Assessment of Personal Income Tax Administration in Nigeria: A Study of Akwa Ibom State Board of Internal Revenue
OBJECTIVES OF THE STUDY
The general objective of this study is to assess personal income tax administration in Nigeria with a particular reference to Akwa Ibom State Board of Internal Revenue. The specific objectives are to:
(i) Analyse the PIT assessment and collection (PIT AC) machinery for the state based on perceived and verified economic predominance in each area of the state.
(ii) Examine the machinery designed to enhance revenue planning and control in the system.
(iii) Identify a system, which will ensure equity and fair play so that the citizens will respond to it positively.
(iv) Recommend how tax legislation could be administered efficiently.
REVIEW OF RELATED LITERATURE
This chapter presents the review of related literature assess personal income tax administration in Nigeria with a particular reference to Akwa Ibom State Board of Internal Revenue. Views and opinions of other authors will be presented as follows.
Administration of Tax in Nigeria
Nigeria is a federation with three tiers of government namely; Federal, State and Local Government. These tiers of government have their different expenditure responsibilities and taxing powers (fiscal federalism). This has serious implications on how the tax system is managed in the country. The Nigerian tax system is lopsided and dominated by the oil revenue. It is also characterized by unnecessarily complex, distortionary and largely inequitable taxation laws that have limited applications in the informal sector that dominates the economy (Odusola, 2006 and Jibrin, et al 2012). The system is concentrated on petroleum and trade taxes while direct and broad-based direct taxes like the value added tax (VAT) are neglected. This is a structural problem for the country’s tax system.
The Nigerian tax system favours the federal government since it controls the buoyant tax components while the lower tiers have jurisdiction over the less profitable ones (Odusola, 2006). In most instances the federal government taxes the corporate bodies while the state and local governments tax individuals. In the areas of concurrent taxation such as the personal income tax, capital gains tax and stamp duties, the federal government retains the legislative power while sharing administrative capacity with the states.
The Nigerian tax system is sick and faced with many challenges. The country is yet to develop an effective and efficient tax system despite the fact that the enforcement machinery of our tax laws is porous that anybody can go against it without being punished and this does not augur well for our economy (Ogbonna 2010).
Those who are charged with administration of tax are not empowered with state of the art equipment to perform. They are not often than not so ill-equipped, so ill-trained and so neglected that they become disillusioned, discouraged, frustrated and therefore hardly give their best services. Therefore, from indications, tax administration in Nigeria is generally poor and inefficient.
The administration of tax in Nigeria is vested in the various tax authorities depending on the type oftax under consideration. Such authorities are the Joint Tax Board, which is the apex unifying body for all tax authorities in Nigeria. It is established under section 85 of the Personal Income Tax Act, (Amendment) 2011, Federal Inland Revenue Service (FIRS) established by Section 1(1) of Companies Income Tax Act (CITA) 1990. It is charged with the powers of assessment, collection of and accounting for all the taxes which the federal government is empowered to collect. The State Board of Internal Revenue in each state is another tax authority vested with the administration of tax in each state. It is established by Section 85A of the Personal Income Tax Decree (PITD), 1993. The Local Government authorities in the state also have specific tax functions. They are established by Section 85E of the PITD, 1993. It is the responsibility of these bodies to ensure that tax administration is strengthened in such a way that no leakage or loopholes of collectible tax is allowed. Contrary to this expectation, there are some administrative problems giving rise to such leakages and loopholes.
Tax administration is all about the machinery put in place to determine, monitor and enforce the collection of taxes by government of a country. To Kiabel (2011) and Soyode and Kajola (2006), tax administration is “the process of assessing and collecting taxes from individuals and companies by the relevant tax authorities, in such a way that correct amount assessed is collected efficiently and effectively with minimum tax avoidance or tax evasion. Ogbonna (2012) noted that tax administration “involves all the principles and strategies adopted by any government in order to plan, implore, collect, account and coordinate personnel charged with the responsibility of taxation”. It also includes the effective use of tax revenue for efficient provision of necessary social amenities and other facilities for the taxpayers.
Tax administration and collection is a major problem facing taxation in the world (Jibrin, et al 2006).
According to them, bad administration and collection of tax has led to tax evasion. According to Udabah (2002), the problem of collection and administration are the major issues facing taxation. Tax administration is problematic because of high rate of illiteracy, poor tax awareness and inadequate orientation (Ogbonna, 2010).
This chapter is concerned with the methods and procedures used in the collection of data for the study. The strategies adopted in the collection of data are discussed under the following sub-headings which includes; research design, area of the study, population of the study, sample size and sampling techniques, sources of data, method of data collection as well as method of data analysis.
DESIGN OF THE STUDY
This study adopted the survey research design. According to Nworgu (1991), defines survey research as one in which a group of people or items are studied by collecting analyzing data from only a few or items considered to be representative of the entire group. Thus, the researcher collected data from the staff and management of Board of Inland Revenue Service, Akwa Ibom that formed the population of the study.
AREA OF THE STUDY
This study is limited to Board of Inland Revenue Service, Akwa Ibom as a study area and upon the subject of study which centers on assessment of personal income tax administration in Nigeria.
POPULATION OF THE STUDY
The population of this study consisted of all the staff of Board of Inland Revenue Service, Akwa Ibom which is estimated to be 120 staff. Emphasis was placed on staff knowledge and information concerning the subject of the study.
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
This chapter dwells on the systematic analysis and arrangement of data collected. The data collected was through the use of questionnaire while the analysis was based on research questions and hypotheses stated earlier in chapter one of this study.
SUMMARY, CONCLUSION AND RECOMMENDATIONS
This chapter presents the summary, conclusion and recommendations for further studies based on the findings.
This study was carried out to assess personal income tax administration in Nigeria with a particular reference to Akwa Ibom State Board of Internal Revenue. To achieve this objective, nine research questions and two research hypotheses were formulated to guide this study. The data collected were analyzed using descriptive and t-test statistical methods were used. The results of the study revealed that:
- a) PIT is a major source of the total revenue of Akwa Ibom
- b) There is a significant relationship between Personal Income Tax and Total Revenue of Akwa Ibom State. Hence it contributes to the economic development.
Based on the findings of this study and subsequent recommendations, it is concluded that personal income tax is an income tax levied on the wealth or income of Individuals, Corporate and Public Companies, Trustees and Partnership. This tax imposed must be backed by legislation, as nobody would agree to pay tax without being convinced that such tax is authorized by law. The law that empowers the imposition and collection of tax on Individuals, Companies and Trustees is the Income Tax Management Act (ITMA) 1961. This act has been amended several times and the most recent amendment is act 104 of PIT 1993, which is now applicable throughout Nigeria.
Based on the findings of this study, the researcher made the following recommendations:
- The tax payers should be educated and enlightened as to importance and benefits of taxes to them and the economy at large.
- A mandate should be given to the states law reform committee and state House of Assembly to draw up a new personal income tax that is constant with present day reality, economy and best global practice and that will take the interest of the tax payer into consideration.
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