Company income tax administration in Nigeria problems and prospects (a case study of Federal Inland Revenue service)

TABLE OF CONTENTS

Title page

Approval page

Certification page

Dedication

Acknowledgement

Table of content

Abstract

CHAPTER ONE

1.0 Introduction

1.1 Background of the Study

1.2 Statement of the Problem

1.3 Objectives of the Study

1.4 Research Questions

1.5 Research Hypothesis

1.6 Significance of the Study

1.7 Scope of the Study

1.8 Limitation of Study

1.9 Definitions of Terms

CHAPTER TWO

2.0 Literature Review

2.1 Introduction

2.2 Brief History of Federal Inland Revenue Service

2.3 Nature of Taxation

2.4 Structure and Administration of Nigeria Tax System

2.4.1 The Joint Tax Board (JIB)

2.4.2 The Federal Inland Revenue Service (FIRS)

2.4.3 The State Board of Internal Revenue (SBIR)

2.4.4 The Local Government Revenue Committee

2.5 Problems of Tax Administration in Nigeria

2.6 Ways of Improving Tax Administrations in Nigeria

2.7 Tax Reform and Legislation in Nigeria

CHAPTER THREE

3.0 Research Design and Methodology

3.1 Introduction

3.2 Research Design

3.3 Sources/Methods of Data Collection

3.4 Population and Sample Size:

3.5 Sample Technique

3.6 Validity and Reliability of Measuring Instrument

3.7 Methods of Data Analysis

References

CHAPTER FOUR

4.0 Presentation and Analysis Of Data

4.1 Introduction

4.2 Presentation of Data

4.3 Analysis of Data

4.4 Test of Hypothesis

4.5 Interpretation of Result

CHAPTER FIVE

5.0 Summary, Conclusion and Recommendations

5.1 Introduction

5.2 Summary of Findings

5.3 Conclusions

5.4 Recommendations

Reference

Appendix

Questionnaire

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Nigeria is organize by a federal system, hence its fiscal operation adhere to the same principle. This has serious implications on how tax system is administered in the country. In Nigeria the government fiscal power is based on a three yield tax structure divided between the federal state and local government, each having a different tax jurisdiction, as at 2003 about forty different tax and level are shared among the three level of government which is their sources of revenue.

The Nigeria tax system is lopsided and dominated by oil revenue. The most veritable tax is handled by the federal government and the lower tiers are responsible for the less buoyant ones. The federal tax corporate bodies while state government and local government tax individual except the residence of federal capital territory, personnel income of police, armed force government of foreign affair which are strictly for federal government. The federal government on average account for 90% of the overall revenue annually. In 2005 the breakdown of total tax and levy collection of the three tiers of government was 96.4 percent for the local government. This development was the prolonged military rule that has ignored constitutional provisions indeed because of the various guests of the government in redistribution of income, poverty eradication.

Emphasizing the rise in per capital income solving unemployment problems and reduce unequally which is a breath on this nostril of a modern government. According to Ekwereike M.F. (2004:2) Taxation therefore is a compulsory contribution imposed by government from members of the public to meet the demands of the government. The main purpose of taxation is to raise fund to meet government expenditure and redistribute income or wealth and management of the economy. Tax collected comes back to the people in form of social amenities. As these amenities increase taxation assure as greater importance since its major sources of government revenue. Taxation encourages saving and regulates expenditures. The granting of tax relief provides incentive for the private sector, the direct tax especially the pay-as-you-earn (PAYE) is progressively high so as to redistribute income from individuals equitably. Some individual regard taxation as important fiscal measures not only for the benefit it yield to the government but also because it directly affects this income level and therefore their standard of living.

1.2 STATEMENT OF THE PROBLEM

The research is set to identify the problems and prospects of company’s income tax administration in Nigeria with special reference to federal Inland Revenue service. Every country has income tax objectives and activities to be carried out in the absence of a well structured policy, the collections tax levies is problematic and often produces inefficient result which eventually turns the process of taxation. There are legions of problems militating against the income tax administration in Nigeria, collection of taxes involves knowing the full identity of persons to be taxed, that is salary earns and self employed persons. These estimates are expected to be defined by the federal Inland Revenue services, where the aims of the income tax administration is not achieved the process are meant to be repeated. In most cases the performance of the organization may be below expectations, salaries are not paid on time, full identity of persons to be taxed are not known because an adequate tax roll is not available, problem of income identification and false income declaration etc., people who wonder whether company’s income tax administration in Nigeria can be improved. It is on this note that this research work is set to work into the problems and prospect of company’s income tax administration in Nigeria.

1.3 OBJECTIVES OF THE STUDY

This research work concentrates on the aims as well the targets of the research work which are discussed below:

–      To determine the proportion of taxable adults from both salary/wage earns and the self employed that can pay tax and if they do whether they pay the correct amount.

–      To find out the problems of income tax administration

–      To find out the prospects of good income tax administration

–      To find out whether there are effective methods used in the collection of tax

1.4 RESEARCH QUESTIONS

In the course of this study the researcher posed the following questions:

–      What are the problems of companies’ income tax administration?

–      Are there prospects of good income tax administration in Nigeria?

–   Are there efficient and effective method of income tax administration in Nigeria?

–      What are the proportion of taxable adults that pays their tax as at when due?

1.5 RESEARCH HYPOTHESIS

For the purpose of this study the following hypothesis were proposed:

1. Ho: there are no problem facing income tax administration in Nigeria

H1: There are problems facing income tax administration in Nigeria

2. Ho: There are no problems improving income tax administration in Nigeria

H1: There are prospects improving income tax administration in Nigeria

3. Ho: There are no efficient and effective methods of income tax administration in Nigeria

Hi: There are efficient and effective methods of income tax administration in Nigeria

4. Ho: There are no proportion of taxable adult at when due in Nigeria.

Hi: There are proportion of taxable adult at when due in Nigeria.

5. Ho: There are no problems facing company income tax administration

H1: There are problems facing company income tax administration

1.6 SIGNIFICANCE OF THE STUDY

The relevance of company’s income tax and taxation as a whole cannot be undervalued because they contribute tremendously to the immense economic growth and developments in Nigeria for the purpose of this study it is assumed:

–      The information obtained in Imo State will not contradict with that obtain from other states

–      The respondents understand the meaning of taxation and what it entails

–      The answers to the questionnaires by the respondents were stated objectively

1.7 SCOPE OF THE STUDY

This study will concern itself with on how effective system has been and the problems associated with assessment and collection of taxes during the post colonial years. Hence, in the process of this, there exist some constraints militating against of the comprehensive of this research work.

It is worthy of more that the researcher limited himself to Federal Inland Revenue

1.8 LIMITATION OF STUDY      

In the process of this research work there exist some constraints that hindered the comprehensive of this work some of them are:

FINANCIAL CONSTRAINT

Finance is a major limitation of this work as a result if that study was only limited to Imo State

UNFRIENDLY ATTITUDE OF STATE

Most strategies staff of the board was uncooperative and some of the materials necessary for the work could not be fetched insisting that they will receive orders from the top before they can release any information

1.9 DEFINITIONS OF TERMS

The following terms are here by defined as may be used in the context of this work

TAX BASE: This is a legal description of the subject with tax applies

TAX AVOIDANCE: This is a legal of reducing ones tax liability. It can also be seen as tax act of winning game without heating which involves the tax payer identifying the loopholes in tax always and taking advantage of them

TAX EVASION: That is an illegal way of reducing tax liability which is a criminal act

DIRECT TAX: These are taxes levied directly on incomes or profits of individuals

INDIRECT TAX: These are taxes imposed on goods and services

GRANTS: This refers to monetary assistance or acts given one government to another

GENERATED REVENUE: These are those income actually realized in a fiscal year.

TAX PAYER: The tax payer from this study will know his right and obligation in respect of tax: He will also understand the reasons why he ought to pay the correct amount and when due to an appreciate tax authority

SELF EMPLOYED PERSONS: This study will help them keep adequate    accounting records of their enterprise which will make the following possible enable him calculate profit or loss on trade for 5 particular periods

Enable him know the operating capacity over a period of time

Enable him to compare his present and past performance level to aid effective and efficient planning, leading to better management of his resources in a future period

TAX ROLL: Is a record that contains the descriptions of all taxable people.

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