ENEMS MICROSYSTEMS RESEARCH SPOT: accounting

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Tuesday 21 March 2023

EFFECT OF TAX AUTHORITY IN THE PREVENTION AND DETECTION OF TAX FRAUD IN OYO STATE

EFFECT OF TAX AUTHORITY IN THE PREVENTION AND DETECTION OF TAX FRAUD IN OYO STATE

ABSTRACT

This study examines the effect of tax authority in the prevention and detection of tax fraud in Oyo state. Specifically, the study seeks to identify the legal and administrative measures in Oyo state to combat tax evasion, ascertain the weaknesses in addressing tax fraud by tax authorities in Oyo State and determine the effect of tax fraud offense on the revenue of the Government in Oyo state. The project made use of primary data and secondary data. Primary data was generated through the administration of 133 questionnaires and all the questionnaires were returned. Secondary data was collected from journals and records. Responses from the questionnaires were classified accordingly. Frequency and contingency tables were constructed. The study reveals that there is relationship between ineffective, inefficient tax management and tax fraud. The significance of the study is that the outcome of the research will serve as a useful guideline to tax administrators, government and also to tax payers, financial analysts, auditors and company executives who pay taxes.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Taxation is not a new word in Nigeria or the world as a whole. In Nigeria, taxation has been in existence even before the coming of the colonial men or the British. Taxation can be defined as the system of imposing a compulsory levy on all income, goods, services and properties of individuals, partnership, trustees, executorships and companies by the government (Akindele, 2021). Income tax is one of the major sources of revenue to all government. In Nigeria, it is a factor to be reckoned with in Federal Government’s budget the taxes so collected come back to the taxpayer in form of services. This has over the years encouraged or discouraged some activities in the private sector; though, this depends on whether the policy of the government is towards discouraging or encouraging such companies (Akindele, 2021). Taxation is recognized as a very important tool for national development and growth in most societies. It has viewed as a major vehicle for long term development of infrastructures of the state.

With the growth and increasing globalisation of businesses (including the increased mobility of capital and rise of e-commerce), the opportunities for taxpayers to violate tax laws are expanding, prompting the need for the tax administration to continually update and broaden the strategies it uses to deal with this problem (Chiezey and Onu, 2013).

Economic losses due to tax fraud and another tax evasion by taxpayers are huge, which means less investment and less money for the government. Tax evasion and the tactics of the tax authorities often do not live up to expectations. It can have a big impact on the economy, public trust in government, and the reputations of those who are involved in tax fraud, among other things. Many developing countries do not manage their tax policies well, have low levels of compliance, and do not have enough tax administration capacity. This all leads to tax systems that are not up to par with the best practices in the world. This also affects how much money can be raised. Even in countries that are not very rich, indirect taxes are becoming more common. Up to two-thirds of all taxes in many of these countries are paid in the form of indirect taxes, like value-added taxes (VAT). Tax fraud is still stealing money that should be used for public projects. They have to pay the bill. People do not believe that the revenue system is going to be fair because of this (Chiezey and Onu, 2013).

Taxes and levies that are paid by people in the state are not well organized and can be easily cheated on, which costs the state money. Due to a lack of funds, the government cannot finish important projects like road repairs, building or renovating hospitals, and schools. There are no rules in the tax system that say that businesses like electronic shops, saloons, hawkers, petty shop owners, and barbershop owners can be charged taxes, levies, or other fees. To collect taxes from businesses, the state takes a random amount that could be below or overpaid. The officer in charge of collecting them can send a reasonable amount back to the state government or not send it at all. A lack of proper infrastructure means that the state government cannot figure out how much money each small business makes in terms of Naira and Kobo, how many petty shops or saloons each location has, and how many people own them.

Tax fraud occurs when an individual or business entity willfully and intentionally falsifies information on a tax return in order to limit the amount of tax liability. Tax fraud essentially entails cheating on a tax return in an attempt to avoid paying the entire tax obligation. Examples of tax fraud include claiming false deductions; claiming personal expenses as business expenses; and not reporting income. Most developed countries are characterized by a broad base for direct and indirect taxes with tax liability covering the vast majority of citizens and firms. Developing countries, in contrast, are confronted with social, political and administrative difficulties in establishing a sound public finance system. As a consequence, developing and emerging countries are particularly vulnerable to tax fraud activities of individual taxpayers and corporations. This can be considered one of the primary reasons for large differences in the ability to mobilize own resources between developed and developing countries (Mohd, 2020).

Detecting and preventing tax fraud and making sure that it cannot be repeated is not solely the responsibility of tax authority and tax officials. Without the cooperation of general public working in high risk areas, it is very difficult to detect illegal tax malpractice and illegitimate personal gain. Therefore, it is up to all levels of hierarchy in public institutions to create an environment of transparency, ethical conduct and accountability in order to ensure proper handling of the very important issues of prevention, detection and handling of tax fraud cases in among the general taxpayer.

1.2 Statement of the Problem

Tax Fraud and other tax offences perpetrated by tax payer heavily harm the economy, lower investment levels and reduce government revenue generation. Anti-tax fraud and tax authority strategies are often not effective enough. Damages done to economy and their budgets as a result of tax fraud can be enormous ranging from financial loss to reduction of economy performance, reputation, credibility and public confidence.

Tax systems in many developing countries are characterized by tax structures being not in line with international standards, by lack of tax policy management, low compliance levels and inappropriate capacities in tax administration. The difference in revenue mobilization also stems from economic conditions (size of the informal sector).

In fact, most developing countries show a trend towards the prevalence of indirect taxation. Many of them rely to a great extent on indirect taxes such as value-added taxes (VAT) with indirect taxes amounting for up to two-thirds of total tax revenues, yet it is not new that, the negative menace of tax fraud deprives governments of revenues needed for public spending Forces honest taxpayers to pick up the tab Erodes community confidence in the equity of the revenue system.

Finally, the current method of collecting taxes/levies from tax payers lack proper organization and prone to obvious fraudulent activities, thereby resulting to loss of funds by the State Government. This however, leads to the inability of the Government meeting the basic projects requirements like rehabilitation of roads, building/ renovation of hospitals, schools and so on. The tax administration system does not clearly states the strategy that is being used to apportion taxes or levies or charges to some key business enterprise like electronic shops, saloon, hawkers, petty shops, barbing saloon, recharge card resellers, cosmetics shops, super markets etc. Random amount is being collected as taxes/levies from these business enterprises, which might be below or over charged taxes; and most times the levies/taxes might not be remitted to the state Government or if remitted, a reasonable amount would have been diverted by the officers in charge of the collection. This situation occurs because there is no proper structure on ground to determine the exact monies and the number of petty shops or saloons in a given location, to enable the State Government to ascertain the actual figures, in terms of Naira and Kobo that is generated from most small scale businesses majority of who are individual taxpayers.

1.3. Objectives of the Study

The main objective of this research work is to examine the effect of tax authority in the prevention and detection of tax fraud in Oyo state.

The specific objectives of the study include:

To identify the legal and administrative measures in Oyo state to combat tax evasion
To ascertain the weaknesses in addressing tax fraud by tax authorities in Oyo State
To determine the effect of tax fraud offence on the revenue of the Government in Oyo state

1.4. Research Questions

What are the legal and administrative measures used to address tax frauds in Oyo state?
Are there any weaknesses in addressing tax fraud by tax authority in Oyo state?
Are there any effect of tax fraud offence on the revenue of the Government in particular and the economy of the country, as a whole?

1.5 Hypotheses of the study

Following the objectives of the study the following hypotheses were formulated and tested

Hypothesis one

Ho: Tax fraud offences does not have significant impact on the revenue of the Government

H1: Tax fraud offences have significant impact on the revenue of the Government

Hypotheses two

Ho: Tax Authority is Not effective in the prevention and detection of Fraud in Oyo state

H1: Tax Authority is effective in the prevention and detection of Fraud in Oyo state

1.6 Significance of the Study

Tax fraud is a general phenomenon that is probably as old as taxation itself. Wherever and whenever authorities decide to levy taxes, individuals and firms try to avoid paying them. Though this problem has always been present, it becomes more pressing in the course of globalization as this process extends the range of opportunities to circumvent taxation while simultaneously reducing the risk of being detected. For the purpose of this study, this research study would contribute to the existing literature on tax fraud by focusing on reform of tax laws and policy in Oyo state with a view to identifying the critical problems on the collection of tax levy and causes of tax fraud among taxpayers so that appropriate measures could be taken to tackle them.

This study shall also seeks to set out, a concrete analysis of other tax fraud offences such as tax evasion/avoidance perpetrated by individual tax payers and corporations, and it will also consider the ‘dark’ side of professional practice by examining the involvement of tax officials in facilitating tax fraud, tax avoidance, tax evasion and other related tax offences in Oyo state.

Finally this study will be of great significance to government, tax officials, tax authority, small scale entrepreneur, investors, corporate organizations, schools and students who are regular taxpayers, it will serve as a reference point for student who would like to make future research or contribute to the existing literature.

1.7 Scope and Limitation of the Study

In the light of broad coverage, the researcher focuses on the role of tax authority in detection and prevention of tax fraud in Nigeria, particularly among tax payers in Oyo State. The research is further limited staff of Oyo State Board of Internal Revenue.

The researcher encountered some constraint in the course of the study; Little time and inadequate funds: the researchers was not able to generate complete and concrete research material, this is because of time and money constraints at the disposal of the researchers, on one hand, and the unwillingness and the busy schedule of the Tax officials, in the other, in order to provide us with more appeal cases and their valued opinions.

However, we had to convince the respondents by giving gentlemen word that the names of the corporate firms would not be disclosed in our study and the materials would be used for this study purpose only.

Not enough previous research work has been carried out on this study, thus creating a lump sum of work for the researcher, and extending the duration initially budgeted for the completion of the research study.

1.8 Definition of Terms

Tax fraud: tax fraud occurs when an individual or business entity willfully and intentionally falsifies information on a tax return in order to limit the amount of tax liability.

State Taxes: Personal Income Tax, Road Taxes, Pools betting and lotteries, Business premises registration, Development Levy, Naming of street registration in state capitals, Right of occupancy on land owned by state, and Market taxes on state financed taxes.

Tax evasion: Tax evasion in general refers to illegal practices to escape from taxation. To this end, taxable income, profits liable to tax or other taxable activities are concealed, the amount and/or the source of income are misrepresented, or tax reducing factors such as deductions, exemptions or credits are deliberately overstated (see Alm and Vazquez, 2001 and Chiumya, 2006). Tax evasion can occur as an isolated incident within activities that are in other aspects legal. Or tax evasion occurs in the informal economy where the whole activity takes place in an informal manner this means the business is not only evading tax payments but is also not registered as formal enterprise at all.

Tax avoidance: Tax avoidance, in contrast, takes place within the legal context of the tax system that is individuals or firms take advantage of the tax code and exploit “loopholes”, i.e. engage in activities that are legal but run counter to the purpose of the tax law. Usually, tax avoidance encompasses special activities with the sole purpose to reduce tax liabilities. An example for tax avoidance is strategic tax planning where financial affairs are arranged such in order to minimize tax liabilities by e.g. using tax deductions and taking advantage of tax credits.

Non-Compliance: can be defined as the failure on the part of a taxpayer to correctly file returns, report actual income, claim the correct deductions, reliefs and rebates and remit the actual amount of tax payable to the authority on time.

Tax: is a compulsory levy payable by individual economic units or corporate bodies to government without any direct quid pro quo from the government.

Fraud: is an act or course of deception, deliberately practiced to gain unlawful or unfair advantage; at the detriment of another.

Direct and Indirect Tax: direct taxes are levied on persons or property, while indirect taxes are levied on manufacture, sale, consumption, and the like, and are indirectly paid by the consumer.

1.9 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), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight 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.

Saturday 4 March 2023

THE NEED FOR EFFECTIVE BUDGETING AS A TOOL FOR PLANNING IN BANKING INDUSTRY

CHAPTER ONE

1.0 INTRODUCTION

A substantial advance has been made in the act and science of managing group efforts in industry, government and other endeavours. The complexity of modern management problems has led to the development of those management tools, techniques and procedures which are commonly and collectively referred to as scientific management. If business is not operated under some sorts of plans, it is merely an incoherent unit without any sense of direction and certainly it cannot be referred to as an organization.

Planning is inherent in the very nature of modern business conditions. Banks and other organizational activities must be well planned so that the firm may operate effectively and efficiently utilize all resources economically to achieve the desired result.

One of the most important approaches that has been developed for facilitating performance of the management process of the bank is comprehensive effective planning and control (management budgeting).

The concepts and techniques of the need for effective planning can be said to be a means by which complex organization can be guided so as to make or produce intended results. One of the objectives of budgeting is to secure economic stabilization in order to achieve desired goals.

Another objective of budgeting is to see how the organization accomplishes its set objectives and this can be inform of what organization does and what it achieves.

Budgeting also tries to allocate and secure adjustment in resources availability this is achieved with the aim of placing some of the laudable programme on priority list prompt alienation.

Planning on the other hand is of course decisions making since it involves selecting among alternative planning is referred to as future circumstances and requirement, deciding objectives, making short and long term plans, determining policies to be followed and also standard to be set.

Planning is based upon a clearly define objectives and it considered factors in the environment which will help or hinder organization goals, planning provides a tools so that performance can be evaluate with established standard, it should be precise, practicable and simple operate and understand. Planning should also be flexible to ensure that circumstances necessitate changes without disrupting the plan. However, budgeting drawn up a financial plan which contain certain financial proposals, these financial proposals

1.1 BACKGROUND OF THE STUDY

One of the most important approaches has been developed for facilitating performance of the management process of the bank is comprehensive effective planning.

The need for effective budgeting as a tool for planning in the banking industry in Nigeria involved use of budgeting to plan, planning is significant in the functional areas of management, which are brought into focus, creating a mutual enrichment of performance that is a vital focuses on the usefulness of planning to aid the management on how profit can be realized. Also, the planning function of the budget is very central to the realization of budget objective.

Planning involves the determination of objectives. This aimed at studying the meaning and importance of budgeting in banks, the problem face by this bank and also how budgeting procedure in planning can be used in bringing possible solution to their problems. As a result, a budget reflects the status of an organization.

1.2 STATEMENT OF PROBLEMS

The bank still finds it difficult to administer their operation effectively to the public because of the fluctuating effect of some factor ranging from economic political socio-cultural and religion factors.

Are there prospect of these bank?
Have you experienced any problem as regards budgeting yet?
What benefit are derivable from the service of the bank?

Other related problems are unqualified staff employed at the influence of top management (directors) and non-repayment of credit facilities at the specific date proposed.

1.3 OBJECTIVES OF THE STUDY

The main objective of this study is to ascertain THE NEED FOR EFFECTIVE BUDGETING AS A TOOL FOR PLANNING IN BANKING INDUSTRY. The specific objective of the study includes:

To find out some problems facing the authority in the process of budgeting.
To determine the area of price rating of authority in planning process and policies in achieving the goal of the organization through budgeting.
To examine how budgeting influence specifically relating the plans to actual performance of UBA Plc. through budgeting can do planning and this.
To offer useful suggestions on the basis of finding and how best to improve the budgeting system through planning process.

1.4 SIGNIFICANCE OF THE STUDY

This researcher work is relevant in the following ways:

It will point the importance of budgeting and how UBA Plc uses it to achieve its organizational aims and objectives.
It is envisage that this project will provide an insight to the problem which is associated with the bank with respect to the topic and proper solutions.
It could serve as a “think tank” for other business owners, particularly for the fact that will involves a big and successful business like UBA.
It is also significance in the area of academics, as it could be used for future reference where it is relevant.

1.5 SCOPE OF THE STUDY

This research work covers the activities of UBA Garki Branch. AU information in respect of this study is based on the branch. The study covers the need for effective budgeting as a tool for planning in banking industry in Nigeria.

Therefore, with the Abuja branch located where researcher is based, it ensures the cost of transportation for the collection of data and necessary information from the other branch.

1.6 DEFINITION OF TERMS

It is essential to make know every bit of term used there in, therefore some terms must be explained in detail to avoid misconception and misinterpretations since there are different people’s interpretation.

The following terms are to be considered:

Budgeting: Is a carefully worked out financial plan, a co-ordinating tool as well as a control technique based on forecasts and the best possible estimate that can be made at the date when budgets are prepared.
Planning: This involves taking a view of an organization how to make it forward through the use of resources and strategies to ensure customer satisfaction.
Management: The act of running and controlling a business organization to achieve its objectives and identify potential problem area for detailed investigation and corrective measure or actions.
Organization: Is a group of people who form a business together in order to achieve a particular aim to ensure effective cost control and put an effective organizational structure.
Credit: Money at owner disposal in an account it could be a sale on trust without money at the time of sale.
Overdraft: This is allow customers to draw cheque in excess of his current account balance.
Current Account: Customer deposit that is with drawable by cheque.
Advance: These are monies lent by a bank general in firm of an overdraft on a current account holder by means of loan.
Loan Capital: Loan capital is normally represented by fixed interest security.
Loan: Lending money to borrowers.

Thursday 2 March 2023

THE EFFECT OF LIQUIDITY MANAGEMENT ON THE PROFITABILITY OF COMMERCIAL BANKS IN NIGERIA

THE EFFECT OF LIQUIDITY MANAGEMENT ON THE PROFITABILITY OF COMMERCIAL BANKS IN NIGERIA

(A case study of selected banks in Nigeria)

ABSTRACT

This work investigated the effect of liquidity on the profitability of bank in Nigeria. The work is necessitated by the need to find solution to liquidity management problems in Nigerian banking industry. Three banks were randomly selected to represent the entire banking industry in Nigeria. The proxies for liquidity management include cash and short term fund, bank balances and treasury bills and certificates, while profit after tax was the proxy for profitability. Elliot Rothenberg Stock (ERS) stationary test model was used to test the run association of the variables under study while regression analysis was used to test the hypothesis. The result of this study has shown that liquidity management is indeed a crucial problem in the Nigerian banking industry. The study therefore recommends that banks should engage competent and qualified personnel in order to ensure that right decision are adopted especially with the optimal level of liquidity and still maximize profit.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

In every system, there are major components that are very important for the survival of the system. This is also applicable to the financial system. The financial institution have contributed immensely to the growth of the entire financial system, as they offer an efficient institutional method through which resources can be mobilized and directed from less productive uses to more productive uses.

In performing these financial role, the financial institutions has proved to be an effective link between savers and borrowers, among the financial institutions that have partake in these important financial role are the commercial banks. The functions of the commercial banks have become the strong base for the two major functions of the commercial banks namely deposit mobilization and credit extension. Commercial banks have become a very important institution in the financial system as it helps in facilitating the movement of financial assets that are less desirable to the more desirable public who needed the financial assets. In view of this role and activities commercial banks play in the society, the commercial bank is selected as the main focus of this study.

An adequate financial intermediation requires the attention and focus of the bank management to the profitability and liquidity, which are the two conflicting objectives of the commercial banks. These objectives are parallel in the sense that an attempt for a bank to achieve higher profitability will gradually destroy its liquidity and solvency position and vice versa. Practically, profitability and liquidity are effective indicator of the corporate wealth and performance of not only commercial bank but to all profit oriented venture. These performance indicators are very important to the shareholders and depositors who are major publics of a bank. As the shareholders expect the bank to increase lending in order to give them maximum return in money invested while the depositor expect the bank to keep much idle cash in order to meet their demand. With profitability objective conflicting with that of liquidity, and with the interest of the shareholders conflicting with that of the depositors, there is the need for reconcile and harmonize these conflicting positions through effective liquidity management so as to ensure the survival and growth of the commercial banks.

1.2 Statement of Problem

Through these financial roles, the commercial banks use the idle funds borrowed from the lenders by investing such funds in other classes of financial assets investment. These business activities of the bank is not done without problem facing it, since these deposit which have been invested by the banks for profit maximization can be demanded for at any time. When the bank is not able to meet their financial obligations, the public begins to lose confidence and these will cause lot of competition to the financial sector. With the high increase of competition in the banking industry, every commercial bank should strive to operate on profit and at the same time meet the financial demand of its depositors by maintaining adequate liquidity. The problem then becomes how to select the optimum point at which commercial bank can maintain its assets in order to optimize these two objectives. These problems become more difficult as a large number of banks are basically engaged with profit maximization and tend to neglect the importance of liquidity management and these can lead to technical and legal insolvency.

This research work will also see to other problems such as the effect of excess liquidity and the problem of estimating the proportion of the deposits that can be demanded for at any specific time, selection of factors that will affect or influence the bank liquidity level and finally problem of satisfying the two major publics of the commercial bank simultaneously. With these solutions will be prescribe and recommendations will be made where necessary.

1.3 Objectives of the Study

The main objective of this study is to examine the effect of liquidity management on the profitability of commercial banks in Nigeria.

To examine the effect of bank cash asset on profitability.
To examine the effect of bank balance on profitability.
To examine the effect of Treasury bill and certificate on profitability.

1.4 Research Questions

The following research questions are given consideration in this work:

Does bank asset have any significant effect on profitability?
How can bank balance have effect on profitability?
What will be the effect of Treasury bill and certificate on profitability?

1.5 Statement of Hypothesis

From the statement of problem, objective of study and research questions of the study, the following hypotheses are formulated:

H_OI: There is no significant relationship between bank cash asset on profitability.

H_O2: There is a significant relationship between bank cash asset on profitability.

H_O3: There is no significant relationship between Treasury bill and certificate on profitability.

1.6 Significance of the Study

For the fact that commercial banks operate on liquidity and profitability motives in the mind to satisfy their major publics, the shareholder and depositor, the need arise for them to bring into agreement these two public concurrently. With this, the commercial bank need effective and efficient liquidity management approaches and principles that will help them realize these motives. The result gotten from this study will reveal the level of attachment of the commercial banks to the monetary policies (Liquidity ratios) established by the government and these will help the government to set appropriate liquidity ratios and cash ratios that will not be harmful to the operation and survival of the commercial banks. It will also help banks operations and credit policy guideline which affect profitability level and finally minimize the effect of liquidity and help in providing effective liquidity formulations.

1.7 Scope of Study

This study examines the effect of liquidity management on commercial bank profitability. The variables used are liquidity management which was the proxies is bank cash asset, bank balance and treasury bill and certificates. Profitability which is the second variables was proxied by profit after tax.

1.8 Definition of Term

Liquidity: Ability with which asset can be easily converted into cash. It also determines a firm ability to meet its short-term obligation.
Liquidity management: The planning and control necessary to ensure that organization maintain liquid assets so as to meet its obligations to customers.
Profitability: Profit is the ultimate measure of overall performance that is the excess of income over cost.
Commercial bank: The business of receiving money from outside sources as deposits, irrespective of payment of interest and granting of money loan and acceptance of credit or purchase and sales of securities for the account of others or incurring of obligations to acquire claims in respect of loans prior to maturity.

THE EFFECT OF LIQUIDITY MANAGEMENT ON THE PROFITABILITY OF COMMERCIAL BANKS IN NIGERIA

(A case study of selected banks in Nigeria)

ABSTRACT

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

1.2 Statement of Problem

1.3 Objectives of the Study

The main objective of this study is to examine the effect of liquidity management on the profitability of commercial banks in Nigeria.

To examine the effect of bank cash asset on profitability.
To examine the effect of bank balance on profitability.
To examine the effect of Treasury bill and certificate on profitability.

1.4 Research Questions

The following research questions are given consideration in this work:

Does bank asset have any significant effect on profitability?
How can bank balance have effect on profitability?
What will be the effect of Treasury bill and certificate on profitability?

1.5 Statement of Hypothesis

From the statement of problem, objective of study and research questions of the study, the following hypotheses are formulated:

H_OI: There is no significant relationship between bank cash asset on profitability.

H_O2: There is a significant relationship between bank cash asset on profitability.

H_O3: There is no significant relationship between Treasury bill and certificate on profitability.

1.6 Significance of the Study

1.7 Scope of Study

1.8 Definition of Term

Liquidity: Ability with which asset can be easily converted into cash. It also determines a firm ability to meet its short-term obligation.
Liquidity management: The planning and control necessary to ensure that organization maintain liquid assets so as to meet its obligations to customers.
Profitability: Profit is the ultimate measure of overall performance that is the excess of income over cost.
Commercial bank: The business of receiving money from outside sources as deposits, irrespective of payment of interest and granting of money loan and acceptance of credit or purchase and sales of securities for the account of others or incurring of obligations to acquire claims in respect of loans prior to maturity.

Tuesday 28 February 2023

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

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.

Thursday 19 January 2023

THE ROLE OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) IN FRAUD DETECTION IN NIGERIAN BANKS

THE ROLE OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) IN FRAUD DETECTION IN NIGERIAN BANKS

(A CASE STUDY OF FIRST BANK OF NIGERIA ENUGU)

ABSTRACT

This research work aims at determining the role of information and communication technology in detecting fraud in the Nigerian banking system. The banking institution which has integrity and trust as its hallmark has been exposed to various forms of fraud and various means employed in defrauding banks. Fraud derails the society’s integrity and value among the committee of nations and in effect, affects the level of trust. The banking sector has been the cornerstone of economic and financial mainstay of any nation, hence the need for study of the role and the effectiveness of information and communication technology in fraud detection in the banking industry. First Bank of Nigeria Pie, Enugu metropolis was used as a case study. The research work treated the causes of fraud in Nigerian banks, forms of bank frauds, Effects and consequences of fraud in first bank of Nigeria plc, the information and communication technology and fraud detection in banks and Fraud control measures in banks. The methodology adopted in this study is the survey research design there were interactions with bank staff of various cadres with structured questionnaire to know their own opinion. 400 questionnaires were administered of which 320 were duly completed and returned. Some of the findings from the research work reveal that lack of staff motivation has an effect on the incidence of fraud in Nigerian banks. It also reveals that the introduction of ICT into the banking industry has reduced the incidence of fraud in Nigerian banks. Further findings reveal that the Nigerian banking laws are not adequate for fraud control in banks. Based on the findings of this study, recommendations made are the adoption of computer aids as tool for fraud prevention and control; banks should employ highly sophisticated security gadgets in their banks, like surveillance TV systems, on —the-spot photographing of customers etc. Proper reviewing of laws relating to fraud should be encouraged and stern penalties that commensurate with any offence committed should be embarked on.

CHAPTER ONE

1.1 BACKGROUND OF STUDY

Today’s business environment is very dynamic and undergoes rapid changes as a result of technological innovation, increased awareness and demands from customers. Business organisations, especially the banking industry of the 21st century operates in a complex and competitive environment characterized by these changing conditions and highly unpredictable economic climate. Information and Communication Technology(ICT) is at the centre of this global change curve. Laudon and Laudon, (1991) contend that managers cannot ignore Information Systems because they play a critical role in contemporary organization as it regards fraud detection in Nigerian banks.

Fraud is a global phenomenon,it is not unique in any sector of the economy or peculiar to Nigeria. The level of fraud in the present day Nigeria has assumed an epidemic dimension. It has eaten deep into every aspect of our life to the extent that a three year old child talks about yahoo mail or 419, newly discovered sobriquet for advanced free fraud that is hunting us as a nation. Nigeria, with all of its natural and human resources, tethers on the brink of destruction because of fraud. Much of what we do is “cutting leaves” instead of dealing with the root problem. Generally, fraud takes its root from the human heart. It is an axiom that the heart is deceitful above all things and is desperately wicked.

Fraud is the number one enemy of the business world, no company is immune to it and it is in all works of life, it is becoming predominant in the banking industry, as banks are now persistent targets of frauds. Nwankwo (1991)said that there is no where fraud is more serious than in banking. It is the biggest cause of bank failure. The fear is now rife that the increasing wave of fraud in the financial institutions in recent years, if not arrested might pose certain threats to stability and the survival of individual financial institution and the performance of the industry as a whole and no area of the economy is immune from fraudsters and even the banking system. Fraud if not checked might cause run on in the banking sector.

Fraud together with its sister white-collar crimes which came into being later in the 19th and 20th century interalia corruption, money laundering, tax evasion,externalization of foreign currency to itemize just a few have stood as potent weapons capable of hemorrhaging the entire world economies particularly the banking sector because of its high risk factor.Since fraud is carried out over a period of time, a minor one at the initial stage snowballs into a sizeable one over a period of time. However, the incidence of fraud has become a nightmare to the bankers who are particularly concerned,not only because it is on the increase, but also it acquires sophistication and tries outwitting every new technology. In the past years, cases of frauds in banks have been on the increase with each year recording staggering figures, even though most of the reported cases are essentially different types of fraud, An example is defrauding a bank using a genuine account of an employee who is the defrauder.Another one is through the use of fictitious account; also, fraud is carried out with the aid of an employee’s friend. Similarly this unholy act is sometimes done usingan account of a third party that depends on an employee-insider to perpetrate the act.

Fraud is a universal phenomenon which has been in existence for so long. Its magnitude cannot the security team designed to prevent it. Its management has become a central point in banking like the management of risk because of the above facts. Fraud and its management have been the precipitating factor in the distress of banks, and as much as various measures have been taken to minimize the incidence of fraud, it still rises by the day because fraudsters always device tactical ways of committing fraud. This has become a point of great attention in the banking sector as well as every organization in Nigeria.

Technology is invented by man to manipulate his social and physical environments. The sociology of science and technology made us to understand that, technology came with both manifest and latent intents. The manipulation of computer and other information and communication technology (ICT) to detect fraud in banks gives more insight into the manifest function of technological revolution. When computer was invented, the intention of its inventors is to hasten data processing with effortless ease. That it has been doing efficiently by giving timely and accurate information. The ability of computer to control manipulations,frauds, and forgeries continue to give the banking system the urge to upgrade their information communication technology (ICT) department. If not for the introduction of information communication technology system in Nigeria, fraud could have defeated the Nigeria banking industry. In this view, despite the introduction of the first banking ordinance in 1952 and central bank act in 1958including acts and ordinance with the amendments over the years to control and regulate the activities of the banks, fraud rather increased in size and thetechniques gained more sophistication.

The introductions of modern banking methods like automatic electronic gadgets;communication systems and computers; fraud has a watchdog to check its excesses. Due to forgery in cheques, bankers are extremely carefully when clearing them, and most times the forged cheques look authentic and the owner will have to confirm the signature on the cheque as his own. It is against this backdrop that this study seeks to evaluate the role of information and communication technology in Nigerian banks with special reference to First Bank of Nigeria plc.

1.2 STATEMENT OF THE PROBLEM

The enormity of bank frauds in Nigeria can be inferred from its value,volume and actual loss. A good number of banks’ frauds never get reported to the appropriate authorities, rather they are suppressed partly because of the personalities involved or because of concern over the negative image effect that disclosure may cause if information is leaked to the ban1cin’ public. The banks’ customers may lose confidence in the bank and this could cause a setback in the growth of the bank in particular.

Fraud leads to loss of money, which belong to either the bank or customers.Such losses may be absorbed by the profits for the affected trading period and this consequently reduces the amount of profit, which would have been available for distribution to shareholders. Losses from fraud which are absorbed to equity capital f the bank impairs the bank’s financial health and constraints its ability to extend loans and advances for profitable operations. In extreme cases rampant and large incidents of fraud could lead to a bank’s failure.

Fraud can increase the operating cost of a bank because of the added cost of installing the necessary machinery for its prevention, detection and protection of assets. Moreover, devoting valuable time to safeguarding its asset from fraudulent men distracts management. Overall, this unproductive diversion of resources always reduces outputs and low profits which in turn could retard the growth of the bank. It also leads to a diminishing effect on the asset quality of banks. This work therefore tends to look into how the Nigerian banks can use information and communication technology (ICT) to detect and minimize fraud.

1.3 OBJECTIVES OF THE STUDY

The main aim of this study is to find a practical means of detecting the incidences of fraud in Nigeria banks with the aid of information and communication technology. While specific objectives are:

To investigate whether the introduction of information and communication technology into the banking industry reduced the incidence of fraud.
To ascertain if lack of motivation contributes to incidence of fraud in FBN in particular.

1.3 RESEARCH QUESTIONS

How has the introduction of ICT into the banking industry reduced the incidence of fraud?
Has the introduction of information technology into the banking system reduced fraud in First bank?

1.5 HYPOTHESIS OF THE STUDY

Ho: the introduction of ICT into the banking industry reduced the incidence of fraud in Nigerian banks
Ho: the introduction of ICT into the banking industry reduce the incidence of fraud in First bank in particular

1.6 SCOPE OF THE STUDY

The research covers the First bank of Nigeria plc within the Enugu metropolis. The information used for the analysis covers the five years period between 2014 and 2018.In order to attain the objectives of this research, the scope of the study is defined to involve all relevant aspect of fraud in First bank operations. Information is obtained on the number of fraud cases perpetrated in First bank and their frequency, the effect it has on the bank, the persons involved,and causes of fraud and the level of effectiveness of the information and communication technology employed.

1.7 LIMITATIONS OF THE STUDY

The main limitations of the study are the uncooperative attitude of some staff of the bank taken into study, inadequacy of time and financial constraints.Some of those approached for information declined and refused to cooperate. This affected the volume of information available for the study. Again, limited time allocated for this research work did not provide room for accuracy and reliability of results.

1.8 SIGNIFICANCE OF THE STUDY

This study can be of importance to the banking industry at large, particularly the first bank of Nigeria because it will expose the fraud perpetuators which will be of interest to the management. It is also prepared for those who may be interested or willing in carrying out further investigation on fraud detection with special reference to first bank of Nigeria. It will throw more light on ways by which fraud can be detected and minimized with the aid of ICT the study will serve as a body of knowledge to be referred to by researchers.

1.9 DEFINITION OF TERMS

Bank: Section 41 of Nigerian banking act of 1969 defined a bank as an institution that carries on banking business and includes a commercial bank an acceptance house, discount house, financial institution and merchant bank.

Banking: the section defined banking as the business of receiving money from outside source as deposits perspective of the payment of interest or the granting of bills and cheques or the purchase and sale of securities for account of other or the incurring of the obligation to acquire claims in respect of loan prior to their maturity.

FRAUD: The act of depriving a person dishonestly of something which is his or of something to which he is or would or might be entitled, but for the perpetration of fraud.

BANK: Refers to a person or company carrying on the business of receiving money and collection of drafts from customers subject to their obligation of honouring cheques drawn upon them from time to time by the customers to the extent of the amount available in their current account.

THE ROLE OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) IN FRAUD DETECTION IN NIGERIAN BANKS

(A CASE STUDY OF FIRST BANK OF NIGERIA ENUGU)

ABSTRACT

CHAPTER ONE

1.1 BACKGROUND OF STUDY

1.2 STATEMENT OF THE PROBLEM

1.3 OBJECTIVES OF THE STUDY

The main aim of this study is to find a practical means of detecting the incidences of fraud in Nigeria banks with the aid of information and communication technology. While specific objectives are:

To investigate whether the introduction of information and communication technology into the banking industry reduced the incidence of fraud.
To ascertain if lack of motivation contributes to incidence of fraud in FBN in particular.

1.3 RESEARCH QUESTIONS

How has the introduction of ICT into the banking industry reduced the incidence of fraud?
Has the introduction of information technology into the banking system reduced fraud in First bank?

1.5 HYPOTHESIS OF THE STUDY

Ho: the introduction of ICT into the banking industry reduced the incidence of fraud in Nigerian banks
Ho: the introduction of ICT into the banking industry reduce the incidence of fraud in First bank in particular

1.6 SCOPE OF THE STUDY

1.7 LIMITATIONS OF THE STUDY

1.8 SIGNIFICANCE OF THE STUDY

1.9 DEFINITION OF TERMS

FRAUD: The act of depriving a person dishonestly of something which is his or of something to which he is or would or might be entitled, but for the perpetration of fraud.