TAXATION AS A MAJOR SOURCE OF GOVERNMENT FUNDING
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TAXATION AS A MAJOR SOURCE OF GOVERNMENT FUNDING
TAXATION AS A PRIMARY SOURCE OF GOVERNMENT FUNDING
Taxation as a key source of government funding was chosen as a topic for this research work due to the continuous and unavoidable reduction in the expansion of the economy, which derives its resources and finance from tax.
The government, like individuals, generated revenue for the executive of her project and the provision of essential infrastructures that make life worth living, such as the construction of roads, schools, bridges, the provision of sound education, the provision of pipe borne water, defence, and others.
Despite this, there are still some degenerative difficulties with tax assessment and collection in Enugu State. This is due to ineffective tax administrative machinery, which has resulted in poor compliance by the State’s taxable citizens.
Based on this trend, faster efforts were required to keep the flag of tax collection flying in Enugu State, as tax is the life and brain fibre of every economy.
Because taxation is the most reliable and sustainable source of funding, it is vital to re-associate all accessible tax sources. This report covers all of the key locations and radial methods for collecting more taxes for the state in order to maintain the ego of a major source of revenue for the government.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Taxation is an important tool for implementing public policies. This applies equally to developed and underdeveloped countries. Taxation is recognised to achieve a variety of goals, including revenue creation for the government, economic stabilisation, and income redistribution.
Taxation, as a tool of public policy, is primarily concerned with manipulating the financial operations of both the public and private sectors in order to achieve specific economic goals.
In Nigeria, these economic objectives include achieving a significant level of full employment, avoiding excessive inflation, and achieving a decent balance of payment position.
Significant increase in national income and reduction in extreme inequality among citizens, provision of other vital elements of life like as water, schools, bridges, highways, and others.
The question now is, how did these activities come to be discovered? The government can only execute these duties by producing enough revenue to finance the completion of the tasks ahead, and the Board of Internal Revenue is mandated by law to assess, collect, and account for all taxes in Enugu State.
Taxation is defined as an obligatory levy by the government to the individual and payable to the economic and social duties. Lord Maccnaghten stated in Simon’s Income Tax (1852), “Income tax is a tax on income.” It is not intended to constitute a tax on anything else.”
Tax, according to Dalton (1954:23), is a compelled contribution levied by a public body regardless of service supplied in return. Njokamma’s income tax law and practise. CA. Defined income tax as a piece of legislation.
When it comes to interpreting its provisions. “No equity, no intendment” or anything else should be indicated. The clear terms of the law should be followed, but not necessarily at the expense of revenue.
However, taxes are not the only source of government revenue; there are others.
Penalties and surcharges
Fees for motor vehicle registration
Rent on quotas set by the government
Deductions for interest and payments
Dividends and royalties paid by the government
Investing in stocks
¨ Miscellaneous
The state’s share of federal government payments.
Loans and grants are both available.
Fees for attending school
Charges for hospitalisation
Revenue from government parastatals such as the water management department.
The private sector is not left out of the fund generating process; they have their own fund that is informed of borrowing, private savings, and so on.
Due to the lack of well-organized and locally managed money markets for borrowing, most developing countries, including Nigeria, have had to rely primarily on fiscal measures to mobilise domestic monetary resources for fund generation.
For example, if taxes earnings fall, the marginal efficiency of investment falls, and investment falls as a result. On the other hand, if investment profits are enhanced through a low tax rate, the marginal efficiency of investment is noticed.
However, Duke Man (1962, p.462) stated that an effective tax system that encourages investment must be based to some extent on high rates, a fact peculiar with the paradox of investment stimulating taxation,
as well as discrimination, so long as it is significantly qualitative and psychologically significant. This advice may not bode well for investment activity, as residual gains and savings are used to make a buck.
Recognising the importance of finance as the train wires of economic growth, the government initiates financial policies through annual budgets and tax laws to fund and provide necessary extension services for these business enterprises, and also ensures adequate financing of small scale enterprises through several government financial policies.
We are now convinced that taxation is the most important source of revenue for the government. With charges in these considerations, attention has been focused on the fiscal policy most suited to the country’s economic development.
The value of products and services payable by final consumers is given special consideration in the quest for suitable fiscal policies. The federal wand Revenue is answerable to the federal government for the collection of this tax, while a reasonable percentage is allocated to the state where VAT is collected.
Nonetheless, the implementation of various government initiatives and their results are frequently at odds with official aims. Some tax collection agencies are either ill-equipped to carry out their functions successfully or are staffed by people of questionable character who believe in the government’s noble goals.
Most tax papers do not pay gladly; some take laws into their own hands to either evade or avoid tax, while others collide with tax officials and hire tax professionals to discover tax loopholes. As a result of such unethical taxing practises, the government’s predicted revenue is constantly reduced.
Given the importance of taxation as a primary source of government finance as well as a significant tool in the implementation of public policy. This study aims to investigate all routes of tax collection in Enugu State,
as well as the performance of the Enugu State Board of Internal Revenue, in order to maintain the flag flying in support of the study’s issue of taxes as a major source of government revenue.
1.2 STATEMENT OF THE PROBLEM
Taxation accounts for the majority of internally produced revenue in Enugu State and is the primary source of funding for the government’s activities. Tax, on the other hand, has basic issues in the areas of administration and management.
There is a pervasive lack of planning, control, and adequate information flow in tax collecting. Since the government’s financial policies and aims are to secure appropriate funds and a conducive atmosphere for the happiness of the people through progressive taxation and other fiscal measures meant to end the society’s rapid growth and development for the benefit of the citizens.
As a result, it is critical that these funding channels be strengthened. However, the implementation of government taxation policy and the achievement of taxation goals frequently diverge from the policy specified in the yearly budget as well as the requirements of tax legislation.
Many individuals and organisations believe that taxes policy is severe and undesirable. They believe that while a few firms, particularly major corporations, continue to benefit from government assistance in the form of grants,
subsidies, and other tax breaks. Others find the policies intolerable, thus any possibility for tax evasion or avoidance is taken advantage of.
As a result of all of this tax evasion and avoidance, the government collects less revenue through taxes and hence implements fewer social programmes than planned.
These issues will be resolved as soon as an efficient machinery for effective administration and evaluation of state tax legislation is put in place.
1.3 PURPOSE/OBJECTIVES OF THE STUDY
The study’s aims are to investigate ways to make the tax system more effective and to put in place measures that will assist the government realise adequate funds for its development efforts.
Other goals include
1. To examine and analyse the taxes that are being administered and the situation of Eungu.
2. To calculate the total value of taxes collected year after year.
3. To identify additional sources of tax revenue for the Enugu State Government.
4. Improve on them by determining other sources of government funding.
5. To give recommendations on methods to increase the state government’s total revenue, including taxation and other sources of revenue.
To truly achieve these goals, efforts will be taken to:
1. Identify all of the issues impeding effective tax assessment activities.
2. Analyse the issues and put the offered remedies into action.
3. Propose implementation strategies to assist management in carrying out government policies and programmes.
4. Bring the issue to the attention of the department and the government.
5. Sensitises the government and raises awareness about the people’s deplorable attitude towards tax payment and the consequences for the state’s economic and social development.
1.4 RESEARCH HYPOTHESIS
H0: Taxation is not the primary source of government funding.
H1: Taxation is the primary source of government funding.
H0: There is no statistically significant link between state tax revenue.
H1: There is a considerable link between tax revenue and total state revenue.
H0: The Enugu state tax administration system is inefficient and mismanaged.
H1: The tax administration system in Enugu State is efficient and well-managed.
H0: The Nigerian government does not fully address her taxes issues.
H1: The Nigerian government adequately addresses her taxes issues.
1.5 THE SIGNIFICANCE OF THE STUDY
The study would aid in evaluating the tax income generated and the tax collection mechanism in place in Enugu State. It will also aid in evaluating the tax and how the administration is using other revenue sources available to the state.
If used correctly, this study will provide the Board of Internal Revenue and the State Government with information about the issues affecting tax assessment and collection in the state.
The study will also indicate how far Enugu State’s tax policies have been implemented, as well as recommendations for increasing income collection for infrastructure development. As a result, the tax papers of the state will have a good level of living.
Finally, it is intended to educate state citizens about tax objectives, thereby reducing tax evasion and avoidance.
1.7 SCOPE OF THE STUDY
This research is claimed to have covered tax administration and revenue generation systems in Nigeria, as well as comparisons with other sources of government revenue. Some federal government taxes, such as corporate income tax, petroleum profit tax, capital gain tax, and capital transfer tax, may have been included in this study.
Due to time limits, a lack of knowledge, and financial constraints, the study cannot be extended beyond these important areas and has been limited to tax administration as it applies in Enugu State Government.
1.8 HISTORICAL BACKGROUND OF THE ENUGU STATE BOARD OF INTERNAL REVENUE.
The current Enugu State Board of Internal Revenue, like most government organisations, can be traced back to when colonialists founded their administration in Nigeria. The requirement for the government to earn revenue in order to carry with its initiatives resulted in the division of the Ministry of Independence in 1060.
And as a result of the expanding responsibilities, the Board of Internal Revenue was founded as an autonomous government entity, tasked with the sole responsibility of tax assessment and collection within their jurisdiction in Nigeria’s then-eastern state.
As a result, the current Enugu State Board of Internal Revenue has evolved through various governments such as Eastern Nigeria, East Central State of Nigeria, and Anambra State Board of Internal Revenue to become the most visible and highest revenue generator of all Enugu State extraministerial departments.
Any nation’s, state’s, or municipal government’s government formulates and implements policies for the benefit of the people. The government, at whatever level, has several organs through which it implements these policies for the benefit of the Board of Internal Revenue, which the government has charged with assessing, collecting, and accounting for all taxes collected within this state.
The current Enugu State Board of Internal Revenue has just (2) two zones, as opposed to (3) three zones prior to the establishment of Ebony state. These tow zones are as follows: 1. Enugu Zone has eighteen tax offices and eighteen motor licencing offices; (2) Nsukka Zone has twelve tax offices and twelve motor licencing offices.
All of these tax and licencing offices have their primary headquarters in Enugu State. The two zones each have zonal tax administrations in charge of collecting and organising all tax activities in their respective zones. These zones are required to submit their monthly return to tax collection at the end of each month.
The statistics department called the planning at the conclusion of each month or quarter month. The research and statistics section will collect, summarise, and analyse these collected returns in order to create a broad chart that will show all of the monthly tax collections as well as the total figure for the fiscal year ended 19…
This chart will be carefully prepared so that one can see the total amount of tax collection for each fiscal year at a glance.
1.9 DEFINITIONS OF TERMS
Some of the terminology used throughout this research that are relevant to the subject are defined:
Revenue: A governmental unit’s gross receipt or receivable obtained from taxes, customs, and other major sources of government revenue, but excluding allocation and allotment from the Consolidated Revenue Fund (CRF).
Tax is defined as “(sum of money purchased, etc.) to the government for public purpose” by the Oxford Advanced Learners Dictionary of contemporary English.
Tax can alternatively be defined as a natural or cooperative tax paid to the government for the benefit of the citizens.
Tax Assessment: The calculation of the tax owing to be paid by an individual.
Tax Collection: Board employees who are in charge of collecting taxes from the general population.
Zonal Tax Authorities: These are senior tax officers in charge of assessing and collecting taxes within their zone.
Tax laws are formed by the government and are subject to review, as well as providing recommendations and draughts on how and when taxes are paid. These statutes serve as a guideline for all of the federation’s tax departments. ITMA 1961, Income Tax Management Act 1991, and so on are examples.
Income management Act (ITMA): These are the laws that govern tax collection and payment in Nigeria.
This was enacted in 1961 but has subsequently been changed.
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