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THE IMPACT OF PERSONAL INCOME TAX ON REVENUE GENERATION OF THE STATE GOVERNMENT

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ABSTRACT

The purpose of this project is to investigate the impact of personal income tax on revenue generated by the state government taking kwara state internal revenue service as a case study. Personal income tax has contributed immensely to the increase in revenue base of all state government in the federation especially in kwara state internal revenue service. The major problem of the study is that kwara state internal revenue service has been able to appreciate PIT as an important fact to the development of the state. The main objective of the project work is to establish the extent to which kwara state internal revenue has profited from PIT proceeds. The methods used in carrying out this work are the use of document questionnaires, observations and oral interviews. However the response gathered from my questionnaires shows that PIT have significantly contributed to the growth of the economy in Nigeria. The summary of findings was that PIT is effective as source of financing government project. This recommendation should not be relied upon because it was based on limited information obtained by the researcher in the case of his study.

TABLE OF CONTENT

Title page………………………………………………………… i

Declaration……………..…………………….………………… ii

Certification …….……………………………………………… iii

Dedication………………………………….…………………… iv

Acknowledgement………………………………………………v

Abstract……………………………………………….………… vii

Table of content……………………………………………….. viii

CHAPTER ONE

  1. Introduction…………………………………….………..1
    1. Background of the study……………………………….1
    1. Statement of the problem…………………….………..3
    1. Objective of the study………………………….……….5
    1. Research question………………………………………6
    1. Significance of the study………………………….……7
    1. Scope of the study…………………………………….…8
    1. Limitation of the study……………………………….…9
    1. Definition of terms……………………………………….10

CHAPTER TWO

  • Literature review………………………………………..13
    • Introduction………………………………….………….13

2.2. Conceptual framework………………………………..13

2.2.1 Types of personal income tax on………………….15

 revenue generated

2.2.2 Problems of personal income tax on…………….15

 revenue generated administration

2.2.3 Imposition of personal income tax on…………….17

 revenue generated administration

2.2.4 Chargeable income………………………………….18

2.2.5 Relief and allowance available under……………19

personal   income tax on revenue generated

2.2.6 Allowable allowance upper……………………….19

limit of tax exempted

2.2.7        Personal income tax on revenue…………………20

generation rate structure as at

1st january (1999)

  • Theoretical framework……………………………….21
    • Empirical review………………………………………25

CHAPTER THREE

  • Research methodology……………………………..….27
    • Introduction…………………………..………..……….27
    • Research design………………………..………………28
    • Sources of data collection…………………………….28
    • Sample size………………………………………………29
    • Population of the study……………………………….30
    • Research instrument ………………………….……..30
    • Method of data analysis………………………………31

CHAPTER FOUR

  • Data presentation and analysis…………………….32
    • Introduction……………………………………………..32
    • Data presentation and analysis…………………….33
    • Summary of finding……………………………………50

CHAPTER FIVE

  • Summary, conclusion and recommendation…….53
    • Summary…………………………………………………53
    • Conclusion……………………………………………….55
    • Recommendation ………………………………………57

References………………………………………………..59

Appendix………………………………………………….62

CHAPTER ONE

  1. INTRODUCTION
    1. BACKGROUND OF THE STUDY

The idea of introducing personal income tax on revenue generated in Nigeria came from the report of the study group set up by federal government in 1991 to review the entire tax system. The decree was promulgated as decree No. 104 and became effective on 25th August, 2003. The law repealed and replaced the income tax management act of 1961.

The purpose of the decree is to regulate the administration of personal income tax on revenue generated throughout Nigeria. In January, 1993, government agreed to introduce personal income tax on revenue generated by the middle of time the relevant legislation would have been made and proper ground work done. Tax is an income to government; taxes collected by the government are divided into two main groups. I.e. direct and indirect taxes are those taxes imposed on the income of an individuals, companies, co-operate bodies, et.c. While indirect taxes are those taxes on goods and services. But for the sake of this research the investigation will be base on direct tax.

Direct taxation was introduced in 1904 by Lord Lugard when protectorates of the northern Nigeria were founded. In Nigeria, the administration of taxes both direct and indirect was governed by four (4) main bodies namely;

  • Federal board of inland revenue
  • State board of internal revenue
  • Local government revenue committee
  • Joint tax board

The relevant tax authority responsible for the administration of personal income tax on revenue generation in the state board of internal revenue of each state in Nigeria. The personal income tax on revenue generation is one of the major sources of revenue to the state government. But to this fact, a lot of problems have surrounded the system and trying to make it ineffective. Therefore it is the intention of this research to investigate and come up with dependable solution on the impact of personal income tax on revenue generation of the state government with a particular reference to kwara state.

  1. STATEMENT  OF THE PROBLEM

The poor administrative of personal income tax on revenue generation in Kwara state (Direct tax) need to be checked because; it is one of the major sources of income to the state. Though the problems of personal income tax on revenue generation administration is a global phenomenon. But in developing country like Nigeria the problem is more compounded due to the following reason:

  1. Inadequate staff
  2. Illiteracy on the part of the tax payer
  3. Corrupt practices of tax administration
  4. Lack of qualified personnel
  5. Insufficient working facilities

In view of the above listed problems, it is a global believes that there is no policy or scheme that has been implemented free from problem. Therefore personal income tax on revenue generation is surrounded with certain problems in Kwara state internal revenue in particular have not been able to appreciate personal income tax on revenue generation as an important impact to the development of the area, to this effect, therefore it is the researcher intention to explore its contribution based on findings and making recommendation and suggestions to the organization concerned.

1.3.  OBJECTIVE OF THE STUDY

The objective of the study is primarily hope:

  1. To find out the nature of personal income tax on revenue generation
  2. To examine the administration of personal income tax on revenue generation
  3. To ascertain the problems of personal income tax on revenue generated administration
  4. To find out the possible solutions the problems to examine the impact of the effective personal income tax on revenue generated administration.

1.4.  RESEARCH QUESTIONS

A research question is a formal statement of the goal of a study. The research question states clearly what the study will investigate or attempt to prove.

The research question is a logical statement that progresses from what is known for or believed to be true (as determined by the literature review) to that is unknown and requires validation. But for the sake of this research, the following questions were asked;

  1. What is the nature of personal income tax on revenue generation?
  2. How effective is the administration of personal income tax on revenue generation?
  3. What are the problems of the administration of personal income tax on revenue generation?
  4. What is possible solution to the problems of personal income tax on revenue generated administration?
  5. What are the impacts on effective personal income tax on revenue generated administration?

1.5.  SIGNIFICANCE OF THE STUDY

A research of this nature is very important not only to the state board of internal revenue but also to the public; this study will be of great benefit to the following groups:

  1. It will enable the government both the federal, state and local government especially the organization concern (SBRS) to evaluate the performance of personal income tax on revenue generation and it contribution to the economic development of the state and the country in global.
  2. The study will enable the organization in question to compare the actual performance in line with the standard set for management decision making purpose.
  3. The study will also enable those contributing the income tax (valuables person) to know if actually what the investor have invested their fund or sources is worthwhile and of benefit to them.
  4. Future researchers; the study will serve as a sources or material for future researchers since the subject to matter is subjected to more enlightenment to the public.

1.6.  SCOPE OF THE STUDY

In this research work, the scope of the study is limited to investigate the impact of personal income tax on revenue generated by the state government. The research work was conducted at Kwara state internal revenue services.

1.7.  LIMITATION OF THE STUDY

During the cause of this study, there are so many factors which really limit the researcher ability to cover a wide scope. Some of these factors;

  1. Lack of current books on the subject matter since taxation laws are always changing.
  2. Lack of cooperation from some officials of the state board of internal revenue department who refuses to divulge any information without express permission from the highest authority in the department.
  3. Also, lack of enough fund to finance all the activities involved in the conduct of the research.
  4. Time constraint also there is no adequate time to carry out the investigation proper on the subject matter.

1.8.  DEFINITION OF TERMS

(a)    BOARD – is a group of people who have powers to make decision and control a company organization and people income relating to tax matters.

(b)    COMMUNITY INCOME – income of group of people residing in a particular place.

(c)    DIRECT TAX – this is a tax levied on income of an individual and profit of firm directly.

(d)    DISPOSABLE INCOME – income that is left for usage after tax has been deducted.

(e)    EARN INCOME – income derived from business or from an employment.

(f)     NON-TAXABLE INCOME – income upon which tax is not charged.

(g)    PAYEE – pay as you earn. The higher the income the higher the payment.

(i)     RELEVANT TAX AUTHORITY – an authority that the mandate of administrating tax in particular territory.

(j)     TAX – is a compulsory levy on all taxable individuals cooperates and companies within a country.

(k)    TAXATION – this is the process of administrating tax.

(l)     TAX AUTHORITY – an organization which has the right and authority to assess and collect taxes on behalf of the government.

(m)   TAX ADMINISTRATION – according to Oputa (2004) defined tax administration as the process which begin with bringing to the knowledge of the tax payer his duties and nature of tax to pay and earns with procurement of a tax clearance certificate or discharge certificate.

(n)    TAXABLE PERSON – person that is subject to tax.

(o)    TAXABLE INCOME – income upon which tax is charged.

(p)    YEAR OF ASSESSEMENT – this is the period of 12 months beginning from first January of a particular year to the 31st of December of the same year.

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