ABSTRACT
This research study examines the
Effect of Information Technology on the Efficiency of Tax Administration in
Nigeria, a case Study of Enugu State Board of Internal Revenue. Its main
objective is to find out whether the application of Information Technology
increases efficiency on tax administration. For the purpose of this study, the
researcher adopted the method of survey Research Design. Data used in this
research were gotten from both primary and secondary sources including
questionnaires and textbooks respectively. These data were analyzed and
presented in tables. Three (3) hypotheses were formulated and tested using the
Analysis of variance(ANOVA) method. The findings of this research tend to show
that effective tax administration resulting from the application of Information
Technology leads to an increase in tax base as more potential taxpayers are
drawn into the tax net when there is a conducive environment. It is recommended
in this work that enlightenment campaign be made available for the masses and
also adequate training for the tax officials on the use of modern technology
TABLE OF CONTENTS
CHAPTER ONE:
INTRODUCTION
1.1 Background of the study
1.2 Statement of the problem
1.3 Research Questions
1.5 Research Hypotheses
1.6 Significance of the Study
1.7 Scope of the Study
1.8 Limitation of the Study
1.9 Definition of Terms
CHAPTER TWO: Review of Related
Literature
2.1 Concept of Taxation
2.2 Nigerian Tax System
2.2.1 Structure of Nigeria Tax
System
2.2.2 Features of Nigerian Tax
System
2.2.3 Objectives of Nigerian Tax
System
2.3 National Tax Policy
2.4 Tax Laws
2.5 Tax Administration
2.5.1 Objectives of Tax Administration
2.5.2 Models of Tax Administration
2.5.3 Tax Administration
2.5.4 Organs of Tax Administration
2.5.5 Procedures of Tax
Administration
2.6 Problems of Tax Administration
in Enugu
2.7 Information Technology (IT)
2.7.1 Application of IT in Tax
Administration
2.7.2 Benefits of IT in Tax
Administration
References
CHAPTER THREE: Research Design and Methodology
3.1 Research Design
3.2 Sources of Data
3.3 Research Instrument
3.4 Reliability/validity of Research
Instruments
3.5 Population
3.6 Sampling Technique and Sample
Size
3.7 Administration of Research
Instruments
3.8 Method of Data Analysis
CHAPTER FOUR: Data Presentation,
Analysis
4.1 Data Presentation
4.2 Test of Hypotheses
CHAPTER FIVE: Summary of Findings,
Conclusion and Recommendations
5.1 Summary of findings
5.2 Conclusion
5.3 Recommendations
Bibliography
Appendix
CHAPTER
ONE
INTRODUCTION
1.1 Background Of The Study
Taxation is one of the oldest and
major sources of government revenue. The history of taxation in Nigeria dates
back to the precolonial era. During this period, there were different systems
of taxation existing in the forms of compulsory services, contribution of
goods, money, labour and the likes, among the various kingdoms and ethnic
groups and tribes controlled by the Obas, Emirs etc., in order to sustain the
Monarch and also for community development (ICAN,2010)
Taxation, as we know it today, was
first introduced in Nigeria in 1904 by the late Lord Lugard, when community tax
became operative in the Northern Nigeria. He later made changes which
culminated in the Native Revenue Ordinance of 1917. An amending ordinance that
extended the provisions of the 1917 ordinance to Southern Nigeria was passed in
1918. The first ordinance applied to Abeokuta in Western Nigeria and to
Benincity in Mid-Western and in 1928, it was extended to Eastern
Nigeria.
Taxation in Nigeria, in a modern
sense, however, only began in
- A more progressive income tax Ordinance No.29 of 1943 Cap92, under which Europeans all over the country and Africans resident in Lagos were assessed, came into operation on the 1st of April, 1943.
The Commissioner, appointed by the
Governor-General by notice in the Gazette (now referred to as the Federal
Republic of Nigeria
Gazette), was responsible for the
administration of the ordinance. By the 1st Schedule, Ordinance
39/58, it was the Federal Board of Inland Revenue that took the place of the
Commissioner (Ola, 1974).
In recent times, tax administration
in Nigeria is vested in various tax authorities depending on the type of tax
under consideration. Broadly, there are three (3) tax authorities, namely;
- Federal Inland Revenue Service Board ii. State Internal Revenue Service Board iii. The Local Government Authorities
However, the organs of the Nigerian
Tax Administration are listed below;
- Federal Inland Revenue Service Board ii. State Internal Revenue Service Board iii. Joint Tax Board iv Local Government Revenue Committee
- Joint State Revenue Committee. (ICAN, 2010)
The enabling laws in respect of each
type of tax will normally contain a provision as to the body charged with the
administration of the tax. For this
purpose, the various enabling tax laws are as follows;
- Company Income Tax Act, Cap C21, LFN 2004, as amended, which imposes tax on the incomes of companies other than corporation soles and companies engaged in petroleum operations Upstream operations) ii. Petroleum Profits Tax Act, Cap P13 LFN 2004, which imposes tax on the profits of companies, engaged in petroleum operations.
- Education Tax Act, Cap E4 LFN 2004, which imposes Education tax on the assessable profits of companies
- registered in Nigeria.
- Personal Income Tax Act, Cap P8 LFN 2004, as amended, which imposes tax on incomes of individuals and
- corporation soles.
- Value Added Tax Act, Cap V1 LFN 2004, as amended, which imposes tax on the supply of goods and services (except those specifically exempted or zero-rated), made by incorporated companies and other business organizations.
- Stamp Duties Act, Cap S8 LFN 2004, which charges duties on specified instruments listed in the Act.
- Capital Gains Tax Act, Cap C1 LFN 2004, which imposes tax on capital gains arising from the disposal of chargeable assets (ICAN, 2006)
According to Alhaji Kabir M. Mashi,
a core success factor for any system is its position on administrative issues.
Presently, the tax administration in Nigeria, Enugu state to be precise, has
been riddled with various limiting factors such as;
- Weak administrative facilities/ administrative lapses which could result in situations such as tax evasion and tax avoidance.
- Corruption and mismanagement on the part of the tax officials.
- The problem of funding the revenue collecting agencies which negatively impacts on efficiency and performance.
- Lack of adequate records from the informal sector of the economy.
- Inability to identify all taxable persons. (Bird, 1988).
- Lack of effective mechanism in place to prosecute cases of tax evasion.
The rapid growth and development of
Enugu State led to an enhanced increase in population as well as an increasing
number of companies. Tax planning and tax management have
increasingly become complex
activities due to growth in business and the subsequent expansion in scope of
operations and fiscal size. Given the amount of data that needs to be analyzed
in order to assess and compute tax liabilities, it has become imperative that
both tax institutions and companies deploy appropriate computer programmes in
order to enhance tax planning and administration.
The advent of Information Technology
in this era has played a major role in enhancing economic and business
activities of both the private and public institutions. While it has opened up
opportunities that have gone undiscovered or neglected, it has saved many organizations
millions of perpetual fraud through its applications. The application of
Information Technology has become increasingly necessary in Nigeria‟s tax
administration as the use of Information Technology makes for fast, easy and
accurate computation, storage and presentation/ retrieval of data/ records.
Certain computer programmes have
been created to facilitate the computation of cumbersome data. Programmes such
as Microsoft Excel (Electronic Spread Sheet), Microsoft Access (Database) are
one of the most common examples. Other database programmes and accounting
packages which allow for easy calculation and computation of an individual or a
company‟s tax liabilities include Peachtree Accounting, PeopleSoft System,
SQL Database, QuickBooks, Management
Information Processing System, Quikens etc.
Presently, the world has gradually
become a global village and the nexus between Nigeria and the rest of the world
is the use of Information Technology in, practically, every sector of the
economy. Therefore, in order to improve on the efficiency of tax administration
in Nigeria, it will be advisable to apply the use of Information Technology
from the basics of tax collection to the final stage in Tax Administration.
1.2 Statement Of The Problem
For many years, tax administration
in Nigeria has been plagued with problems, most of which can be attributed to
the lack of or inadequate application of Information Technology in tax
administration.
In Enugu State, the tax institutions
have not fully embraced the use of Information Technology for record keeping.
According to BECANS Business Environment Report 1(15) (2007), there is evidence
of a manually compiled database of tax payers. Manual
Compilation involves the use of
files/ folders for data storage. When records are stored in this manner over a
long period of time, retrieval of such records can prove to be very difficult.
Records stored in this manner can be very unreliable as these records are
easily prone to manipulations.
Another major problem can be found
in the method of tax collection. The tax officials are often aggressive as they
use unorthodox methods in tax collection especially at the local government
level.
Furthermore, the identification of
taxable persons has proven to be a herculean task using the manual systems.
The thorough application of
Information Technology in tax administration in Nigeria would be a welcome
change in the system as this will greatly enhance the efficiency in tax
administration in Enugu state in particular and Nigeria in general.
1.3 Objective Of The Study
This research work is aimed at
achieving certain objectives which are stated below:
- To determine if effective tax administration leads to an increase in tax base;
- To ascertain whether inefficiency in tax administration creates room for tax evasion;
- To find out whether the application of information technology increases efficiency in tax administration;
- To know whether poor remuneration of tax personnel affects the dispensation of taxation.
1.4 Research Questions
- Does effective tax administration lead to an increase in tax base?
- Does inefficiency in tax administration create an avenue for tax evasion?
- Does the application of Information technology increase efficiency in tax administration?
- Does poor remuneration of tax personnel affect the effective tax administration?
1.5 Research Hypotheses
Based on the objectives, the
following researches were formulated:
Hypothesis One
H0– Effective tax administration does not lead to an increase
in tax base.
H1– Effective tax administration lead to an increase in tax
base.
Hypothesis Two
H0– Inefficiency in tax administration does not create and
avenue for tax evasion.
H1– Inefficiency in tax administration create and avenue for
tax evasion.
Hypothesis Three
H0– The application of information technology does not
increase efficiency in tax administration.
H1– The application of information technology increase
efficiency in tax administration.
1.6 Significance Of The Study it is hoped that this work will form a major catalyst to
stimulate the initiation of a proper legislative process that will regulate tax
administration in Nigeria, particularly in Enugu State.
Furthermore, effective
implementation of information technology in tax administration will be of
immense benefit to tax authorities. The use of information technology will
invariably reduce work hours, enhance efficiency and reduce opportunities for
corrupt practices in the system.
Finally, it is believed that the
information generated from this research will enhance the tax payers awareness
on tax issues like tax incentives and penalties for tax related offences such
as tax evasion.
1.7 Scope And Limitation Of The
Study
As this research work is focused on
the effect of information technology on the efficiency of tax administration in
Nigeria, with particular reference to Enugu State, the scope of the study will
be limited to the activities of Enugu State Board of Internal Revenue
In the course of carrying out this
research work, certain limitations were encountered, they include the
following:
- Lack of access to certain materials needed for the research.
- Lacks of co-operation from institutions as certain tax institutions were not forthcoming with their record
- Certain libraries did not have contemporary materials for the researcher to work with.
1.8 Operational Definition of Terms
In order to avoid confusion
surrounding the words, the following technical terms have precisely been
defined, as they relate to the context of the research work.
Tax- An amount of money levied by a government on its citizens
and used to run the government, country, a state, a county or a municipality/
local government.
Tax Evasion- This is an act whereby the taxpayer can achieve the
minimization of tax through illegal means. It involves outright fraud and
deceit.
Tax Avoidance- This arises in a situation where a taxpayer arranges his
financial affairs in a form that will make him pay the least possible amount of
tax without breaking the law.
Ordinance- A law or rule made by an authority such as a city
government.
Stakeholders- Those persons/ entities that contribute to, and derive
benefits from, the country‟s tax system. This includes every Nigerian citizen
and resident, corporate entities, government at all levels and government
agencies.
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