INCOME TAX ADMINISTRATION IN ABIA STATE. 

A CRITICAL EVALUATION OF PROBLEMS AND PROSPECTS. 

(A CASE STUDY OF BOARD OF INTERNAL REVENUE UMUAHIA)

ABSTRACT

Tax policy administration and implementation have been a great problem to the third world countries, which Nigeria is one.  This research work, “income tax administration in Abia State, a critical evaluation of the problems and prospects.  Thereafter, suggests ways of minimizing the effects of the following problems.  Avoidance and evasion of tax, waiting the taxpayers, initial tax payer compliance, resolution of controversies between tax payer and tax officials and collecting of taxes etc.

These problems have affect on the income tax revenue base of the government, which will in its totality have adverse effect on its capital expenditure.  To enable the researcher find solution to the problem of this study, some questions were raised in form of hypothesis, which was developed into null and alternative hypothesis. 

H0:    There is no relationship between income tax revenue and government capital expenditure.

H1:    There is a relationship between revenue from income tax and government capital expenditure.

H0:    No relationship exists between revenue generated from income tax and the government recurrent expenditure.

H1:    There exist a relationship between revenue generated from income tax and the recurrent expenditure of the government.

H0:    There is no problem confronting tax administration.

H1:    There are problems confronting tax administration.

As a result of detailed analysis, the study has revealed so many important phenomena in revenue generation in this state which in-adequacy of staff, inefficiency and ineffectiveness of tax assessment authorities due to heavy work load, miss appropriation of collected funds just to mentions but a few.

The method of data collection was through primary and secondary sources. The secondary source, which involves the analysis of vital documentations available at the state library ministry of finance and board of internal revenue.  Data collected were analyzed by simple Pearson’s  correlation co-efficient and chi-square.

With respect to the research findings, the following recommendation are made to a successful use of improved income tax administrations to enhance development.

-                     Government should provide conductive working environment for the tax authorities and also adequate funding and provision of operational facilities.

-                     A high standard of literacy among taxpayers.

-                     The absence of political influence to tax measures.

-                     Prevalence of accounting records honestly and reliably maintained.

 LIST OF TABLES

Table 1:      Abia State income tax revenue with capital and recurrent expenditure 1993 – 2003.

Table 2:      Date for proper accounting date for provision of adequate working condition.

Table 3:      Response from problem facing tax administration in Abia State.

Table 4:      Response from attitude of tax payers

Table 5:      Data for the level of communication between your staff and taxpayers.

Table 6:      Response from factors affecting level of communication between your staff and taxpayers.

Table 7:      Response from the rate of tax evasion and avoidance in Abia State.

Table 8:      Response from the quality staffs in state board of internal revenue

Table 9:      Response from problem of locality the tax payers

Table 10:    Response from how to notify the public on the importance of taxation.

Table 11:    Correlation test between capital expenditure and income revenue.

Table 12:    Correlation test between recurrent expenditure and income revenue.

Table 13.    Computation of chi-square test statistics of problem facing tax administration.

Figure I:      Organization chart of the board of internal revenue Abia State.

Figure II:     Testing for if there is any problem facing tax administration at 5% level of significance with 4 degree of freedom.

TABLE OF CONTENTS

Cover page

Title page

Certification

Dedication

Acknowledgement

Abstract

Table of contents

CHAPTER ONE:        

INTRODUCTION

1.1            Background of the study

1.2            Organization of the study

1.3            Statement of the problem

1.4            Purpose of the study

1.5            Research question

1.6            Research hypothesis

1.7            Scope and limitation of the study

1.8            Significance of the study

1.9            Definition of terms

CHAPTER TWO:        LITERATURE REVIEW

2.1            Development of income taxation in Nigeria

2.2            Taxation

2.3            Tax administration and policy in Nigeria

2.4            Income tax administration in Abia State

2.5            The problem of income tax administration in Abia State

2.6            Income tax policy and administration

2.7            Prospects of income tax administration in Abia State

2.8            Income tax administration, revenue yield and economic development in Abia State.

2.9            Objective of income taxation

2.10       Qualities of a good system of taxation

2.11       Effect of taxation

2.12       Classification of taxes

2.13       Why tax

2.14       Fiscal policy

2.15       The instruments of fiscal policy

2.16       The goals of fiscal policy

2.17       Types of fiscal policy

2.18       Techniques of fiscal policy

  CHAPTER THREE:    RESEARCH METHODOLOGY

3.1            Research design

3.2            Selection of data

3.3            Collection of data

3.4            Sampling design

3.5            Data analysis techniques

3.6            Problem of data collection

CHAPTER FOUR:     

PRESENTATION ANALYSIS AND INTERPRETATION OF DATA

4.1            Presentation and analysis of data

4.2            Analysis of data

4.3            Testing and proving of hypothesis

CHAPTER FIVE:       

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1            Summary

5.2            Conclusion

5.3            Suggestions of further research

Bibliography

Appendices

Appendix   A:      Letter of introduction

                   B:      Letter to the respondents questionnaire

                   C:      Statistical computation.

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

The tax system is often identified as one of the most powerful levers available to the government to move their economic state from a pitiable condition to a happier position.  According to Anyanwu (1999) taxation can simply be seen as “a compulsory transfer of money from private individuals, institution or groups to the government”.  On another note Agolu (2001) says “taxation may be defined as a compulsory levy by the government through its various agencies in the income capital or consumption of its subjects. These levies are made on personal income such as salaries business profits, interest, dividends commission royalties or rests.  It may also be levied on capital gains and petroleum profits.  All of the above are taxes levied on income”.  Income tax is one levied on the income after allowances have been granted what remains taxable.

The questions then arises as how efficient is the administration of income tax in Nigeria and Abia State in particular.  This is the questions this research work tries to provide an answer to.  It is important to note that during colonial period, income tax administration was placed on the shoulders of colonial masters according to the orders of the governor general.  After independence, the government of Nigeria took over administration of taxes, especially, income tax.

Consequently, board of internal revenue were established in the different regions and states of the federation.  These states were charged with responsibility of income tax administration.

THE BACKGROUND OF BOARD OF INTERNAL REVENUE

Section 85A of PITD provided for the establishment of a state board of internal revenue to be known as “the state service” to comprise of:

-                     The executive head of the state board as chairman who shall be a person experienced in taxation and appointed by the governor of the state from within the state service.