PROCEDURE, PROBLEM AND PROSPECTS OF PERSONAL INCOME TAX ADMINISTRATION IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

There has been in existence various tax policies before the enactment of the direct tax ordinance by Fredrick Lugard in 1946. However, the deficiency of the ordinance was dealt with within 1950 through the introduction of basic principles of taxing income of individuals 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 the 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 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 taxpayer 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 the government of Nigeria. The payment of the tax was made by money based on a flat rate per head, later other forms of revenue like stamp duty, capital gain tax and betting 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 the tax administration encounters a lot of problems. The problem of personal income tax nowadays is the source 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 taxpayer. The problem faced by tax collectors in order to know the exact amount of individual income from each source of income. The inadequate orientation of the taxpayer about the importance and usefulness of tax especially for people in the rural area. The 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 brings 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 the income of self-employed individuals. The exercise will cover a period of four years 1999 to 2002 so as to highlight the rent 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 taxpayers. It has in one way on the other contribu

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