capital projects
Recurrent Expenditure: It deals with government spending in the payment of salaries, electricity, water rte etc.
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