An Evaluation of the Effectiveness of Tax Administration as a Tool for Enhancing Economic Development in Nigeria, A case Study of Federal Inland Revenue Service, Gusau.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF STUDY

Taxation is used as a major instrument for revenue generation as a key factor to sustainable economic growth and development.

However, the situation is different is a developing economy like that of Nigeria. The Nigeria Tax system is exercised with unbraid of problems ranging from administrative inefficiency, tax evasion and avoidance, lack of proper orientation of the citizens, lack of training and incentives and ineffective for taxation to be used as a principle tools to sustain economic development in the country. It is an indisputable fact that tax (benefit of an effective tax administration system in Nigeria) have not had the district effect on the various segments of the Nigeria economy, a careful look at the Nigeria tax collections system. This is because of the standard of living of people and general economic situation of the country (Nigeria). In fact, tax is one of the major sources of revenue for the Nigeria government at all levels of the tiers of government (Federal, state and local government levels).

The annual budget of the government hugely depends on its income, which is principally derived from taxes. The taxes generated by government are used to provide social amenities for the people (citizens). Apart from revenue generation, taxation can also be used to regulate investment and control inflation in the country. One of the factors determining the taxable capacity of a country is administrative competences of the tax collecting organs of the government.

The problem of tax collection has however been generally accepted and some degree of effort have been made and still being made to eradicate tax avoidance and evasion. This is however attributed to the degree of poverty ignorance illiteracy and inefficient collection machinery in the Nigerian tax system. The gross inadequacy machinery in the put in place for tax collection has in no small measure affected the high degree of tax avoidance and evasion. The project will highlight the benefit that will be derived from a well structured and effective tax administration in Nigeria. This can be achieved through adequate funding and provision of a sound economy and this is directly related to adequacy source of revenue for the Nigerian economy which is a dream yet to become a reality.

1.2 STATEMENT OF THE PROBLEM

Even though drastic measures has been taken by government to improve and enhance the Nigeria tax system and administration of tax in the country, the Nigerian tax system is still faced with a lot of problems like ambiguity in tax, ignorance and illiteracy of the tax payers, tax avoidance and evasion, understatement of profit by individuals and companies and the situation where companies prepare two (2) financial statement and present whichever is of benefit to then to the tax authorities. These problems can however be reduced to the near of minimal of government can employ qualified tax offices, increase the salaries of the tax officers to a level of minimal satisfaction, create an enlightenment program to educate the tax payers on the importance of tax payment to every Nigerian and the Nigerian economy as a while and also provide adequate machinery (manpower and technological facilitated needed to effectively carry out the tax operations.

1.3 OBJECTIVES OF THE STUDY

The objective of this research work is to find a lasting solution to the problems imitating against the effective tax administration in the country (Nigeria). The need for an effective and efficient tax system cannot be over stressed. Obviously, it can be used as a instrument to generate fund for government to execute its various programs and as fiscal tool/instrument for charting appropriate economic development, bearing in mind, this research work is aimed at economic growth in the country and to find out ways of achieving it.

1.4 RESEARCH QUESTIONS

The performance of any government can be measured from the angle of the economics of the development of the country.

In an attempt to reach a dependable solution to the problem of the study, the following questions are therefore raised:

i. Does effective and efficient tax system have any significant role of play on the economic development of Nigeria?

ii. Does tax evasion and avoidance have any effect on achieving economic development in Nigeria?

iii. Does tax revenue generation influence the country’s economic development?

iv. Does the current tax system have any significant impact on the economic situation of the country?

v. Is the Nigerian tax system equipment with the most proper and qualified staff?

vi. Is the Nigerian tax system the most appropriate for the Nigerian current economic situation?

1.5 SIGNIFICANCE OF THE STUDY

Taxation is a major economic tool in enhancing economic development of any nation. It has become imperative that Nigeria being a developing economy needs to stretch line in its tax machinery aimed at enhancing its economic development. The major beneficiaries of this study therefore are:

i. The researchers:- This study has indeed enhance our knowledge about the Nigerian tax system and it has increase our understanding of taxation as a course in this institution.

ii. Other Researcher:- Other students or researcher who intend to conduct a research on issues relating to tax administration in Nigeria can make reference to this very particular research work as a source of secondary data.

iii. Lecturers:- Lecturer on the course of compling ther lecturer notes can have access to this research work as an addition ton this knowledge or the materials in their position.

iv. The general public:- This research work will enlighten the general public on the importance of tax administration to the economy of the country, the barrier tax avoidance and evasion causes to the Nigerian tax system etc.

1.6 LIMITATION OF THE STUDY

In the course of this research work, it suffered limitations which affected adversely any generalization that might be attempted with it, as the study involves an in depth and exhaustive analysis of the Nigerian tax system there was difficultly in the collection of sufficient relevant data as it is not possible to extend the survey beyond federal inland revenue service Gusau in view of the nature of the study.

Moreover, the researcher does not have sufficient time to travel to different states in order to cover a wide range.

Another challenge is the inability to get asses to some of secrecy and lack of up to date in the (F.I.R.S) Gusau. This however, posed the problems of gaining an insight on how much was generated and expended on projects.

The constraints of finance and disruptions from academic activities equally affected the research. In spite of the limitation stated above, it is hoped that the sample covered would be adequate through proper scrutinizing for the realization of the objectives.

1.7 DELIMITATION OF THE STUDY

The scope of the study covers the federal Inland Revenue service (F.I.R.S.) Gusau. Hence, the scope of this research project is limited to Gusau in zamfara state.

1.8 HISTORICAL BACKGROUND OF FEDERAL INLAND REVENUE SERVICE, GUSAU

The Nigeria federal Inland Revenue service was created in 1943 when it was carved out from the east while inland revenue department that covered what was then the anglo phone west Africa (including Ghana, Gambia and Sierra Leone) during the colonial era.

In 1958, the load of Inland Revenue was established under the income tax ordinance when the federal name was later changed in 1961 when the federal board of Inland Revenue was established under section 4 of company’s income tax Act – No 22 of 1961. Federal board of Inland Revenue operated then as a department in the federal ministry of finance. A further transformation of the federal board of inland revenue took place in 1993 when the finance (Miscellaneous taxation provisions) Act of No. 3 of 1993 established the federal inland revenue service as the operation corn of federal inland of inland revenue. The Act also created the office of the executive chairman of the board.

On the first of October, 1996, the federal Inland Revenue service Gusau come on stream. The board came into under the chairmanship of Alhaji sama’ila Maru with detachment of staff started to expend beyond Gusau opening up four (4) other branches to aid them in collection of these taxes. The branches include:

- Gusau zonal office

- Zurmi zonal office

- Talata mafara zonal office

- Kaura Namoda zonal office

In 2005 all these branches were closed when the office was upgraded to integrated tax office.

1.9 DEFINITION OF TERMS

ANNUAL ALLOWANCE:- An annual allowance is given in respect to qualifying assets from year to year. The allowances are granted in annual year of assessment for the period for which the qualifying assets as in use for the purpose of trade, business profession or vocation.

BASIC PERIOD: This is the manner in which an assessment is determined. It is the accounting year of business to year. It is also known as the government year which commence from 1^st January every year to 31^st December of the same year.

CAPITAL ALLOWANCE:- This is a charge or deduction usually made periodically in the accounts of an individual carrying on a trade, business, profession or vocation for depreciation of fixed assets.

EARNED INCOME:- Incomes which are derived by an individual as a result of usage of mental and physical energy, such income includes, salaries, wages, bond, benefit in kind, allowance etc.

EVALUATION: - This is the making of judgment about the number, amount or value of something.

INITIAL ALLOWANCE:- It is an allowance given in the assessment for the year of assessment in the basic period for expenditure incurred. It is only granted once in the life of an asset.

CHAPTER TWO

1.0 LITERATURE REVIEW

2.1 INTRODUCTION

The aim of this chapter is to review the work of others regarding the concept of taxation, incidence of tax, tax administration in Nigeria, and the problem of Nigeria tax system.

2.2 CONCEPT OF TAXATION

A tax is a fee charged or levied by a government on a product income or activity. If it is levied directly on personal or corporate income, it is called direct tax. If it is levied on the price of goods or services, then if is called an indirect tax (Worlu and Nkoro 2012). Furthermore, the institute of chartered accountants in Nigeria (2006) defined tax ‘as enforced contribution of money to government pursuant to a defined authorized legislation. Okafor 2012 added that “every tax must be based on a valid state. Without a valid statute no legislates tax can be imposed”.

Therefore, the act of the above responsibility of tax paye in contributing to the income of government and subsequent demand by the government through its agent to pay the compulsory levy is what is known as “taxation”.

Taxation therefore, is the process and system of levying and collection of tax. Tax of individuals and companies income is reduced hence taxation only affects individuals and companies disposable income. Taxation provides government with the revenue with which it caters for expenditures on economic, social, political and cultural matters. The issue of taxation is the revenue generation of any nation is of valuable importance. During the formal launching of the Nigeria institute of taxation in 1983 the chairman of the occasion comment thus. Taxation is such an important aspect in the life of any nation, and therefore, the need to be further developed to certain standard is also important. No nation or government can function effectively when it is restricted of the needed fund to meet its ever increasing obligations. Based on this premise, there is need for Nigeria to change their attitude towards ensuring regular and continuous payment.

2.2.2 TYPES OF TAXATION

There are various types of tax which constitute a large percentage of the total revenue or income to the government these major taxes are classified into two (2):

1. DIRECT TAXES

These are taxes which are directly borne by the tax payers. They are collected directly from the tax payers. They are imposed directly upon the income or wealth of individual(s) or companies paying the tax and the incidence of such taxes fall directly on the tax payer since it is not possible for the person(s) who pay the tax to shift the burden to someone else. That is, the incidence of direct taxes varies from one tax payer to another, according to their functional circumstances and their payment is a direct transaction between the tax payers and the government. Direct taxes can be further categorized as follows:

PERSONAL INCOME TAX

This is a form of tax where tax is derived on the income of the individual tax payer. This income includes income from employment, individual effect (i.e. sole trader), partnership, investment and trust settlement. Section 3 of income tax management Act of 1961 as amended provide that income of individual, community or any trustee or executor under any trust or estate are prose to the income tax levy. With the exception of osculating (Itinerate workers). The taxation of an individual is a formation of resident state.

The personal income tax is provide for and covered by the income tax management Act (I.T.M.A) of 1961 as amended and it is controlled by state internal revenue board (SIRB) and the joint tax board (J.T.B). The tax payer is normally given some allowance or relicts which are subtracted from his income before arriving at his income which is to be taxed. This income after allowance deduction is usually referred to as “taxable or chargeable income”.

Below are types of allowance granted

i. Personal allowance

ii. Wife allowance (abolished in 1992)

iii. Children allowance (maximum of four (4) children)

iv. Dependent relative allowance (maximum of two (2) relatives)

v. Life assurance premium

vi. Disable person allowance

vii. Equity shareholders in a research and development companies

viii. Donation to research institutions and canters

CAPITAL GAIN TAX

Capital gain tax is a form of tax which is imposed on gain arriving from the disposal of fixed assets, by companies or individuals. Capital gain tax was introduced in Nigeria with the effect from April 1967 by the promulgation of the capital gain tax decree No. 444 of 1967, now renamed capital gain act 1967, this act oversees and caters for the capital gain tax in Nigeria, it is controlled and administered by the federal board of inland revenue (FBIR) and state internal revenue board (SIRB). It became applicable throughout the country to both individuals and companies with the promulgation of the finance (miscellaneous taxation provision) decree No. 15 of 1996, the decree was promulgated with retrospective effect.

CAPITAL TRANSFER TAX

This is a tax levy on the value of any property transferred by person during its life time. The transfer of the property must be considered between connected person or individuals, this is provided for by the capital transfer tax act of 1^st April, 1979 and it is administered, collected, controlled and implemented by state inland revenue board (SIRB) with reference to the act, capital transfer tax shall be payable on property with value exceeding N100,000

COMPANY INCOME TAX

Company income tax is a tax imposed by the government on the income and profits of companies operating in the country. The law which was first enacted in 1961, which has undergo so many amendment, the least being that of April, 2007. The administration of the companies income tax is rested on the federal inland revenue service (FIRS) which used to be known as the federal inland revenue establishment act in April 2007 which scripted the federal board of internal revenue (FBIR) and replaced it with the federal inland revenue service. It has its headquarters at the federal capital territory (Abuja) and offices in all the states of the federation.

THE PETROLEUM PROFIT TAX

In accordance with company income tax act 1979, section 19 of the act provide for some reliefs. Meanwhile, petroleum profit tax can be defined as a levy by government on the profit generating by individuals/companies on the sale of petroleum in the country.

2. INDIRECT TAXES

These are taxes initially suffered by a tax payer but ultimate tax burden is borne by the final consumer of the goods and services. Various cases of indirect taxes are as follows:

IMPORT DUTIES

Import duties are tax levied on goods imported into the country paid by the importers and later borne by the final consumer of such goods.

EXCISE DUTIES

This is an indirect tax levied on the production of goods, sales or consumption of certain commodities such as tobacco, beer etc.

VALUE ADDED TAX

This is tax imposed on spending paid by supplier or manufacturers of goods and bodies rendering service but borne by the final consumers. The administration of VAT is governed by provision of VAT decree No. 102 of 1993 as amended. VAT is a tax on consumption of valuable goods and services, ministries, parastatals and other agencies of government pay Vat on their consumption. VAT is paid as a percentage of the contract price of the item consumed. All federal, states, and local government agencies, religious organization and other similar person, corporate and non corporate, including those that are normally excepted from income tax are expected to pay VAT on the goods and services consumed by them.

2.2.2 PRINCIPLE OF TAXATION (CANON)

A good tax system is one that is easy to administer and must comply with the following canons of taxation:

i. Equity: This means that the distribution of the tax burden must be equitable. Everyone should be made to pay his equity, this means that those with the same income should pay an equal amount of tax. Vertical equity means that those with different income should pay different amount of tax

ii. Convenience:- Under this case, taxes should be convenient in such a way that the manner and time of payment should be suitable to the tax payers.

iii. Certainty:- This scope of the tax should be clear. The tax should not be arbitrary. The tax payer ought to be aware of the exact amount of tax they are expected to pay as well as the time and method of payment.

iv. Economy:- The administration cost should not be higher than the revenue to be realized. This principle of taxation requires that taxes should not be imposed if their cost of collection is excessive. A tax can be considered economical if the cost of collection is not excessive.

v. Simplicity:- A good tax system should be coherent, simple and straight forward. The tax should be clear to the tax payers and must be accepted by the public. Ambiguity should be avoided. A properly understood tax system eliminates the chances of corruption and fraud by tax officials.

vi. Flexibility:- The tax system should be flexible especially in a feudal and democratic country where there are always change of government. It is recognized under the principle that instead of rigid tax system. A tax system that is responsible tax system would allow any tax found to be absolutely to be scarping and to be replacing with meaningful and collectable tax. The laws guiding it should be flexible in nature to requirement of changing government.

vii. Impartiality: This principle recognize that a tax should not be discriminating between tax payers under similar circumstances. An important tax system ensures all person similar should be placed to pay the same amount of tax.

viii. Productivity fiscal adequacy: This principle advocates that the fee from tax collection should be adequate to cover government expenditure.

2.3 INCIDENCE OF TAX

By incidence of tax we refers to who pays or bears the burden of tax with direct taxes, it is not difficult to determine who pays the tax, as it falls direct on the company or individuals income or wealth the problem however. Is with indirect taxes which are imposed on commodities and they are only paid when these commodities are bought in certain instances, the tax incidence is wholly on the suppliers or producers, produces in some cases on the consumer while in other case, it is shared between both supplies and consumers. The burden of tax is determined by the elasticity of demand for such commodities that helped to locate who pays the tax. It must be emphasized that during the pre – colonial ere, taxation function principally on an ethical basis. In the chieftaincies areas with a centralizes authority, administrative machinery and judicial institutions such as in the northern Nigeria, Yoruba land and Benin Kingdom where there were Emirs and Obas respectively, there was a system of taxation. This was not so in the non- chieftaincies areas like the Ibos, Tivs, Bura, Ebura and Badara areas, they exercise little or no form of organized taxation. During those period, the form of taxation operation in the northern area are as follows: Zakkat, a religious tithe/alms, exclusively for Muslims, paid on wealth (money, crops and livestock) had if origin from farming for use of landed property for agricultural purpose. It is collected by Dongaris who are errand boys for the emirs. The Shuika tax ( a plantation tax) was paid on all crops not subject to Zakkat, and the Jangali (cattle tax) was levied on livestock’s. Jizya was a tax paid to the king by conquered tribe.

Before the coming of the British colonial masters, Nigerians cheerful paid their taxes in kind by rendering free services such as clearing the bush, digging pit toilets and wells e.t.c for the benefit of the community as a whole.

i. Where demand is perfectly elastic, the supplier bears the tax. However, there are some situations where the supplier wholly bears the tax burden, as increase in price will cause a fall in quantity demanded.

ii. Where the demand is perfectly inelastic, then the supplier can successfully transfer the burden of the tax to the consumer. This is therefore, a situation where the burden of tax is borne only by the consumer as increase in price of any elastic demand will also cause quantity demanded and supply increase.

iii. When the demand for the commodity is relatively inelastic demand, it is when it shows that both the suppliers and consumers bear the tax burden. In this situation of relatively inelastic demand, the suppliers and the consumer will be shared between them but the consumer will bear the greater part of it.

iv. In a case where there is a relatively elastic demand, the tax will be shared between the suppliers and the consumer but the supplier been the greater part of it.

2.4 TAX ADMINISTRATION

The Nigeria we know today is an amalgamation of two (2) major regions. These regions were engaged by the British for a long time before Nigeria obtained its independence prior to the coming of colonial rule, there has been a particular system varied from one part to the other. As time goes by, the voluntary contributions gradually transferred into obligation to contributes in money or in kind to the provisions and maintains of public services since as at that time, there was no objective means of measuring tax, to this regard, the apportionment, contribution and collection of levies was bound to be extremely complicated and difficult invariably reading themselves to abuse and prevision of justice, it was common for the revenue collector to use taxation as a means of slowing favour to some people to some people or a means of opposing other people through arbitrary assessment and unjust fines, was the reason why you Can have a king, but the man to fear is the tax collector.

The first step taken towards improving the taxation system was the introduction of income tax law (Nature revenue proclamation No. 2) entitled land revenue proclamation was first introduced in northern Nigeria in 1904 as personal income tax (community tax) by Lord Lugard in order to check some of the abuse of traditional community tax as it was operated in Northern Nigeria. They later introduced the direct tax system to the north as part of the indirect rule system of governance in 1960. In 1928, it was extended to eastern Nigeria. The extension of the ordinance faced resistance by the residents leads to riot in some eastern districts (e.g Aba women riot of 1929).

The development of income tax in Nigeria was greatly influenced by the provision of 1914 and 1960 constitution which related to the sharing of income tax revenue among the tiers of government.

The highlights of the constitutional provision are as follows:

a. Each regional government to fix the rate under the direct tax ordinance, collect tax and sharing to draw a distinction between tribute collectible by traditional rulers in their capacity as rulers and judges on one hand and “taxes” on the other hand (i.e chiefs were to pay one fourth of the revenue collected by traditional method of the government).

b. To consolidate all taxes into single general tax payable annual on a single demand under the same “HARAKI”. These led to elimination of “ZAKKAT” and “JIZYA” while Haraki and Jangali tax retained. But during that period, the native resident in southern Nigeria had no law regulation (national or colonial).

c. The central government should fix the rate and share the proceed to the regions on the basis of derivation.

d. The central government should fix the company income tax collected and retain the whole proceed to the tax. But this provision of the constitution at the eastern and western regions was granted internal government. In 1956 they stated their own tax laws and they had the power to impose tax on their resident and retain the proceed of such taxes. Income Tax Management Act 1961 (ITMA) it was the act of National Assembly and applied to three regions in Nigeria ( Northern, Southern and Eastern region) while Lagos (FCT) had its separate law referred to as “personal income tax (Lagos) Act 1961, this act of ITMA was enacted for three reason:

i. Promote personal income tax law and the ascertainment of income of individual liable to pay tax through out the federation.

ii. To promote uniformity in the incidence and application of personal income tax throughout the country.

iii. To confirm with the provision of the constitution to ensure that no income tax was subjected to tax by more than one tax authority in the country. Any region adopting the law must ascertain income of individual in the territory in accordance with the provisions of provisions ITMA. May region that could not adopt the provision of ITMA could enact its own personal income tax law without adopting ITMA, must conform with provisions of ITMA.

iv. The act contains the following provisions:

a. Identifying the source of income chargeable to tax.

b. Ascertainment of the deduction allowable and not allowed.

c. Identifying assessable income from a particular source.

d. Double taxation relief provision

e. Establishment of joint tax board (JTB) with the duty promoting uniformity in the administration of personal income taxation through out the federation.

THE JOINT TAX BOARD

This was established under the income tax management act (ITMA) of 1961 as amended according to the personal income tax decree of 1993. The composition of joint tax board (JTB) is a follow:

i. The Executive Chairman of the federal board of internal revenue (FBIR) is also the chairman of joint tax board (JTB).

ii. An office from each state of the federation and the federal capital territory being a person revenue income tax matters nominated by the commissioner of finance of a particular state.

iii. A secretary of the board appointed by the federal public service commission to record the proceeding of the meeting of the board. He is not a member of the board.

iv. The legal adviser of the federal board of internal revenue (FBIR) who is not a member of the board but in attendance as an observer and offer advice when required.

POWER AND DUTIES OF THE JOINT TAX BOARD

The personal income tax decree of 1993 stipulated the power and duties of the joint tax board as follows:

a. Exercise the power or duties conferred on it by express provision of this decree any matter arising under the decree which may be agreed by the government of each territory to be exercised by the board.

b. Exercise power and perform duties conferred by any enactment of the federal government in posing tax on the income and profit of companies or which may be agreed by the minister are to be exercised or performed by it under the enactment in place of the federal board of inland revenue.

c. Advice the federal government on request in respect of double taxation arrangement concluded or under consideration with any other country and in respect of rate of capital allowance and other taxation matter having effect throughout Nigeria and

d. Use its best endeavour to promote uniformity both in application of this decree and in the incidence of tax on individuals throughout Nigeria.

e. Imposed decision on matters of procedure and interpretations of this decree of any state for purpose of conformity with agreed producer or interpretation.

f. Exercise power and perform duties relating to companies income tax which might be delegated to it by the minister of finance.

POWER AND DUTIES OF THE FEDERAL BOARD OF INLAND REVENUE (FBIR)

The board, that is FIBR has the power to assess, collects and administers the taxes through:

a. Company tax on companies

b. Withholding tax on companies

c. Petroleum profit tax

d. Value added tax (VAT)

e. Education tax

f. Capital gain tax for Abuja resident and corporate bodies’ nationwide.

g. Collection of stamp duties of corporate entities.

h. The personal income of external affairs, nonresident of federal capital territory Abuja and armed forces personnel.

i. It’s also responsible for initiating amendment to tax law.

j. Negotiating and concluding double taxation agreement in addition to the above powers, the board has the following duties:

1. Can sue and be sued in its name.

2. It ensure that amount collected by the services are accounted for and paid into government confers.

3. It can acquire hold and dispose off properties of any defaulting companies and handover the proceed to the minister of finance.

4. With the approval of minister of finance it can delegate some of its certain exception.

5. Generally, it controls the management of the services on matters of policies subject to the provision of the law setting to the service.

6. Appointing, promoting and discipline (including dismissing) employee of the service.

THE TECHNICAL COMMITTEE OF THE FEDERAL BOARD OF INLAND REVENUE

The act also established the technical committee of the federal board of Inland Revenue is also the directors and Heads of department of federal board of internal revenue service and secretary to the federal board of Inland Revenue.

The function of the technical committee is to advise the federal Inland Revenue board on tax matter that requires professional and technical expertise. The committee also to carry out any other duty assigned to it by the federal board of Inland Revenue.

2.5 PROBLEMS OF NIGERIA TAX SYSTEM

It has long been evident that company income tax administration in Nigeria is one of the satisfactory and problematic of taxes in the system today. It is therefore felt that company income tax in Nigeria requires a proper handling the ensure that a large number of the taxable companies does not escape tax.

This research work is an attempt to examine the problems of company’s income tax administration in Nigeria. The following are some of the problems of company’s income tax administration in Nigeria.

1. Lack of voluntary compliance from the tax payers (companies): voluntary compliance is seriously lacking this problems which manifest itself in defaults (willful default) tax avoidance and evasion and delayed payment of taxes constitutes an endemic problems of company income tax administration, tax avoidance and evasion appear the most serious. It has become typical for companies to manipulated the provisions of tax laws or exploit the loopholes there in, to their advantage. The making of false claims in respect of capital allowances, assurance premiums and false declaration of income receipt from trade, business omission to state gross amount of dividend, rent e.t.c.

2. High rate of corruption among tax officials: In this present day, Nigeria tax collectors personal interest overrides their official interest in the performance of the duties.

3. Inadequate facilities and structured in the rural areas: There is absence of adequate structure and organization of the body charge with the responsibility for assessment and collection of company income tax and also facilities like motor vehicle and motorcycle to carry out the assignment effectively is inadequate.

4. Mismanagement of tax collected: Where taxes collected were not been utilized for the purpose for which it was collected, this makes taxable companies not to give out or pay more taxes.

5. Improve use of tax consultations: The use of the consultant by the relevant tax authority is not in full use. This is the inability of the relevant tax authority to stock to the advice which the tax consultants have given to them based on the assessment and collection of income from companies.

6. Constant changes in the tax laws and policies: It will be important to note that there has been several amendment to tax laws and policies. This is the ability of the relevant tax authority to have knowledge or technical known how to tackle issues relating to tax avoidance and tax evasion by companies.

7. Inadequate funding: The relevant tax authority that is responsible for the assessment and collection of company income tax is not been properly funded, and most of staffs are not been given their pay.

8. Poor record keeping: There is also the issue of poor record keeping. The relevant tax authorities have not been able to keep proper record of their daily transaction.

9. There is also the issue of lack of proper accountability of the collected.

10. The government of the nation sometimes completely neglects the relevant tax authority.

11. Limited or lack independence of the relevant tax authorities.

12. There is also issue of lack of qualified and experienced tax officers to administer tax law on defaulting companies and individuals.

13. There is also the use of extra – legal means to collect tax by the relevant tax authorities for companies.

2.6 SUMMARY

In summary therefore, it is no doubt that the topic” An evaluation of the effectiveness of tax administration as a tool in enhancing economic development in Nigeria. A case study of federal inland revenue service Gusua” covers a lot of works, which touches the aspect of effective and efficient economic development in Nigeria, the barriers there to it, such as the problems of tax administration in Nigeria.

CHAPTER THREE

2.0 RESEARCH METHODOLOGY

3.1 INTRODUCTION

The aim of this chapter is to point out the total population of the federal inland revenue service Gusau, and the possible sample there from it, how the research is designed, the methods of collection of data, the method of administration of questionnaires and method of data analysis.

3.2. POPULATION.

According to Magaji (2006) population in a more specialized sense include not just people, but also events, animals and objects who are members of the target of the study as defined by the aims and objectives of the researchers.

The population of this study is made up of the staff of the federal Inland Revenue service Gusau, who are thirty eight (38).

3.3 SAMPLE

According to oxford advance learners dictionary, sample size is a number of people or things taken from a large group and used in test to provide information about the group.

Using a stratified sampling technique a sample size of twenty (20) was chosen out of the population of thirty eight (38) for the purpose of this study.

3.4 RESEARCH DESIGN

Descriptive system of study is used in this project so as to achieve unbiased and maximize reliability to achieve the desired result. To maintain consistency on topic of this nature, descriptive study is the best approach since the researchers have no definite control over the subject.

3.4.1 METHOD OF DATA COLLECTION

Data collection is an activity aimed at obtaining relevant information for decision making. the researchers used both primary and Secondary sources of collect data for this study.

1. Primary source: The primary source refers to the data obtained from original sources, the various method used by the researchers in collecting data include

a. Questionnaire

b. Personal interview

a. Question:- Questionnaire is designed to obtain information from the employees of the board to find out about the effectiveness of tax administration and its effect on the development of the Nigerian economy. Based on the answer given to the questions, the researchers will be able to determine the effectiveness of tax administration and how it influence the economic development of Nigeria.

b. Personal interview:- This is a technique adopted to get direct information from people (respondent) on a face to face basis. It is designed to gather valid and reliable information through the responses obtained from a class of planned sequence of question.

2. SECONDARY DATA

In the area of secondary sources of data, it includes the information that was already made available and information that could be gotten from documents such as text books, journals, newspapers, magazine etc.

3.4.2 METHOD OF ADMINISTRATION OF QUESTIONNAIRES

The questionnaires were administered personally by the researchers to the staffs of federal Inland revenue service Gusau twenty (20) staffs selected at strata to enable us have an insight on the problems of tax administration in Nigeria.

3.4.3 METHOD OF DATA ANALYSIS

The statistical procedure in analyzing data in the research is the simple percentage.

The representation of the respondent shall be the percentage, this it will be calculated with the use of formula below:

CHAPTER FOUR

3.0 DATA PRESENTATION AND ANALYSIS

4.1 INTRODUCTION

This chapter deals with the analysis of data collected through questionnaire. The data collected will be analyzed using simple percentage formula. Twenty (20) questionnaires were distributed to the staff of federal inland revenue service and all were returned.

4.2 ANALYSIS OF RESEARCH QUESTIONS

Question 1: Does effective and efficient tax system have any significant effect in the economic development of Nigeria?

Table 4.2.1: Effective and efficient tax system

Option	Responses	Percentage (%)
Yes	5	25
No	15	75
Total	20	100