PROCEDURE, PROBLEM AND PROSPECTS OF PERSONAL INCOME TAX ADMINISTRATION IN NIGERIA: A CASE STUDY OF OYO STATE BOARD OF INTERNAL REVENUE
CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY
There has been in existence various tax policies before enactment of the direct tax ordinance by Fredrick Lugard in 1946. However, the deficiency of the ordinance was dealt within 1950 through the introduction of basic principles of taxing income of individual other than Limited Liability Company. The original purpose of taxation was to raise money to finance public expenditure since 1940 it has also became accepted that “taxation is one of the instruments used by government of the day on managing the economy” assessment of taxes on an individual in Nigeria purposely to achieve the set of objectives. It is also required to ascertain the effective and efficient execution of tax machinery set up by the Nigeria government to administer takes in Nigeria, these are Federal Board of Internal$ Revenue (F.B.I.R) and State Board of Internal Revenue (S.B.I.R). Proper personal income administration avoidance which is very common and rampant in Nigeria. Personal income tax is charged on all income which accrues to people residing in Nigeria. It is also levied on all income arising within Nigeria no matter where the tax payer resides or his / her nationality. The Oyo State Board of Internal Operates under both the Personal Income Tax Law of 1962 as amended by Personal Tax Law (Amendment) Edict 1962 (Edit Number (1) of 1977 and other federal tax law.
The background of taxation as a whole dated back as far a biblical day when the European Colonized were in government of Nigeria. The payment of the tax was made by money based on flat rate per head, later other forms of revenue like stamp duty, capital gain tax and betting business commission were also introduced business commission were also introduced and embraced by our people. The decrees and acts that are in we as follows Finance (Miscellaneous taxation provision) No 2 decrees 1997. The Federal military government hereby decrees are as follows: The personal income tax decrees 1993 The company’s income tax of 1999. The petroleum profit act of 1959. The value added tax decree 1993.
1.2 STATEMENT OF THE PROBLEM
In the previous year, the government machinery in tax administration encounters a lot of problems. The problem of personal income tax nowadays is the sources of income. People have been engaging in avoidance and evasion of tax from time to time since the Board Inland Revenue Imposed taxation. However, the major problem confronting tax, administration in Nigeria particularly the Internal Revenue Board of Oyo state is highlighted below: Inability to provide adequate and appropriate guidelines and interpretation of legislation to the tax payer. Problem faced by the tax collectors in order to know the exact amount of individual income from each source of income. Inadequate orientation of the tax payer about the importance and usefulness of tax especially for people in rural area. Problem of tax avoidance and evasion, which is yet t0 be cured by the state Internal Revenue Board.
1.3 RESEARCH HYPOTHESIS
For the purpose of this research work, the researcher attempted to find out the validity of the following hypothesis
Ho: The high rate does not bring about the tendency to evade or avoid tax in Nigeria particularly in Oyo State.
Hi: The high tax rate brought about the tendency to evade avoids tax in Oyo State.
1.4 PURPOSE OF THE STUDY
The aim of this project is to know the procedure, problem and prospect of personal tax administration in Nigeria and also to know whether the high rate of tax bring about evasion avoidance tax.
1.5 SCOPE OF THE STUDY
The scope of this study deals with the areas of the study project i.e the area they will cover. The scope of this study is strictly restricted to personal income tax administration on Oyo State under PAY – AS – YOU EARN SYSTEM (PAYE) and directly assessed income of self-employed individuals. The exercise will cover a period of four years 1999 to 2002 so as to highlight the rend for better analysis of data that will be obtained. So that reasonable conclusion could be drawn from it.
1.6 LIMITATION OF STUDY
The most prominent constraint is the high level of illiteracy among tax payers. It has in one way on the other contributed to the wrong computation of tax. Another factor is the total ignorance of tax payer in keeping proper accounting records. Adequate accounting records of business man and other self-employed people is not kept for the tax authority to examine. There is also difficulty in study due to dishonesty by staff and this increase corruption in tax system. In conclusion, having consigns out with in the available time limit and on the basis of available data. It’s worth nothing than the quality of this research work was not reduced as a result of these barriers but rather the resource available was effectively and efficiently used.
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