CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF STUDY.
Every country in the
world tends to generate income through tax administration. In Nigeria the
company income tax administration aims and tries to tax each company in the
state more effectively. However the level at which the company income tax
Administration in Nigeria tend to achieve its desired goals and objectives
depends mostly on the tax office and the company that is operating in Abia
state.
For the tax
Administration in Nigeria to be effective the aspect of the companies been
taxed should be considered adequately and more accurately so that the company
would provide reliable financial performance information for assessment. In
which the federal government derives its income.
Due to the ever
changing tax administration policies in the country and modifications in the
aspect of taxation in Nigeria some companies want to stay afloat and employ all
kind of strategies that benefits them. Some of them evade tax and some avoid
tax.
When tax in Nigeria is
paid by the various companies operating in the state the revenue collected are
used to provide utility services and providing additional government services
such as in education and transport which are of great importance to the growth
of the economy of the state and to the country.
Tax administration in
the country is a very important aspect that assist in the provision of revenue
to the economy of which the avoidance of tax payment by the companies in the
country in general and in Abia state in particular will result to a serious damage
to the revenue which should have been generated and used for the provision of
infrastructure.
When a company is been
taxed by the federal board of inland revenue (FBIR) the company is meant to
give an accurate information about their income but some companies go to the
extent of forgery in provision of their documents which gives an incorrect
information to the board, thereby causing reduction in their tax assessment.
Based on the above
observation or trend of this action over time this study set out to examine the
problems and prospects of the company income tax administration in Nigeria and
in Abia state to be precise.
1.2
STATEMENT OF PROBLEMS.
The tax administration
(collection and assessment of tax from companies is a difficult task. The assessment
and collection of companies’ income tax as at when due has been a problem
Associated with company
income tax administration in Nigeria. These problem through observation has
been influenced by the following understated factors.
Fraudulent
under-declaration of income and making of incorrect returns by companies
coupled with collusion of officials of FBIR staff with company under
assessment.
The problem of tax
evasion is real and so much in Nigerian economy where individuals and companies
use all means to evade tax.
The fact that the
federal board of inland revenue (FBIR) is unable to bring their entities within
the letter of the law is of a serious concern mostly in the area of highly
government spending borrowing and when there is pressing need to improve
revenue generations from all sources including taxation.
The problems of revenue
losses to government due to fraudulent and illegal deals from her citizens and
organisations within the country prompt the need for this research work.
1.3
RESEARCH OBJECTIVES
1. To
ascertain whether sharp practices in administration between the staff of FBIR
and assess company contributed to tax evasion
2. To
ascertain if there is any variation between financial statement used for AGM
and that sent to FBIR for tax administration
3. To
ascertain whether loss of confidence in government officials has contributed to
tax evasion.
1.4 RESEARCH QUESTIONS
For the purpose of this study the
following question were raised for an indept
study of this
research work;
1. To
what extent has sharp practices in administration between the staff of the FBIR
and assess company contributed to tax evasion
2. To
what extent has there been variation between financial statement used for AGM
and that sent to FBIR for tax administration
3.
Has
loss of confidence in government officials contributed to tax evasion
1.5
RESEARCH HYPOTHESIS
HYPOTHESIS ONE;
Ho:- Sharp practices in tax administration between
the staff of FBIR and assessed company does not contributes to tax evasion
H1:- Sharp practices in tax administration between
the staff of FBIR and assessed company contributes to tax evasion
HYPOTHESIS
TWO;
Ho:- There is variation between the financial
statement used for AGM and that used for tax administration of assessed
company.
H1:- There is no variation between the financial
statement used for AGM and that used for tax administration of assessed company
HYPOTHESIS
THREE;
H0:- The loss of
confidence in government does not contribute to tax evasion
H1:- The loss of
confidence in government contributes to tax evasion.
1.6 SIGNIFICANCE
OF STUDY
The result of this
study will throw more light on the problems of companies’ income tax
administration in Abia state Nigeria. The special emphasis on the federal Board
of Inland revenue (FBIR) will highlight peculiar problems and difficulties in
administering the companies’ income tax would increase the revenue generation
of the government.
1.7 SCOPE OF THE
STUDY
This study shows the problems and prospect of
Nigerian company tax with Abia State Federal Board of Inland Revenue as the
case study. The period covered by this research enabled the research to be
reliable.
1.8 LIMITATION OF THE STUDY
This research study is limited to detailed study of
(FBIR) and the relevant Act setting it up with particular emphasis on the
overall administration of the act in Abia state.
Gathering of relevant data for this
study was a hectic task it is also expected that there will be limited mostly
in areas of questionnaire distribution answering the question sincerely and
returning them (especially the tax officials) due to fear of the unknown.
1.9
THE OPERATIONAL DEFITION OF TERMS.
1. ASSESSMENT
AUTHORITY:- This is the body appointed by the board for
the purpose of assessing tax payable.
2. COMPANY:-
A company is defined by section 3(1) of the act as “any co-operation(other than
a corporation sole) established by or under any law in force in Nigeria
orelsewhere”. The relevant tax authority in respect of company income tax is
the Federal Board of inland revenue.
3. COMPANIES
INCOME TAX:- This is the tax imposed on the profit made by
companies.
4. EFFICIENCY
AND EFFECTIVENESS:-Horngreen (1984) defines efficiency
as an optimum relation between input and output whereas effectiveness is the
accomplishment of pre-date runnined objective. Tax collected can only be said to be effective when a
high proportion is actually collected. Similarly for efficiency and assessment
should be less than the revenue accruing from such expenditure.
5. FEDERAL
INLAND REVENUE SEVICE (FIRS):- This is the body set
up by section 5.1 of ITA (1979) and charged with the overall administration of
companies income tax act.
6. INCOME:-
There is no statement that defines the word `` income`` in taxation
status. However, for the purpose of this study reference is made to section 5.4
(2) (6) of income tax management act (ITMA)1961, which recognizes income as
including any amount deemed to be income under the act.
7. TAX
ARRERS:- These are assessment of tax during the preceding
period whose payment are received at the current assessment period.
8. TAX
AVOIDANCE:- This is the arrangement of the affairs of the tax
payer in such a way as to reduce tax payable. Tax avoidance is not a
criminal or crime punishable under the law. This was clearly stated in Lord
Tumbling declared as follows in his judgement
Every man is entitled
to order his affair so that the tax attached under the appropriate tax act is
less than is otherwise would be.
According to Longman
Dictionary of contemporary English, tax avoidance are Legal way of paying less
tax.
9. TAX
BASE:-
This is simply that object on which tax should be imposed or applies.
10. TAX EVASION:- Is a
fraudulent, dishonest intentional distortions or concealment of fingers by the
tax payer in order to reduce the tax payable. It is a criminal and deceitful
was of not paying tax or reducing ones tax liability. These offences are
punishable under law.
According to Longman
Dictionary of contemporary English Tax evasion are the illegal ways of paying
less tax.
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