AN EVALUATION OF THE PROBLEMS AND PROSPECT OF REVENUE GENERATION IN NIGERIA
(A CASE STUDY OF BOARD OF INTERNAL REVENUE NASARAWA LAFIA)
ABSTRACT
This research work is aimed at finding out an evaluation of problems and prospects of revenue generation in Nigeria taking Nasarawa state board of internal revenue, as a case study. The problems which the state is encountering in term of evaluating revenue generation some how affect the borad and the state entirely such as tax avoidance and evasion on part of tax payer, illiterate and ignorance. The research aimed at achieving the following objectives, to determine effect of tools of generating revenue on revenue generation. To determine the effect of internally generated revenue on standard of living. The population of the research is about 136 which the sample size use by the researcher is (40). The researcher adopted a face to face interview method and personal observation in collecting relevant data aimed at finding. The researcher came out with some finding such as there significant effect of tax evasion and avoidance a revenue generation; there is significant effect of revenue generation. And revenue generation is a tool toward achieving better development & improving based on the findings, the researcher came up with a number of recommendations aimed at curbing problems of revenue generation. These recommendations include the revenue generating tools used should be motivated, individuals and companies tax paper should be aware on the need for payment of tax, to avoid evasion-and avoidance. Machinery should be set to draft laws with expediency for possible legislation, training of revenue collectors.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY The Nigeria Federal system of government has three tiers of structures of government. Each of them has the power to collect revenue for it functions as stated in the constitution of the federal public of Nigeria.
Also, the Nigerian tax structure mediates that federal government relies mainly on the external sectors of the economy for revenue in other to finance their over all expanding public sector programmes. The Nigeria government is muchly concerned on spending large amount of tax payers’ money and local rate for discharging their complex functions. This functions touch the lives of individuals citizens and vocational educational education, housing, road, market, law and order health and welfare services to mention a few.
It is for this reason or direction that in meeting up these demands, since loans from external source cannot be equate enough to the demand.
This project examines the sources of government revenue such as personal income tax, comprising the self-employed (direct assessment) and the employee pay-as-you earn (PAYE), capital transfer tax, capital gained tax, stamp duties, toll gate tax, development levies, withholding taxes fees and charges pools being taxes to mention but few. These taxes are as direct or indirect taxes. Direct taxes on different kinds of income (Except death duties) are levied directly on the person or company receiving the income. Personal income tax is a component of direct taxation which is a tax in an individual’s income and it comprises of Pay – as – you – earn. (PAYE) and direct assessment tax an self employed individual personal income tax forms a small contribution towards government revenue in West Africa since only few west African citizens are wage or salary earners. Moreover, many self-employed person fail to declare their correct income for taxation while others evade or avoid payment of tax completely. For the purpose of assessing revenue generation especially on personal income tax management Act of 1961 (TIMA 1961) was provided and each of the states in the country has a body charged with the responsibilities of the assessment and collection of taxes.
This body in Nasarawa state is called “The Nasarawa Revenue Commission” or “Board of Internal Revenue Nasarawa.
However, the state has been facing a lot of constraints coupled with the rapid decline in it internal revenue most especially through the personal income tax with the separation of plateau from her. While the government is yearning for more revenue sources, other citizens are crying of too much tax.
However, the tax payer look at the tax collectors as their enemies, and trying to avoid and running from them and on the other hand the government are putting blame on tax collectors for not carrying out their duties effectively. This project titled “An Evaluation of Problems and Prospects of Revenue Generation in Nigeria. A Case study of Nasarawa state Board of Internal Revenue Nasarawa, aimed at finding out those problem and offering solutions.
Revenue is a very essential element because it is a source from which government draws its strength for survival, a propelling ingredient of administration which cannot in any way be treated carelessly. The Advance English Dictionary (9th edition) defines revenue as “income especially the total annual income of the state government department which collects money for public funds” The Nigeria constitution (1999) on the other hand defines revenue as:
Any income or return accruing to or derived by the government of the federation from any source and includes; any receipts, however described, arising from the operation of any law; any return, however described arising from or in respect of any property held by the government of the federation: any return by way of interest on loans and dividends in respect of shares or interest held by the government of the federation in any company or statutory body.
Hence, internally generated revenue refers to those revenue sources that are generated solely by the state, local and federal governments in Nigeria.
1.2 STATEMENT OF THE PROBLEMS
Revenue is one of the major source by which the federal, state and local government generate funds for economy growth and expansion of public programmes.
The problem on which the state is encountering in term of evaluating the problem and prospects of revenue generation in Nigeria.The problem are as follows
Illiterate / Ignorance among some tax payers: Some citizenry of one state that own business centers and factors are not educated, this seem to influence their level of their reasoning either negatively or positively as a result of this they find it difficult to pay their tax and understand the need for payment.
Secondly, tax avoidance: Some tax payer irrespective of their wealth they voluntarily refuse to pay their tax reasons best known to them.
Political instability: due to change in government affect revenue generation. The new government may bring their own ways or style of governance which may in turn not the same with previous ones. For instance like our previous government where depending solely on crude oil as their major source of revenue generation, but due to change in government, the present government has come with their own policy of trying to diversify into agriculture and other sources of generating revenue. This may affect revenue generation either positively or negatively.
Problem of depending on allocation rather than generating: Some individual or sector believe on the wealth of the country without working for it, where some state are struggling to generate revenue others are busy waiting to share the national cake. Some state generate their annual revenue below stipulated standard as require by the Federal government.
Tax payer should be educate and inform on the essence of collecting and generating revenue for the various tires of government, and various sector / individual should not just rely on government alone for revenue generation but it should be all round pay as when due, irrespective of your status and wealth. Allocation of revenue should be share base on rate of those who generate higher revenue so as encourage and stimulate other state that are not willing to contribute their revenue generated to the country.
1.3 OBJECTIVES OF THE STUDY
In Nigeria, emphasis has been place on how to boosting local revenue sources, since new ones can no longer be found nor help the situation of state or the nation. It is discover that there are Nigerians who are more richer than the state itself. This can be seen in the asset own by citizenries or a particular individual. However, the truth remains that it is the poor that pays his tax as at when due, which the richer evade and avoid tax payment. Thus the primary aim of this research work is to achieve the following objectives.
- To determine effect of tools of generating revenue on revenue generation.
- To identify effect of tax evasion and avoidance on revenue generation.
- To determine the effect of internal generated revenue on the standard of living.
- To re-examine all sources of revenue available to the state with a view to identify other relevant sources where revenue can be tapped.
- Examine the existing machineries for assessment and collection of all form of revenues with a view to detecting loopholes and suggesting remedies there to.
- To enable tax payer to understand how essential tax is, after seeing the use to which tax is collected and it use.
The study focus on the topic: An evaluation of problems and prospect of revenue generation in Nigeria is very necessary and important especially at this era where Nigeria. Focuses their attention on how allocation are made to their various state and where almost the average Nigerian finds it difficult to earn a living. And the multiplication of political offices within all the three tiers of government which leads to higher wage bills, lack of enough federal allocation to states and ‘wage war’ facing every state calls for an improved federal machinery for the assessment and generation of revenue. It is discovered that federal, state and local government councils and private individuals are for each of finds for the implementation of their set goals and objective. The study will therefore provide the state with the necessary tools for efficient and effective administration of revenue generation in an effort to assist the state to generate the required funds to meet the present political requirements and improve the standard of the society. In addition, the study provide us with the knowledge, importance and ways of improving administration of revenue generation in Nigeria.
There is no doubt that the study will also be of immense benefit for its users as well as other researchers, scholars, students, government and the society in general.
1.5 RESEARCH QUESTIONS
This study is important as it sheds light on the revenue generation. The following research questions were addressed in the study.
- To What extent does revenue generating tool effect revenue generation?
- To what extent does tax evasion and avoidance affect revenue generation?
- To what extent does IGR affect people standard of living?
Hypothesis formulation is not strange to classic research study. Hypothesis forms the basis for data collection and relevant research findings. These hypotheses are drawn for this research work and will be dealt with in the proceeding chapter.
- HO: There is no significant effect of revenue generating tools on revenue generation.
Hi: There is significant effect of revenue generating tools on revenue generating.
- HO: There is no significant effect tax evasion and avoidance on revenue generation.
HI: There is significant effect tax evasion and avoidance on revenue generation
- HO: Revenue generation is not a tool toward achieving better development and improving standard of living of the population.
HI: Revenue generation is the tools toward achieving better development and improving standard of living of the population.
1.7 SCOPE OF THE STUDY
This research study on an evaluation of the problems and prospect of revenue generation in Nigeria, a case of Nasarawa State Internal Revenue Lafia. The research therefore, shall not go beyond the area of the coverage for this project work.
It is therefore expected that the date necessary for the writing of this project work shall be gather and collected within the area of coverage stated in this research work.
1.8 LIMITATION OF THE STUDY
It is therefore expected of the researcher to carry his / her research within this scope. The following are limitation of the study:
- Time Constraint: There is insufficient time available for the researcher to go round the states government in gathering and collecting all relevant information required for the writing of this project work. In the sense that the research has to attend lectures, do all the necessary assignments and read for examinations as well.
- Financial constraints: This research work is limited to Nasarawa state board of internal revenue due to inadequate funds of the research, such as cost of transportation, purchase of materials such as papers, biros, cost of taping and printing.
- Ignorance of respondents: It is obvious that some respondents are ignorance about what the study is all about. This also caused a limitation to the project writing. Thus, research has to decide to limit her study to those respondents that could give her meaningful and useful information.
EVALUATION: The making of a judgement about the amount, number, or value of something assessment or evaluation offer away to determine whether an initiative has been worthwhile in terms of delivering what is intended.
Or is a systemic collection and analysis of data in order to assess the strength and weaknesses of programs.
REVENUE: This is define as any system in which a government adopts to generate income. It could be a form of taxation and others sources.
TAX: Can simply be defined as a charge on income of individuals and corporate bodies by the government.
Taxation: Is a means by which government finance their expenditure by imposing charges on citizen and corporate entities, governments use taxation to encourage or discourage certain economic decisions.
Income Tax: This is tax payable, however to various reliefs by an individual who is permanently resident in a country in all sources of incomes, whether arising in the country or in another.
Personal Income Tax: Person income tax is levied on the income of individuals, partnership, executors and trustees.
Valued Added Tax (VAT): This is levied on income added during the course of production of goods and services.
Companies Income Tax (CIT): This is levied on income of limited liability companies. It is administered by Company Income Tax Act (CITA) 1979 as amended to date.
Tax Avoidance: This is generally considered as a way of identifying the loopholes in the tax law and then taking advantage of such a loop-hole to reduce the tax payable.
Tax Evasion: Tax evasion on the other hand is a deliberate act on the part of the tax payer not to pay tax due.
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