Taxation and Its Effect on the Nigerian Economy (a Case Study of Owerri Municipal Council)
CHAPTER ONE
THE OBJECTIVE OF THE STUDY
The main objectives of the study include;
- To examine why people evade income tax payment
- To examine the effect income tax evasion has on the economy.
- To examine the problems that tax administration faces in an attempt to mobilize tax revenue from traders in Adum-Kumasi and offer solutions with suitable suggestions and recommendations.
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
In this chapter, the research team presents a comprehensive account of theories on income tax evasion and its effect on the economy.
Taxation policy and practice” by Dora Hancock, defined “Tax as a compulsory levy, imposed by government, on income, expenditure or capital assets, for which the tax payer receives nothing in return”
Organization of Economic Co-operation and Development (OECD) on a debate concluded that the term tax could be “confined to compulsory unrequited payment to government”. From the above definition, one can draw the following conclusion or implications:
- Tax is an imposition
- It is a compulsory levy
- Tax is a no quid pro qua payment to the tax payer
- It involves capital or funds outlay
Taxation is a compulsory levy and an imposition by the government or the authority that be. Hence the team has no other choice than to state that “tax is a payment forced down the throat of the tax payer by the powers that be. The conclusion drawn from this exposition is that, taxes have been and still continue to be a vexatious issue because one can cite several instances of peoples’ resentment to taxes.
CHAPTER THREE
RESEARCH DESIGN
The study makes use of survey research technique. It was carried out with a view to achieve some previous stated objectives. It’s a means of obtaining information directly from group of individual by using interview and questionnaire techniques. The techniques serve as aids in collecting contemporary data either by direct or indirect method.
POPULATION OF THE STUDY
The population of the study for this work consist of 45 respondents that are directly affected by tax policy i.e Tax consultant, auditor; inspector of taxes and Administration officer of an organization.
CHAPTER FOUR
DATA ANALYSIS AND INTERPRETATION
INTRODUCTION
This chapter is based on the response obtained and interpretation of the analysis from the field. The outcome or results are presented with the use of table to illustrate some key variables contained in questionnaires.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
DISCUSSION OF FINDINGS
The study therefore conclude from all the available findings that in order to encourage and attract investment in certain preferred sector, enhances capital information thereby leaving more retained profit arising from tax saving for re-investment and protection of certain industries and manufacturing sectors against competition stimulate the expansion of domestic productive capacity in those area all these benefit will lead to economic growth in Nigeria.
SUMMARY
The purpose of the study is to know the effect that income tax evasion has on the economy. Chapter one traced the background of the tax system and how it was introduced in Imo State. The study also shed light on the efficiency of the system so far as education, record keeping, tax awareness, understatement of trade income etc. The study however, was restricted to income tax system on self-employed in Owerri Municipal in Imo State.
Chapter two which has the caption of literature review discussed the definitions and nature of income tax, the principles of tax, income tax evasion, tax avoidance and tax default. The problems associated with income tax payment and collection in the metropolis was also given some attention.
The findings from the research conducted on traders and Imo State tax (domestic tax division) officials indicated that taxes are paid and collected, however, tax payers complain of not seeing the impact or the purpose for which these taxes are being paid that is garbage are not disposed of on time this in turn poses threat on health, some classrooms are without enough furniture, some roads are in a very poor condition for which some landlords have to contribute money in order for roads leading to their houses to be constructed and also poor drainage system was found to be predominant in the Owerri Municipal. Income tax evasion, avoidance and default are commonplace in the metropolis. This situation persists in the metropolis because the majority of the traders claimed they did not see the need to pay tax since they did not see the benefits accruing thereof. Chapter three and four discussed the methodology and analysis of the data collected. These included among other things, choices of the population and sample for the study, research instruments and research designs were used. Lapses in the tax systems were identified during the process of the analysis.
CONCLUSION
The study was to find out the problem connected with income tax evasion on the economy. The research revealed many problems on individuals’ attitude towards income tax. It was found out that their educational background were low. This was especially in the case of traders. Most of them were basic and secondary school leavers who had no in-depth education in taxes. Also, it was observed that the traders did not keep proper records, which makes it difficult to ascertain their correct and actual assessable incomes. Again the traders’ taxes were used on public officials instead of using it for national development to the benefit of the tax payers and the nation at large, the traders claim. Other conclusions drawn from the study are as follows;
Income taxes are very high in that it takes almost half of their income
There is a poor customer relation on the part of the Imo State tax officials. Tax collectors connive with income tax payer to cheat. Thus figures are understated for tax payers to pay low and the rest of the money which is supposed to be credited to the consolidated fund rather went into individual income tax collector’s pocket.
Most people did not know the importance of tax and therefore feel reluctant to come forward boldly to declare their incomes for tax purposes.
RECOMMENDATIONS
Based on the primary data obtained from our study through questionnaires and interviews, the researcher recommended that;
The government should ensure organizing regular and frequent tax education for the public to encourage self-employed people about the role their contributions play in the country’s development. This would allow more tax payers to rope into the tax system.
The government of Imo State through the Imo State tax (Domestic tax division) should impose moderate taxes on traders. This is to enable their business to grow and mostly because the operations of traders had been a major source of employment for the youth in Owerri Municipal who did not have the privilege to pursue higher education, as the study revealed that about 87.88% of traders had their academic qualification to be SSCE and below.
Tax officers should pay visit to self-employed place of business in order to make real assessment.
Provision of infrastructure should be seen to be equitably distributed (that is hospital, roads, schools, good drinking water and electricity supply). That is to say, the government should at least distribute its resources fairly for the public to feel impact of the income tax paid.
With regards to the traders, it is being recommended that there should be non- formal classes organized for them in the evening at least three times a week to prepare them overcome their illiteracy deficiency.
Finally, the Imo State tax official should be increased in terms of number and should be well-equipped with the requisite logistics so that they can reach tax payers all the time, to at least guide them on how to prepare up to date tax returns.
REFERENCES
- HARDWISCH, Philip et al (1980). Introduction to Modern Economics of Taxation. England, Longman house, Brunt and Harlow.
- HERSCHEL, Frederico J. (1978). Tax Evasion and its Measurement in Developing Countries, Journal of Publication Finance, England.
- BOTCHWEY, Kwesi (1990). The 1990 Budget Highlight of Economic Policy. The People’s Daily Graphic, Accra, Graphic Corporation.
- Oldman, Oliver (1978). Controlling Income Tax Evasion in Joint Tax Programme. Reprinted In Public Finance Journal, England.
- Shoup and Carl (1961) Public Finance, Chicago, Aldina Publication Company.
- Spicer, M.V and S.B Lundstedt (1978). Understanding Tax Evasion Journal of Public Finance, England.
- Toby, A.R (1978). The Theory and Practice of Income Tax. London Street of Maxwell Ltd. Fatherland.
