Tax Administration in Nigeria: Challenges and Prospects (A Case Study of Lagos State Board of Internal Revenue Service)
1.1 BACKGROUND TO THE STUDY
The development of any nation depends on the amount of revenue generated by the government for the provision of infrastructural facilities. One major source of generating this revenue is taxation. According to Azubike (2009) tax is a major source of government revenue all over the world, including Nigeria. Government use tax proceeds to render their traditional function of law and order, defense against external and internal aggression regulation of trade and business to ensure social and economic justice. Musgrave and Musgrave (2006) also maintain that the economic effects of tax include micro effects on the distribution of income and efficiency of resource use well as macro effects on the level of capacity output, employment, price and growth. However, the use of tax as an instrument of fiscal, policy cannot be possible except effective and efficient government tax planning and administrative machinery is ensured in the country. Anyamu (1997) writing on tax policy planning and administration in Nigeria opines that a tax system that ignores the tax planning and administrative aspect is deemed to remain a good system only on paper. It is on the basis of this that Bhatia (2004) maintains that: it is not an easy task to introduce an optimum task structure in an underdeveloped country. There is an inevitable conflict between defined policy and ability to execute them. Various characteristics and institutions of an economy may come in the way of adapting on idea tax system such as the paucity of date, level of education cultural patterns, etc. A tax system has to be politically acceptable and in conformity with administrative capabilities of the authorities. Moreover, several taxes tend to work at cross purposes. (This also poses its own problems in devising an efficient and optimal. Taxation is key to unlocking the resources required for public investment and infrastructure growth. But collecting taxes from citizens have proved herculean tax because the average person would rather evade tax than paying it. In Nigeria and other African countries, the level of tax evasion is quite high. As a result, African countries collect little or nothing from taxes. African countries have to improve on their tax collection, while also improving on their political and financial independence if they wish to develop their economics. Furthermore, in a less complex society or country in which the government has less duties and responsibilities, its financial needs are minimal. However, as society becomes complex the needs of the people increase with corresponding demand for greater responsibilities. To discharge the responsibilities, the people, through the constitution ampoule the government to raise finances through a number of sources. As it has been proven that the master source of generating revenue is taxation, other once include fees and fines, specific charges, rents royalties and profits, grants and loans. Of all these sources, taxation is the most important safe and legitimate for this reason, it demands closer analysis to ascertain and ensure that no stone is left unturned in collecting maximum taxes. With such power at the disposal of the government to raise enough finances with which to meet its financial commitments, failure to do so amounts to irresponsibility or at best inexcusable negligence. Understandably however, tax administration is embedded with a legion of problems on one hand and there are prospects available to administer taxes effectively on the other. To achieve the desired results, all hands needs be an deck, both the government and the people having distinctive roles to play, with the former leading to the collection of maximum taxes to boost revenue generation for the state is a task that must be done.
1.2 STATEMENT OF THE PROBLEM
Tax is a compulsory levy imposed on a subject or upon his property by the government to provide security social amenities in order to create condition for economic well being of the society and its citizenry. Tax system has been considered to mean the process of taxation involving sets of rules, regulations and procedures with the organs of administrations interacting with one another to generate fund for government. Be that as it may, it appears the situation is centrally when view from the practical implementation especially as it concerns the area under investigation. The major problems being sought out in this study include, Tax authorities in Lagos state internal revenue service and Nigeria at large lack the desired institutional capacity to administer tax system effectively. Bulk of taxes today is paid by only the employees and less privileged individual in the state. Politicians, the rich, professionals and privileged individuals are not equitably taxed. It is observed that due to their low level of education tax officials are not conversant with the tax laws and regulations. Problem of tax evasion and default may not only stem from the lack of voluntary compliance by tax payers but also from the fact that not all the taxes collected reach the public treasure, this is stealing by some tax officials as distinct from alleged bribes given to them. Since there is a gap between what is supposed to be and what is actually on the ground, it therefore become impossible for smoothly collection of tax by Lagos state internal revenue service. Because tax payer need to know not only the tax but how the board is governed to interface with their economic and social living. The magnitude of the doubt raised above implies some underlying problems and this is the inspiration of the research.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
To examine the problems associated with tax administration in Nigeria.
To examine the prospects of tax administration in Nigeria.
To identify the problem associated with the tax laws and proposes amendments for same.
1.4 RESEARCH QUESTIONS
What are the problems associated with tax administration in Nigeria?
What are the prospects of tax administration in Nigeria?
What is the problem associated with the tax laws and what are the likely amendments for same?
1.6 SIGNIFICANCE OF THE STUDY
The need for the appraisal of tax administration has been over due. This is particularly pertinent given the acute financial situation of the Board of Internal Revenue Service. The situation is a common knowledge, which manifest sometimes in delay of payment of salaries for some months, and in ability to execute needed projects for the good of the people. Yet among the revenue sources at the disposal of the Lagos State Board of Internal Revenue Service, taxation constitute a lion share, hence there is a need to establish why maximum taxes are not collected. This study therefore, as much as possible
Will help in achieving maximum tax collection
Help in identifying and appraising the problem inhibiting tax administration, with the view to addressing them
It will create the right perspective about tax payment and thus encourage commitment to it
It will throw challenge to the need, to review the existing tax laws with the view of amendment where desirable
It will provide a body of information for reference for other researchers on the same subject.
1.7 SCOPE/LIMITATIONS OF THE STUDY
this study is restricted to tax administration in Nigeria, its prospects and problems with a case study of Lagos state internal revenue service
DELIMITATION OF STUDY
Taxation being a wide subject time and resources are bound to constitute a bottleneck for its coverage. It therefore explain why only on aspect of it is undertaken in this study which is “tax administration in Nigeria: problems and prospects” Even this, is further delimited to Lagos State Board of Internal Revenue Service for the purpose of thoroughness so that justice could be done to it. The research on Lagos State Board of Internal Revenue service covered between 2005– 2015
Musgrave, S. A & Musgrave, M. R, (2006). Value Added Tax and Economic Growth of Nigeria. European Journal of Humanities and Social Sciences Vol. 10, No.1 (Special Issue).
Azubuike (2009). Public Sector Economics: Theories, Issues and Applications. Lima computers, Port Harcourt.
Ahabi, S. Ijewere, E. (1998). The Modified Value Added Tax and the Nigerian Economy. Ibadan University Press, Ibadan .
Bhatia, O. F. (20o4). “An Evaluation of the Contribution of Value Added Tax (VAT) to Resource Mobilization in Nigeria”. An M.Sc Seminar Presented and Submitted to the Department of Economics, University of Port Harcourt, Nigeria
Anyanwu, J. (1997). Nigerian Public Finance. Joane Educational Publishers Ltd, Onitsha, Nigeria.