E-taxation as a Means of Reducing Cost of Tax Collection in Nigeria (a Case Study of Federal Board of Inland Revenue, Umuahia Abia State)
Purpose: This research is aimed at finding out whether electronic taxation will significantly curb tax evasion avoidance and improve revenue generation. Design/methodology Approach – Survey method was adopted. The data for the study were collected from primary and secondary sources. The primary data were collected mainly from questionnaires. The data collected were analyzed using simple percentages and presented in tables. Findings from the analysis it was discovered that electronic taxation will enhance revenue generation in the state studied. Also large data base of the citizenry achieved through proper record keeping will enhance revenue generation. The researcher equally found out that e-government is an indispensable factor in achieving the objective of e-taxation computer literacy will enhance electronic tax administration which will significantly curb tax evasion and avoidance and reduce operational compliance cost research implications. This research requires further empirical research on the extent of application of e-government in Nigeria to enhance revenue generation through e-taxation. It equally recommends further studies on the issue of jurisdiction in taxing online trading. Originality/value. This is the first empirical study on the effect of e-taxation on revenue generation in the selected states of Nigeria (Anambra, Enugu and Akwa-Ibom States) and the study equally make contribution to existing literatures.
1.1 General Description of Area of Study
Electronic filings eliminates much that human labour in 2001, according to the agency, processing can electronic return cost only 74% compared to about 1.50 U.S dollar for a traditional paper returns.
The Inland Revenue Service in 1980 tax year introduced electronic filling during which more and more tax Payers prepared their returns on personal computers, the agency’s main ideal was to cut its own cost of processing returns, every year, thousands of temporary employees had to be hired to sift through mountains of tax returns, and then check enters the data by hand into land revenue service computers.
In 1986, electronic filling was tested in three cities and proved so successfully that it was expanded to more four cities the following year.
In 1988, the program included 14 states from the beginning, the electronic filers did not submit returns directly to the inland service authorized private agent, usually and established tax firm which transmitted them to a regional Inland revenue service office. The rationales for using intermediaries to electronic file at the time was partly that the moderns and others necessary uncommon in most homes.
It is noted that the Inland Revenue did not have the technical capability to transmit returns electronically from regional office to its headquarters in Washington rather the copied to magnetic tapes, which were the mailed to Inland Revenue Service’s Headquarters.
In 1998, 500,000 individual filed from home, the following year the number mushroom to 2.5 million. In 2001, the paper signature form was eliminated from those electronic filers and replaced by a five-digit number that the Inland Revenue Service issued to each electronic filer. The federal Inland Revenue Service (FIRS) embarked on an Integrated Tax Administration System (ITAS) project in 2013, ITAS is aimed at enhancing tax administration and simplifying the tax compliance process in Nigeria through the use of technology.
When fully functional, taxpayers will be able to file their tax returns electronically, pay their taxes online, get instant credit for withholding taxes deducted on their income generate tax clearance certificates and chat with their FIRS local tax office through the “message Centre”.
These would examined in the study:
Meaning of e- taxation
Administration of e – taxation
Administration of Nigeria tax system.
Cost of tax collection
E – taxation as a means of reducing cost of tax collection.
1.2 Historical Background of the Case Study
The Nigeria Federal Inland Revenue Service (FIRS) was created in 1943. It was carved from the erstwhile Inland Revenue Department that covered what was then the Anglophone West Africa (including Ghana, Gambia, Sieria Leona) during the colonial era. Tax provides revenue to fund governance, ensures resources redistribution, streamline consumption of certain goods and services, reduce inflation and generates employment.
The Federal Inland Revenue Service is constitutionally empowered to collect taxes. In 1958, the Board of Inland Revenue (FBIR) was established under the income tax ordinance of 1958. The name was letter change in 1961 when the Federal board Inland Revenue (FBIR) was established under section 4 of the company and income tax Act (CTIA) on 22 of 1961. F.B.I.R operated then as a department in the federal ministry of finance.
A further transformation took place in 1993 when the finance (miscellaneous taxation provisions) Act No 3 of 1993 established of federal Inland Revenue Service (FIRS). The act also created the office of the executive Chairman of the board in (2007). The first Act. (2007) which granted autonomy to the service, was enacted. The Federal Inland Revenue Service is one of the Federal ministries departments and agencies (MDAS) undergoing massive changes.
In 2005 Integrated Tax Offices (ITOS) replace the old tax offices which were structured along tax types: value added tax office, personal income tax office, petroleum, International tax office, withholding tax office, Area tax office. The new one stop-shop for all tax types lessened the burden of tax payers, who can now transact their tax businesses under one roof.
1.3 Statement of the Study
The tax administration (collection and assessment of tax from companies is a difficult task). The assessment and collection of companies income tax as at when due has been a problem.
Associated with company income tax administration in Nigeria. The problem through observation has been influenced by the following understand factors.
Fraudulent under – declaration of income and making of incorrect returns by companies coupled with collusion of officials of F.B.I.R staff with company under assessment. The problem of tax evasion is real and so much in Nigeria economy where individuals and companies use all means to evade tax. The fact that the federal board of inland revenue (FBIR) is unable to bring their entities within the letter of the law is of a serious concern mostly in the area of highly government spending borrowing and when there is pressing need to improve revenue generation from all sources including taxation.
The problems of revenue losses to government due to fraudulent and illegal deals her citizens and organizations within the country prompt the need for this research work.
1.4 Purpose of Study
1. To ascertain whether sharp practices in administration between the staff of F.B.I.R and assess company contributed to tax evasion.
2. To ascertain if there is any variation between financial statement used for AGM and that sent to F.B.I.R for tax administration.
3. Has loss of confidence in government officials contributed to tax evasion.
4. To identify the problem of E-taxation.
5. To suggest solution to the problem.
1.5 Research Question
For the purpose of this study the following question were raised for an indebt study of this research work.
1. To what extent has sharp practices in administration between the staff of the F.B.I.R and assess company contributed to tax evasion?
2. To what extent has there been variation between financial statement used for AGM and that sent to FBIR for tax administration?
3. Has loss of confidence in government officials contributed tax evasion?
4. Are there adequate working tools for the revenue officers to enhance their effective and efficient performance?
5. Has every vatable organization registered?
1.6 Scope of the Study
This study shows the problems and prospect of Nigeria company tax with Abia State Federal Board on Inland as the case study. The period covered by this research enabled the research to be reliable.
It was assumed that the operation of federal Inland Revenue Service (FIRS) Umuahia would be able to supply the researcher the necessary assistance required for the successful completion of this research work and that the supervisor and other respondents would give the researcher required assistance.
1.8 Significance of the Study
The result of this study will throw more light on the problems of companies income tax administration in Abia State Nigeria. The special emphasis on the Federal Board of Inland Revenue (FBIR) will highlight peculiar problems and difficulties in administering the companies income tax would increase in the revenue generation of the government.
1.9 The Operational Definition of Terms
1. Assessment Authority: This is the body appointed by the board for the purpose of assessing tax payable.
2. Company: A company is defined by Section 3 (1) of the act as “any co-operation (other than a corporation sole) established by or under any law in force in Nigeria or elsewhere”. The relevant tax authority in respect of company income tax is the Federal Board of Inland Revenue.
3. Companies Income Tax: This is the tax imposed on the profit made by companies.
4. Tax Avoidance: This is the arrangement of the affairs of the tax payer in such as way as to reduce tax payable. Tax avoidance is not a criminal or crime punishable under the law. This was clearly stated in lord tumbling declared as follows his judgment. Every man is entitled to order his affairs so that the tax attached under appropriate tax act is less than is otherwise would be.
5. Tax Evasion: Is a fraudulent, dishonest intentional distortions or concealment of fingers by the tax payer in order to reduce the tax payable. It is a criminal and deceitful was of not paying tax liability. These offences are punishable under law.