AN ASSESSMENT OF TAX POLICY AND ADMINISTRATION OF LOCAL GOVERNMENT ON THE GOVERNMENT COUNCIL

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AN ASSESSMENT OF TAX POLICY AND ADMINISTRATION OF LOCAL GOVERNMENT ON THE GOVERNMENT COUNCIL

ABSTRACT

Tax is a compulsory levy on income, value of goods and services of individuals, partnership and companies derived from the government, that is, federal, state and local government. Taxation is therefore a compulsory levy imposed on individual organization called by tax authority or public authority with proper jurisdiction in order to defray public expenditure. Tax policy is a plan of action, statements of aims and ideas in relationship to charges made on income or certain types of goods. Taxation as it relates to local government is simply charges made by the local government on income or certain types of goods to help pay for running of the local government. Tax assessment is the ascertaining of actual number of tax payers in a particular area. The first policy in tax assessment is to enlighten those villagers whose tax is expected to be collected from them. They will know when the local staff will come for assessment and they wait for such exercise. After enlightenment, the proper assessment takes place and finally, becomes the actual collection of tax. Through the assessment, the tax is collected according to the number of assessment. The public responds favorable to government policies when it feels the political system protects their interest and encourages them to aspire un-hindered in their chosen careers in the same breadth, taxpayers will be much more forthcoming in discharging their tax obligations if they feel the state is for them than when they feel oppressed or derived of their fundamental rights. The population of government is a factor in relinquishing private resources to the state in the form of taxes. Citizens want to be satisfied that when paid their taxes will be honestly committed to finding the common weal, an assurance that only a good government can give. There is no tax collection without assessment. Therefore, tax assessment is the major key to tax collection, and one of the major sources of revenue to the local government.

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

In this present time, it is obvious that the governments raises and spend funds to finance her activities and to provide practical mechanism of positive central control over the economy. Government expenditure is mainly directed towards the satisfaction of collective wants, that is, those wants which are common to all members of the society rather than to the particular ends of individuals. These collective wants included provision of law and order, administration of justice and defense of the country.

Therefore, for the government to meet this wants, there must be an enforcement of fiscal policy which is concerned with the provision of government revenue through taxation.

Tax as the name implies is a compulsory payment imposed on the citizens and companies by the government modern to attain her national goal and objectives.

According to A.K. AGYUEI, he states that tax is the transfer of resources from the private to the public sector, in other to accomplish some of the nation’s economy and social goals.

Therefore, taxation is the system whereby individual and companies are assessed and the final collection of funds for and used as a variable instrument for shaping and directing a nations social political effectiveness of the various types of taxes introduced.

However, for the purpose of the study, the researcher is more concerned with the main reason on how the government generates her own revenue from companies, individual and corporate bodies. One of the act regulating the taxation practice relating to companies income tax Acts 1979(CITA 1979)this Act is contained in chapter 60 law of federation of Nigeria (LFN 1990).it is a consolidation of the provision of the formal principal Act. The companies’ income tax Acts 1916 and the various amendments were top in other to ascertain the extent, to which such profits were incurred in Nigeria, derived from Nigeria, received in Nigeria or brought into Nigeria. The companies’ income tax Act (CITA, CAP6O, and LFN 1990) classified companies into two broad categories namely:

1. Nigeria companies

2. Foreign companies

Companies classified as Nigeria companies for the purpose of Nigeria taxation are those companies incorporated under the companies allied matters decree(CAMD 1990) Or any enactment replaced by that decree. Any profit made by such companies shall deemed to have either incurred in Nigeria, been derived from Nigeria, received in Nigeria, and brought into Nigeria, such profit thereafter be subject to Nigeria companies income tax irrespective of where they have actually arisen. By constitutional arrangement, the taxation of companies in Nigeria is vested In the federal tax authority thus irrespective of where a company may be located in Nigeria. it is under federal tax jurisdiction.

Companies classified as foreign companies for the purpose of Nigeria taxation are those company corporation (other than corporation sole) established by or under any law. in force in any territory or country outside Nigeria, any profit made such companies shall be to have incurred, been derived from, or arisen from outside Nigeria to the extent that they are not attributed to the activities within Nigeria.

Tax is payable for each year of assessment of the profits of any company at the rate of 30%.these include profit incurred, been derived from, brought into or received from a trade business or investment. Also, companies paying dividends to its shareholder are first obliged to pay tax on its profits at the companies’ tax rate.

Generally, in Nigeria company dividends or other company distribution whether or not of a capital nature made by a Nigeria company is liable to tax source of 1O%.However, dividends paid from the bonus of share of scrip share to individual shareholder are not subject to tax, were also a company is a shareholder in another company, then such dividends are excluded from the profit of the company br the purpose of computation of tax.

1.2   STATEMENT OF PROBLEM

Taxation has been a major tool thought which governments generate her revenue for the sole aim of allocation. Such generated revenue on the various facilities needed for the standard of living for her citizens and presently this service is an immense importance in improving the Nigeria economy. Company income tax cannot be overlooked because it serves as one of the major source of revenue to the government and to the federation account. Company income tax helps the federal government to generate revenue, create employment and also to help the government to know the companies that are registered and the ones that are not registered. There had been so many companies in Nigeria and the income generated from these companies as company income tax has not been able to meet some of the required facilities to better the Life0 of tax payers and these has create a big problem and many are wondering if the income tax has not been utilized judiciously.

1.3   OBJECT WES OF THE STUDY

Despite emotion of tax payer on why the government should take part of the legitimate earnings of persons, certain reasons can be advanced to justify government in position of tax in any country. Some of these reasons are stated as follows:

I. REVENUE GENERATION: Provision of service and infrastructure facilities entails huge expenditure. Most of the services and facilities are public goods which cannot be adequately financed by individuals. Revenue realized from taxes, are used to cover such public expenditure such as school, roads, water supply etc.

2. ECONOMIC STABILIZATION: When a country is facing some economic problems like inflation and poor economy used to bring about a change in case to inflation, high rate of taxes will be charged to reduce the disposable income in the hand of the consumer which in turn reduce the demand of goods and services and which in a long run bring about low prices. Taxes can also be used to sustain economy growth when a country is experiencing a depression, in this case, taxes will be lowered to increase disposable income in the hand of consumers and thereby increasing the demand for goods and services the multiple increases of income, output and employment.

3. REGULATNG OF ECONOMIC ACTIVITIES: Government can use taxes in regulating micro economic activities like consumption and production patterns. When the government intends to discourage the consumption of certain goods and services tax, for such goods and services will be increased and reduced when consumption is to be encouraged, imposition of impact duties. This applies when there is need to encourage or discourage production patterns.

4. RE-DISTRIBUTION OF INCOME: Government levy progressive tax to reduce disparities or difference in the standard of living between the rich and the poor.

1.4   RESEARCH QUESTION

i. What are some of the tax and factors that are militating against the collection of company income tax?

ii. What measure has been put in place to ensure that all the companies understand the system of tax and the importance?

iii. What important role has the company income tax played on the federation revenue funds?

1.5   SIGNIFICANCE OF STUDY

This research work will be useful to the government in planning her fiscal policy as regards improving the Nigeria economy. This reason is that much emphasis will be placed on the companies income tax of which in the past generation over 30% of the government revenue instead they concentrated solely on petroleum (oil sector)ineffective in centrally disposable income and inflation, thus, the research work is to urge the government in paying more attentions on company income tax, also government should use the excess income from the oil sector and allocate such sector like agriculture, industries to mention, but a fence of the Nigeria economy so as to strengthen government tax policy.

1.6   SCOPE OF THE STUDY

Though there are other agencies which the government use in collecting tax, this research work is only restricted to the revenue mobilization, fiscal allocation commission Abuja for easy access to data kept by them and also with the help of seminar 4paper presented at the chartered institution of taxation. Other reasons are the time factor and financial constraints which also hindered this research work in acquiring more data from other sources.

1.7   DEFINITION OF TERMS

TAX: A tax is a compulsory levy imposed by the government or public authority on the income, profit or wealth of an individual, community, corporate body etc. for public purpose.

TAXATION: Taxation can be defined as the processor system of raising an income through the levying types of taxes. The extent to which taxation can be used as veritable instrument shaping and directing nation socio-political economic financial activities various types of taxes.

COMPANY: The court defined company as a justice person having no physical existence of its own but recognized by law as performing its functions through agents and servants who do exist physically. Company can broadly be classified into the following types in accordance with their mode of formation.

ASSESSMENT OF INCOME: This is the amount of income after charging expenses and outgoing against the gross income from each source in the year immediately preceding the year of assessment.

VALUE ADDED TAX: Value added tax is a tax payable on the supply of services they purchase. (input VAT is charged VAT on goods and services they supply output VAT),input VAT relates the goods and services purchased or imported directly for resale and goods which from the stock in trade used for the manufacturer production of any new product on which the output tax is charged.

WITHHOLDING TAX: Tax is an advance tax on income deducted at source, in some cases; it is the final tax most especially when it is paid to nonresident recipient. The tax payable to the relevant tax authority.

COMPANY INCOME TAX: Tax is payable on each year of assessment profit of any company at a specific rate. Company income tax is assessed on all the profits of any company that is incurring in, derived from, brought into or received in Nigeria in respect of any trade or business for whatever period of time such trade or business may have been carried on.

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