TAX ADMINISTRATION IN NIGERIA
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TAX ADMINISTRATION IN NIGERIA
Chapter one
1.1 Historical Background of the Study
This paper looked at tax policy in Nigeria. It traced Nigeria’s tax history and tax policy implementation. The report stated that tax policy has been unproductive throughout time.
It discovered that the federal government has been working on tax reform. The study addressed problems in tax reforms and presented solutions for a more effective Nigerian tax system.
1.2. Introduction
A tax administration is a crucial resource allocator between the public and private sectors in a country; it is typically levied on individuals and entities that comprise the country.
The funds generated by taxes are used by states to finance certain state obligations such as the education system, health care system, pensions for the aged, unemployment compensation, public transportation, and so on.
A country’s tax system frequently reflects its communal beliefs or the values of those in power. To establish a taxation system, a country must make decisions on who will pay taxes, how much they will pay, and how the tax revenue will be spent.
Nigeria’s taxation system dates back to 1904, when the personal income tax was implemented in the northern half of the country prior to its unification by colonial overlords. It was eventually enforced through native revenue legislation in the western and eastern areas in 1917 and 1928, respectively.
Among other revisions in the 1930s, it was eventually included into direct taxation laws no. 4 of 1940. Since then, various administrations have attempted to modernise Nigeria’s revenue system.
Scholars generally agree that Nigeria’s fiscal framework is characterised by overly complex, distorted, and mostly inequitable taxes regulations that have limited relevance in the formal sector, which dominates the economy.
In every sense, taxation is a tool for economic re-enforcement. Most governments across the world have always devised ways to levy various taxes on their citizens. This is done to raise revenue to cover its expenses.
As a result, taxes is the process of levying and collecting compelled contributions from individuals, commercial organisations, and corporate bodies to offset government expenses in the public good.
Fundamentally, its payment is usually monetary, with the public paying the government to allow it to perform its tasks. It could be levied on income, products, or services.
Tax can be defined in several ways:
(a) A government-imposed levy or duty on income or property. Anyanwura (1999).
(b) As a transfer of resources from the private to public sectors in order to achieve some of a country’s economic and social objectives. Agyel (1988).
(c) A contribution of wealth made by citizens of a country, business organisations, and corporate organisations to the government in order for the government to provide social, economic, and fiscal services. Fagbule (1982).
(d) A obligatory contribution from a person(s) made in the common interest of all, regardless of the unique benefits granted. Adegboyega (1998).
According to the various definitions of taxation provided above, the primary goals of taxation include wealth or income redistribution, revenue generation, stimulation or stabilisation of economic growth, discrimination against certain types of goods and services in terms of both production and consumption, and correction of balance-of-payments imbalances, among others.
1.3 Statement of the Problem
This study aims to determine the impact of tax evasion and tax avoidance on the Nigerian economy, with a focus on the Lagos State Internal Revenue Services.
The government’s overreliance on crude oil sales to generate much-needed cash has left taxation prospects and potentials unexplored. Unfortunately, in Nigeria, only salary earners pay the whole cost of income tax, while private businessmen frequently avoid it. This undermines the social, political, and economic goals of income redistribution, which is one of the primary purposes of taxation.
The focus of this research is on the effects of tax evasion, the causes of tax evasion, tax avoidance, and the many ways used by payers to carry out these actions, as well as how those acts can be reduced if they cannot be totally eliminated.
In conclusion, a type of taxation based on professionals and self-employed individuals; given that tax evasion is high among this group of taxpayers, it has been proposed that reducing evasion would result in a significant increase in revenue yield.
Efforts to raise income from this group of taxpayers have been impeded by two issues.
The first is an inability to have them adequately appraised, and in most cases, not assessed at all. As a result, tax money is lost while actual and potential taxpayers in this category live in a tax-free environment.
The second issue that makes assessment difficult is a lack of information about this group of people, many of whom do not register their business names, and when they do, some provide inaccurate and false information, impeding any monitoring. Inadequate and lack of information make tax administration difficult.
1.4 Research Objectives
This research aims to identify the elements that contribute to tax evasion in Nigeria’s economy. The repercussions of deviation, and specifically how they might be reduced and regulated in order to meet the nation’s current concerns.
Furthermore, the study aims to disclose the economic and sociopolitical implications of taxation in Lagos State, as well as to highlight the effects of tax evasion on the Nigerian economy.
To provide potential solutions to this problem, civil servants and business organisations should religiously reveal their income from other sources (if any), and the tax authorities should faithfully carry out their statutory tasks.
1.5 RESEACH QUESTIONS
This study aims to provide answers to the following questions:
i) What do the Internal Board of Revenue (Lagos State) perceive to be the primary causes of tax evasion?
ii) How does tax evasion influence the financial operations of the Lagos State Government?
iii) Does the Lagos State Internal Revenue Board impose any penalties on tax evaders?
iv) Is there public awareness of the importance of taxation?
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