EFFECTS OF INFORMATION TECHNOLOGY ON

THE EFFICIENCY OF TAX ADMINISTRATION IN

NIGERIA
(A CASE STUDY OF ENUGU STATE BOARD OF
INTERNAL REVENUE)

BY

AGUSIY BRENDA ADA

ACC/2009/532

DEPARTMENT OF ACCOUNTANCY
FACULTY OF MANAGEMENT AND SOCIAL
SCIENCE CARITAS UNIVERSITY AMORJI-NIKE,
ENUGU

1
 TITLE PAGE
EFFECTS OF INFORMATION TECHNOLOGY ON THE
EFFICIENCY OF TAX ADMINISTRATION IN NIGERIA
(A CASE STUDY OF ENUGU STATE BOARD OF INTERNAL
REVENUE)

BY

AGUSIY BRENDA ADA

ACC/2009/532

A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT

OF ACCOUNTANCY FACULTY OF MANAGEMENT AND SOCIAL
SCIENCE CARITAS UNIVERSITY AMORJI-NIKE ENUGU,
ENUGU STATE

SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENT FOR THE AWARD OF BACHELOR OF
SCIENCE (B.Sc) DEGREE IN ACCOUNTING

2
 CERTIFICATION
This is to certify that the work titled the “The Effect of

Information Technology on the Efficiency of Tax Administration in

Nigeria” was carried out by Agusiy Brenda Ada with registration

number, Acc/2009/532 under the supervision in the Department

of Accountancy, Caritas University, Amorji-Nike, Enugu.

---------------------------- ------------------------------
Agusiy Brenda A. Date

3
 APPROVAL PAGE

We have reviewed this work and are satisfied that it meets the

partial fulfillment of the requirement for the award of Bachelor of

award of Bachelor of Science (B.Sc) Degree in Accounting of

Caritas University, Amorji-Nike, Enugu State.

----------------------------- --------------------------
MR. CHINEDU ENEKWE DATE
PROJECT SUPERVISOR

----------------------------- --------------------------
DR. FRANK OVUTE DATE
HEAD OF DEPARTMENT

----------------------------- --------------------------
EXTERNAL EXAMINER DATE

4
 DEDICATION

I dedicate this work to God Almighty

5
 ACKNOWLEDGEMENT

I wish to express my profound gratitude to God Almighty who has

seen me through all these handles encountered in the course of

writing this project.

I would also like to acknowledge the tireless efforts of my

supervisor, Mr. Chinedu Enekwe, the guidance of my HOD, Dr.

Frank Ovute, my lecturers, Mr. James Ugwu and Mr Desmond

Ubani and Mr. Agu for their input.

My parents, Mr and Mrs Lawrence Agusiy, who have been

my guide, morally, spiritually, financially and in any everyway

possible, I want to say a big thank you.

To my siblings, Chioma, Sandra and David, thanks for being

there for me, my friends and roommates, Jennifer, Jennifer and

Jennifer, Uche, Maryanne & others I cannot name, the memories

will be kept alive in our hearts.

And I will not forget Dr. C.H. Okeke, who taught me the first

steps in project writing, without your help I wouldn‟t have

understood this work and how to go about it. Thank you.

6
 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

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 TABLE OF CONTENT
Cover page i
Certification ii
Approval page iii

Dedication iv
Acknowledgement v
Abstract

CHAPTER ONE: Introduction

1.1 Background of the study 1
1.2 Statement of the problem 7
1.3 Research Questions 8
1.5 Research Hypotheses 9
1.6 Significance of the Study 10
1.7 Scope of the Study
1.8 Limitation of the Study 10
1.9 Definition of Terms 11

CHAPTER TWO: Review of Related Literature

2.1 Concept of Taxation 13
2.2 Nigerian Tax System 16
2.2.1 Structure of Nigeria Tax System 17

2.2.2 Features of Nigerian Tax System 20

2.2.3 Objectives of Nigerian Tax System 22
2.3 National Tax Policy 25
2.4 Tax Laws 28
2.5 Tax Administration 33
2.5.1 Objectives of Tax Administration 34
2.5.2 Models of Tax Administration 35
2.5.3 Tax Administration 37
2.5.4 Organs of Tax Administration 38
2.5.5 Procedures of Tax Administration 48
2.6 Problems of Tax Administration in Enugu 52
2.7 Information Technology (IT) 54
2.7.1 Application of IT in Tax Administration 56
2.7.2 Benefits of IT in Tax Administration 57
References 59
CHAPTER THREE: Research Design and Methodology

3.1 Research Design 60

8
3.2 Sources of Data 60
3.3 Research Instrument 61
3.4 Reliability/validity of Research Instruments 61
3.5 Population 62
3.6 Sampling Technique and Sample Size 62
3.7 Administration of Research Instruments 65
3.8 Method of Data Analysis 65

CHAPTER FOUR: Data Presentation, Analysis

4.1 Data Presentation 68

4.2 Test of Hypotheses 80

CHAPTER FIVE: Summary of Findings, Conclusion and

Recommendations
5.1 Summary of findings 89
5.2 Conclusion 90
5.3 Recommendations 90
Bibliography 93

Appendix 95

9
 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 pre-

colonial 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 Benin-

city in Mid-Western and in 1928, it was extended to Eastern

Nigeria.

10
Taxation in Nigeria, in a modern sense, however, only began in

1940. 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;

i. 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;

i. Federal Inland Revenue Service Board

ii. State Internal Revenue Service Board

11
iii. Joint Tax Board

iv Local Government Revenue Committee

v. 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;

i. 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.

iii. Education Tax Act, Cap E4 LFN 2004, which imposes

Education tax on the assessable profits of companies

registered in Nigeria.

iv. Personal Income Tax Act, Cap P8 LFN 2004, as amended,

which imposes tax on incomes of individuals and

corporation soles.

12
v. 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.

vi. Stamp Duties Act, Cap S8 LFN 2004, which charges duties

on specified instruments listed in the Act.

vii. 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;

I. Weak administrative facilities/ administrative lapses which

could result in situations such as tax evasion and tax

avoidance.

II. Corruption and mismanagement on the part of the tax

officials.

III. The problem of funding the revenue collecting agencies

which negatively impacts on efficiency and performance.

13
IV. Lack of adequate records from the informal sector of the

economy.

V. Inability to identify all taxable persons. (Bird, 1988).

VI. 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

14
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.

15
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.

16
 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:

i. To determine if effective tax administration leads to an

increase in tax base;

ii. To ascertain whether inefficiency in tax administration

creates room for tax evasion;

iii. To find out whether the application of information

technology increases efficiency in tax administration;

iv. To know whether poor remuneration of tax personnel affects

the dispensation of taxation.

1.4 Research Questions

I. Does effective tax administration lead to an increase in

tax base?

II. Does inefficiency in tax administration create an

avenue for tax evasion?

17
 III. Does the application of Information technology

increase efficiency in tax administration?

IV. 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.
18
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:

19
 I. Lack of access to certain materials needed for the

research.

II. Lacks of co-operation from institutions as certain tax

institutions were not forthcoming with their record

III. 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.

20
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.

21
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 Concept Of Taxation

The government of Nigeria, like others in different parts of

the world, has legislative powers to impose on its citizens any

form of tax and at whatever rate it deems appropriate.

A perusal of the Nigerian Tax Laws shows that no attempt

has been made to define the term “tax”. However, the Oxford

Advanced Learner‟s Dictionary defines tax as, “money that has to

be paid to the government so that it can pay for public services.”

Also Black Law Dictionary defines tax as; “monetary

charged imposed by the government on persons, entities or

property levied to yield public revenue.”

Thomas Cooley in “The Law of Taxation” defines tax as;

“enforced proportional contributions from persons and property,

levied by the state, by the virtue of its sovereignty, for the support

of government and for all public needs.”

According to Winfry (1964), tax is regarded as a compulsory

payment imposed on the public by an authority (federal, state or

local government).

22
 Nworji (2000) also defines tax as a compulsory levy by

government (federal, state or local) on the profit, income, wealth

or consumption (e.g. sales or VAT) of an individual or estate

through trustee or executor and corporate organization

(registered under the Companies Allied Matters Act of 1990).

Another author defines tax as; a compulsory levy imposed

by the government through its agents on its subjects or his

property to achieve some goals. It is paid “quid pro qui” i.e.

without expecting something specific in return (Agbetunde,

2004).

Taxation is also a compulsory imposition of levy within a

society on individuals, organizations, companies, goods and

services (Igwe-Kalu, 1998).

In simple terms, taxation is a compulsory contribution

levied by a sovereign power on the incomes, profits, goods,

services or properties of individuals or corporate persons, trusts

and settlements, which when collected, are used for carrying out

government functions.

Tax has three basic features, namely;

a. A compulsory levy,

23
b. Imposed by government or local authority; Tax must be a

payment to a public authority or a government. Where payment

is made to an individual it becomes extortion.

c. For public purpose; A tax must be for public purpose. This

has to do with the intended purpose of the tax. If a contribution

is made for the use of an individual, it is not a tax.

2.1.1 Elements Of A Tax

For effective and efficient imposition of tax, there are some

unique elements in a tax that must be appreciated; these are tax

base, tax rate and tax yield/ revenue.

Tax Base: This is the legal description of an object on which tax

is imposed or charged. It can be the income of the taxpayer, gain

from certain activities he engaged in, property or asset owned or

some services received. The base of Income Tax is the income

received by the taxpayer, while the base of Petroleum Profit Tax is

the profit from petroleum operations.

Tax Rate: This is the proportion of the tax base that is payable

as tax. It is usually fixed by the law imposing such tax but is

sometimes reviewed. Presently, the rate of Company Income Tax

is 30% of the profit, while the rate of Petroleum Profit Tax is 85%

of the profits.

24
Tax Revenue/ Yield: This is the total amount of revenue

generated from tax imposed. It is the product of the tax rate and

the tax base. {TY= TB X TR} (Agbetunde, 2004)

2.2 Nigerian Tax System

The tax system is the process of taxation involving sets of

rules, regulations and procedures with the organs of

administration interacting with one another to generate fund for

government (Agbetunde, 2004). Economists often argue that the

tax system should be designed to avoid the taxation of

intermediate goods (Ogbuefi, 2004). The reason is that it may

lead to inefficiencies, in that different industries will face different

relative prices, so that the marginal rate of transformation

between inputs, or between an input and an output would be

unequal across industries. Therefore, each tax system must be

defined to fit into the particular circumstances peculiar to a

country (Tomori, 2003).

The Nigerian Tax System involves the following tripartite

activities;

a. Formulation of tax policy

b. Translating the tax policies into tax laws and

c. Tax administration. (Agbetunde, 2004).

25
2.2.1 Structure Of The Nigerian Tax System

The structure of the Nigerian Tax System, basically, deals

with classification and types of taxes. Nigerian taxes can be

classified in any of the following ways;

a. Rates

i. Proportional Tax

ii. Progressive Tax

iii. Regressive Tax

b. Incidence

i. Direct Tax

ii. Indirect Tax

Under (a) above, Nigerian taxes are classified into;

i. Proportional Tax

This form of tax assesses a taxpayer to tax at a flat rate on his

total assessable income. Therefore, the tax payable is

proportional to the taxpayer‟s income.

For instance, at a flat rate of 20%, a taxpayer with total

assessable income of N100,000 will pay tax of N20,000, while a

taxpayer with income of N1,000,000 pays tax of N200,000 and so

on.

ii. Progressive Tax

26
 This form of tax is graduated as it applies higher rates of tax

as income increases. For instance, the progressive tax concept

can be explained using the current Personal Income Tax table

as follows;

TAXABLE INCOME (N) TAX RATE (%)

First 30,000 5

Next 30,000 10

Next 50,000 15

Next 50,000 20

Over 160,000 25

(Source: ICAN, 2009)

It is a tax whose objective is the redistribution of income from the

well-to-do to the less privileged.

iii. Regressive Tax

Under this type of tax, the tax payable decreases as the

taxpayer‟s income increases. This type of tax is not commonly

applied (ICAN, 2010).

The second form of classification is by incidence as follows;

27
 i. Direct Tax

This form of tax is assessable directly on the taxpayer who is

required to pay tax on his property, profit or income. The type

of taxes that fall under this heading are;

a) Personal Income Tax; imposed on the income of all

Nigerian citizens or residents who derive income in

Nigeria or outside Nigeria.

b) Companies‟ income Tax; imposed on the profits of all

corporate entities who are registered in Nigeria other

than those engaged in petroleum operations.

c) Capital Gains Tax; imposed on capital gains derived

from sale or disposal of chargeable assets.

d) Education tax; imposed on all corporate entities

registered in Nigeria.

e) Petroleum Profit Tax; imposed on the profit of

companies engaged in petroleum operations.

ii. Indirect Taxes

Indirect taxes are those taxes which are imposed on

commodities before they reach the final consumer and are paid

by those upon whom they ultimately fall, not as taxes but as part

of the selling price of the commodity. Indirect taxes may affect the

28
cost of living as they constitute taxation on expenditure. The

types of taxes that fall under this heading are;

a. Value Added Tax; imposed on the supply of goods and

services (except those specifically exempted or zero-

rated) made by incorporated companies and other

business organizations.

b. Stamp Duties; imposed on instruments otherwise

called WRITTEN DOCUMENTS.

c. Excise Duties; is levied on locally produced goods. It

was established in 1998 but was partially re-

introduced from 1st January, 1999. (ICAN, 2006)

d. Custom Duties; is payable by importers of specified

goods.

2.2.2 Features of The Nigerian Tax System

There are fundamental features that taxes in the Nigerian Tax

System must exhibit. Accordingly, any tax that substantially

violates these fundamental features should not be part of the tax

system of Nigeria (Mashi, 2012).

a) Simplicity, Certainty and Clarity

Taxpayers should understand and trust the tax system, and

this can only be achieved if the Nigerian Tax Policy keeps all
29
taxes simple, creates certainty through considerable

restrictions on the need for discretionary judgments‟ and

produces clarity by educating the public on the application of

relevant tax laws. It is, therefore, imperative that the Nigerian

Tax System should be simple (easy to understand by all),

certain (its laws and administration must be consistent) and

clear (stakeholders must understand the basis of its

imposition).

b) Low Compliance Cost;

To enable a high level of compliance, the economic costs of

time required and the expense which a taxpayer may incur

during the procedures for compliance shall be kept to the

absolute minimum at all times. Furthermore, taxpayers should

be regarded as clients with the right to be treated respectfully.

c) Low cost of Administration

A key feature of a good tax system is that the cost of

administration must be relatively low when compared to the

benefits derived from its imposition. There must, therefore, be

a proper cost-benefit analysis before the imposition of any

taxes and the entire machinery of Tax Administration in

Nigeria should be efficient and cost effective.

30
 d) Fairness

Nigeria‟s tax system should be fair and as such observe the

objective of horizontal and vertical equity. Based on the

foregoing, there must be overwhelming reasons for granting

tax incentives, and concessions shall be, as much as possible,

be general and apply to all taxpayers.

e) Flexibility

Taxes in Nigeria should be flexible enough to respond to

changing circumstances. Prevailing circumstances should also

be considered before the introduction of new taxes or the

review of existing ones.

f) Economic Efficiency

The Nigerian Tax System shall, at all times, strive to

minimize the negative impacts of taxes on economic efficiency

by ensuring that the marginal tax rates do not distort marginal

propensity to save and invest (Mashi, 2012).

2.2.3 Objectives of The Nigerian Tax System

The Nigerian Tax System is expected to contribute to the

wellbeing of all Nigerians and taxes which are collected by the

government should directly impact on the lives of the citizens.

They can be accomplished through proper and judicious

31
utilization of the revenues collected by Government (Mashi,

2012). In line with the above, there are certain objectives which

the tax system is expected to achieve. These objectives include;

I. To facilitate Economic Growth and Development

The overriding objective of the Nigerian Tax System should be

to achieve economic growth and development. As such, the

system should allow for stimulation of the economy and not stifle

growth, as it is only through sustained economic growth that the

potential ability to offer improvements in the wellbeing of

Nigerians will arise. The tax system should, therefore, not

discourage investment and the propensity to save. Taxes should

not be a burden, but should be applied proactively with other

policy measures to stimulate economic growth and development.

II. To provide the Government with stable resources for the

provision of public goods and services.

For Nigeria to pursue an active development agenda and carry

out the basic functions of government, its tax system should

generate sufficient resources for government to provide basic

public goods and services (e.g. education, healthcare, security,

infrastructure etc.). It is, therefore, a primary objective of taxation

to provide the government with resources that it shall invest in

32
judicious expenditure that will ultimately improve the wellbeing

of all Nigerians.

III. To address Inequalities in Income Distribution

Nigeria‟s tax system should take cognizance of our peculiar

economic circumstances and seek to narrow the gap between

highest and lowest income groups. Those with the highest income

should pay the highest percentage of tax and tax revenue should

be utilized to provide Nigerians with affordable social amenities,

basic infrastructure and other utilities.

IV. To provide Economic Stabilization

Nigeria should use its tax system to minimize the negative

impacts of volatile booms and recessions in the economy and also

to help complete the efforts of the monetary policy in order to

achieve economic stability.

To Pursue Fairness and Equity

Nigeria‟s tax system must be fair and shall institutionalize

horizontal and vertical equity. HORIZONTAL EQUITY ensures

equal treatment of equal individuals. The Nigerian tax system

should, therefore, seek to avoid discrimination against

economically similar entities VERTICAL EQUITY, on the other

hand, addresses the issue of fairness among different income

33
categories. In this regard, the Nigeria tax system shall recognize

the ability-to-to pay principle, in that individuals should be taxed

according to their ability to bear the tax burden. Individuals and

entities that earn high incomes should pay a corresponding high

percentage of tax. The overall tax system shall therefore be fair,

so that simile cases are treated similarly.

- To correct market failures or imperfections

One of the objectives of the Nigerian tax system is the ability to

correct market failures in cases where it is the most efficient

device to employ. In this regard, taxes may be reviewed upwards

or downwards, as may be necessary, to achieve government

intentions. Market failures which the Nigerian tax system may

address are those that are as a result of externalities and those

arising from natural monopolies (Mashi, 2012).

2.3 National Tax Policy

Policy is a statement of ideas and intentions of government

guiding her thinking and actions towards the realization of goals

set. Tax policy is the line of action adopted with fiscal objectives

intended by government in respect of taxation. Whatever

government intends, as a fiscal objective, to interfere and correct

any inefficiency noted in the market, or encourage certain areas

34
in the society. Government will get this down formally as a tax

policy (Agbetunde, 2004).

The National Tax Policy is a document which is essentially

about taxation and other ancillary matters connected with

taxation. The National Tax Policy seeks to provide a set of

guidelines, and modus operandi that would regulate Nigerian‟s

Tax system and provide a basis for tax legislations and tax

administration in Nigeria. (Mashi, 2012).

The National Tax Policy is an initiative of the Federal

Government of Nigeria which is being driven by the Federal

ministry of finance on the basis of the report from a STUDY

GROUP in July 2003. The STUDY GROUP was inaugurated on 6th

August, 2002 to examine the tax system and make appropriate

recommendations towards entrenching a better tax policy and an

improved tax administration in the country.

Tax policy formulation is done by the macro-economist.

They are usually spelt out in government annual budgets,

development plans and other records of government plans.

(Agbetunde, 2004).

In January, 2004, a private-sector-driven WORKING GROUP

was constituted to review the recommendation of the STUDY

35
GROUP. Both Groups (the study and working) addressed macro

and micro issues such as tax policy, taxation and federalism, tax

incentives and tax administration generally their

recommendations were further reviewed and commuted upon by

various stakeholders.

The reasons for reforms and the decision to develop a

national tax could, therefore, be tread back to the structure of

the existing tax system and some of its inherent problems.

Some of the tax policies adopted by Nigerian Government

since early 1990s are;

- encouraging tax payers‟ participation in tax assessment process

via introduction of self- assessment scheme

- Reduction of individual tax burden via pursuance of low tax

regime so as to encourage savings and investments.

- Movement of attention from income tax to consumption tax so

as to reduce tax evasion.

- movement from traditional coercive method to voluntary

compliance method of tax collection.

- using legal process and efficient tax administration to curb tax

evasion and tax avoidance (Agbetunde, 2004).

36
2.4 Tax Laws

This is the legal instrument of fiscal policy derived from

adopted tax policy. Once a tax policy is adopted by the

government and expressed formally on paper, it will be translated

into law to make it effective. This tax law is crafted by the lawyers

reflecting the tax policy. After the drafting, it will be enacted or

decreed case the case may be). This enactment will legalize

government action in implementing her objective. Tax laws are

interpreted and clarified in the court by lawyers and judges.

Tax law is a very complex issues because the terms used

may have different meanings and interpretations, more so, tax,

itself, is dynamic. Based on this, extra caution is required in

drafting tax to avoid confusion, inconsistency and contraction.

It should be noted that those laws made under democratic

settings are called Acts while those made under military areas are

called DECREE ( OR EDICTS of state level)

Basically, the tax laws backing the tax system in Nigeria

today are;

37
Personal Income Tax Act of 2004: This act is a redraft of the

income Tax management Act (IIMA) Cap 173 LFN 1990 and

Income Tax (Armed forces and other persons) special Provisions)

Act, 1961. This Act identifies taxable persons, establishes their

assessable income and proceeds to tax such income. The Act also

establishes the residence of the taxpayer and the source or origin

of his/her income Two forms of taxes fall under this Act; Pay-As-

You-Earn (PAYE) from employment and taxes from trade or

business.

- Companies Income Tax Act Cap (21 LFN 2004: This is a

federal law operated by the federal Inland Revenue Services. It

deals with the taxation of all limited liability Companies in

Nigeria, with the exception of those engaged in petroleum

operation which are assessed under the petroleum profit Tax Act

P13 LFN 2004. The Act imposes a tax at a particular rate

(currently 30%) upon the profit of any company accruing in,

derived from, brought into or received in Nigeria in respect of

trade or business etc.

Industrial Development (Income Tax Relief) Act Cap P17 LFN

2004: This Act which is otherwise known as the pioneer

38
legislation provides incentives for investment in certain types of

industries. These industries include those, that are

i) Not being presently operated in Nigeria,

ii) That though in existence, have prospects for further

development in Nigeria and

iii) Considered as expedient in the public interest, to encourage

their establishment and development.

The industries are classified as pioneer Industries by the

ministry of Industries, and their products as pioneer products.

- Petroleum Profits Tax Act CAP P13 LFN 2004) PPT); The

taxation of Petroleum Operations started in Nigeria in 1959, with

the enactment of the Petroleum profits Tax Act. In view of the

importance of Petroleum operations as a major source of revenue

for the government (over 80% of the nations annual foreign

exchange earnings), the ownership and the control of all natural

petroleum products (crude oil & gas) wherever student in Nigeria,

is vested in the federal Government.

Petroleum operations under this Act, involves Petroleum

Exploration, Development, Production and the sale of Crude Oil

and Gas. Activities of Petroleum Companies taxed under their

Act, are regarded as being engaged in the Upsteam operation

39
sector of the oil and gas Industry. Conversely, companies

engaged in petroleum refining, petroleum marketing and Gas

utilization project, are classified as being engaged in the Down

stream operation sector of the oil and gas industry. This letter

class is taxed under the companies income Tax Act cap C21 LFN

2004).

- Valued Added Tax Act Cap V1 LFN 2004: This tax was first

introduced as value Added Tax Decree 102 of 1993. It is a

consumption tax which impacts on the final consumer a taxpayer

only suffers this tax, if certain classes of good or services are paid

for VAT is collected by the Federal Inland Revenue Services, and

the current rate is 5% of the value of taxable goods and services.

- Capital Gains Tax Act CAP C1 LFN 2004: The management of

the capital Gains Tax Act with respect to corporate bodies,

individual resident in the federal capital territory and non-

resident individuals (individuals outside Nigeria), has been placed

under the administration of the federal Inland Revenue services.

This is with regards to returns, assessment, appeals, collection,

recovery and repayments, offences and penalties as well as

legislation.

40
 The management of the Act will respect to individual (except

Non-Residents) is placed under the administration of the State

Internal Revenue Services.

- Education Tax Act CAP E4 LFN 2004: This tax applies to all

companies registered in Nigeria, it impose a tax at the rate of 2%

on the assessable profits of all incorporated bodies. The objective

is to generate separate funds for the sustenance of the country‟s

tertiary institutions. The tax is administered by the FIRS, which

transfers all the collections to the Education Tax Fund Revenue

services of Trustees, who in turn manage the fund,

Note: Under the Petroleum profits Tax Act CAP P13 LFN 2004,

Education Tax is charged before arriving at the Assessable profit,

thus: 2/102 x Profits before the Education Tax Charge.

- Stamp Duties Act CAP S8 LFN 2004: Stamp Duties are duties

based on Instruments otherwise called WRITTEN DOCUMENTS.

It is important to stamp instruments otherwise, such instrument

will not, except in criminal proceedings, be admitted in evidence,

or be available for any purpose whatsoever in a chain for title or

right.

The stamping rates vary from instrument to instrument and

the duties are collectable by both Federal Inland Revenue

41
Services and states Internal Revenue service. Where one of the

parties is a corporate body, the tax is payable to the Federal

Inland Revenue Services while others pay to state Internal

Revenue Services.

- Custom and Excise Duties Management Act CAP C45 LFN

2004: A major source of revenue for the Federal Government is

custom Duty, which is payable, by importers of specified goods.

The tax is charged solely by the federal government and collected

through the Nigerian customs services. Excise duty is levied on a

variety of locally produced goods. It was abolished in 1998 but

was partially re-introduced from 1st January, 1999. It is also

collected through the Nigerian customs service. The rates vary

depending on the nature/classification of the goods or products.

(ICAN, 2009).

2.5 Tax Administration

Tax Administration is the third and most important activity

of taxation process. It is the actual or real practice of taxation. In

as much as tax is a compulsory levy, it has to be enforced by a

legal statue. In fact, not tax in imposed without any enforcing

law. It is the implementation of what these laws demand that

results in tax administration (Agbetune, 2004).

42
 Tax administration involves interpretation and application

of tax laws into practice. This is the function of tax officials and

tax consultants who assist taxpayers in computing their taxes.

The agents of government responsible for tax administration are

called Tax Authorities. These tax authorities all have operational

arms saddled with the day to-day operation of tax administration.

Tax administration basically involves the following activities:

i. making of returns or information gathering

ii. Assessment

iii. Objection and Appeals

iv. Collection and Recovery of taxes

2.5.1 Objectives of Tax Administration

There are certain objectives that tax administration in

Nigeria ought to achieve and this objectives include;

- Establishment of fiscal objectives to pursue

- Designing most appropriate tax policy to achieve established

objective

- Implementation of established policy, efficiently, economically

and effectively,

- Monitoring and evaluation of implemented policy

- Ensure efficiency in actual administration

43
- Collection and accounting for tax revenue

- production of tax reports from time to time.

2.5.2 Models of Tax Administration

The standard model developed for modern tax analysis is

perfectly competitive and, in the absence of distortionary tax

structures would yield and efficient equilibrium (Newbery, 1987).

These distortionary tax structures are prevalent in Nigera

(Ogbuefi, 1983).

British Model

This model assumes tax payers are incompetent as to tax

process, hence, tax authorities do not rely on the information

supplied by the taxpayers. Each returns supplied by the taxpayer

is audited and independent verification is done in the data

supplied. Thus, it is very expensive to run as collection cost is

usually high.

American Model

This models is referred to as “voluntary compliance system” is

assumes competence of taxpayer. It believes what the taxpayer

supplied but penalizes them heavily for any wrong or false

declaration. It rarely investigates returns (only 5% is audited) this

44
model is considered by many writers to be more efficient as

practiced in United States of America (USA).

Reasons adduced are:

- Efficient date processing system thus aiding detection of tax

fraud

- Tax offence are heavily penalized

- Efficient organization for tax collection (Into division with

assigned schedule).

It is worth noting that Nigeria inherited the British models

since 1960 and has since then been consistently operating this

up to 1990 when self-Assessment scheme similar to the one

operated in USA was introduced (Agbetunde, 2004).

Unfortunately, all the points mentioned above that aided

efficiency of the system in USA are either lacking or not

adequately employed in Enugu, Nigeria (BECANS 2007). As such,

100% of the returns supplied by taxpayers shall continue to be

audited until the conditions are presented.

Moreso, there is lack of confidence on the past of taxpayer in

Nigeria as to the utilization of tax proceeds. So voluntary

compliance is difficult. (Agbetunde, 2004).

45
2.5.3 Tax Administration in Nigeria

Nigeria tax administration has been following the pattern

and form of the British Tax Administration. Nigeria is divided into

three distinct but interacting tiers, viz: Federal, state and Local

levels. The federal level performs a sort of co-ordination and

supervisory roles.

At each of these tiers are specific tax authorities charged

with the responsibility of tax administration. These tax

authorities are organs of tax administration established by

federal law of the land to administer tax on behalf of government.

Under Nigeria Constitution (1979), the power to legislate

and impose taxes on incomes, profits capital gains and stamp

duties (for individuals and companies) is vested in the Federal

Government. Hence, Federal Government is given the exclusive

power to enact law imposing tax on individuals and companies in

Nigeria.

However the collection of the tax imposed is in the

concurrent list as the three (3) tiers of government share the

power to collect the various taxes (Agbetunde, 2004).

46
2.5.4 Organs of Tax Administration in Nigeria

Federal Inland Revenue Service Board

The administration of taxation on the profit of incorporated

companies is vested in the Federal Inland Revenue Service (FIRS)

whose management board is known as the federal Inland

Revenue Service Board (FIRSB) (Sections 1-3 FIRS Establishment

Act)

Composition of the FIRSB

The federal inland Revenue service Board comprises,

a. Executive Chairman – Who shall be a person within the

service to be appointed by the president.

b. Six members with relevant qualifications and expertise, to

be appointed by the president to represent each of the six

geopolitical zones

c. A representative of the Attorney-General of the Federation

d. The governor of the Central Bank of Nigeria or his

representative.

e. A representative of the minister of finance not below the

rank of a director

47
f. The chairman of the Revenue Mobilization Allocation and

Fiscal Commission or his representative who shall be any of the

commissioners representing the 36 states of the federation.

g. The Group Managing Director of the N.N.P.C. or his

representative who shall not be below the rank of a Group

Executive Director of the Corporation or its equivalent.

h. The comptroller General of the Nigeria Customs Services or

his representative not below the rank of Deputy Comptroller

General.

i. Registrar-General of the corporate Affairs Commission or his

representation, not below the rank of a director

j. The Chief Executive Officer of the National Planning

Commission or his representative not below the rank of a director

the members of the board, other than the executive

chairman, shall be part-time members.

Powers and Functions of FIRSB

The Board shall:

a. Provide the general policy guidelines relating to the

functions of the service

b. Manage and superintend the policies of the service, on

matters relating to the administration of the revenue assessment,

48
collection and accounting system under this Act or any

enactment or law.

c. Review and approve the strategic plans of the Service

d. Employ and determine, the terms and conditions of service

including, disciplinary measures of the employees of the service.

e. Stipulate remuneration, allowances, benefits and pensions

of staff and employees in consultation with the National Salaries,

Income and Wages Commission.

f. Do such other things, which in its opinion, are necessary to

ensure the efficient performance of the functions of the service

under the Act.

Duties of the Secretary to the FIRSB

There shall be a secretary to the Board who shall be

appointed by the Board within the FIRS whose duties are to;

a. Issues notice of meetings of the Board

c. carry out such duties as the Executive Chairman or the

Board may, from time to time, direct.

In order to assist the FIRS in the performance of its duties,

provision is made for the setting up of a committee of the Board,

to be known as “The Technical Committee”.

Technical Committee Composition

49
The technical Committee shall consist of;

a. The Executive chairman of FIRS as chairman of the

committee;

b. All Directors and Heads of departments of the FIRs

c. The legal Adviser to FIRS

d. Secretary to FIRSB

the Technical Committee may co-opt from the service, such

staff as it may deem necessary, for necessary, for the effective

performance of its functions under the Act.

Function of the Technical Committee

a. To consider all tax matters that require professional and

technical expertise and make recommendation to the Boar.

d. To advise the Board on any aspect of the functions and

powers of the FIRS.

c. To attend to such matters as may from time to time be

referred to it by the Board

Joint Tax Board

Section 86 of the personal Income Tax Act, Cap P8, LFN 2004

(PITA), establishes the joint Tax Board (JTB)

50
Composition

The Joint Tax Board Comprises

a. The chairman of the Federal Inland Revenue Service Board,

who doubts as the chairman of the Joint Tax Board.

b. One member from each state, being a person experienced in

income matters (tax), nominated either by name or office, from

time to time, by the commissioner charged with responsibility for

matters relating to income tax of the state in question.

c. The secretary, who is not a member of the Board, and is

appointed by the Federal civil service commission.

d. The legal Adviser of the FIRS acts as the legal Adviser to the

Joint Tax Board.

Quorum

Seven members or their representatives, shall constitute a

quorum.

Functions of Joint Tax Board

The Board shall

a. exercise the power or duties conferred on it by the PITA and

other Acts.

b. advise the federal Government, on request, in respect of

double taxation arrangement with any other country.

51
c. advise the federal government, on request, in respect of

rates of capital allowances and other taxation matters, having

effect throughout Nigeria in respect of any proposed amendment

to PITA.

d. Promote uniformity, both in the application of PITA and in

the incidence of tax on individuals throughout Nigeria.

e. Impose its decisions, on matters of procedure and

interpretation of PITA, on any state, for purposes of conforming

with agreed procedures or interpretations.

State Internal Revenue Service Board (SIRB)

Section 87 of PITA establishes the state internal Revenue Service

Board whose operational arm is known as the state Internal

Revenue Service (SIRS).

Composition

The Internal Revenue Service Board for each State and FCT,

Abuja comprises

a. the executive head of the State Internal Revenue Service is

chairman.

b. the directors and Head of Departments within the state

internal revenue services.

c. A director from the state ministry of finance.

52
d. the legal Adviser to the State Internal Revenue Service,

e. three other persons nominated by the commissioner for

finance on their personal merit.

f. the secretary of the state Internal Revenue Service, who

shall be an ex-official member.

Quorum

Any five members of the state Internal Revenue service board, of

whom one shall be the chairman or a Director, shall constitute a

quorum.

Functions of the State Internal Revenue Service Board

The state Internal Revenue Service Board shall be responsible for:

a. Ensuring the effectiveness and optimum collection of all

taxes and penalties due to the government under the relevant

laws

b. Doing all such things as may be demand necessary and

expectant, for the assessment and collection of the tax and shall

account for all sums so collected, in a manner to be prescribed by

the commissioner.

c. Making recommendations, where appropriate, to the JTB

tax policy, tax reforms, tax legislation, tax treaties and

exemptions as may be required, from time to time.

53
d. Generally controlling, the management of the service (state)

on matters of policy, subject to the provisions of the law setting

up the state internal Revenue service

e. Appointing, promoting, transferring and imposing discipline

on employees of the state Internal Revenue Services.

In order to assist the state Internal Revenue Board in the

performance of its duties, PITA also, established a committee of

the Board, know as “The technical committee”.

Technical Committee

Composition

Section 89 establishes the Technical Committee of the State

Board which comprises.

a. the chairman of the state Board as chairman,

b. The director within the state service

c. The legal Advisers to the State Services

d. The secretary of the state services

Functions

The technical committee shall:

a. have powers to co-opt additional staff from within the state

service, in the discharge of its duties

54
b. Consider all matters that that require professional and

technical expertise and make recommendation to the state Board

c. Attend to such other matters as may, from time to time, be

referred to it by the Board.

Local Government Revenue Committee

Section 90 establishes local government Revenue committee

(LGRC), for each local government area of a state. It should be

noted that many local government in Nigeria, which vests the

local government administration in the house of Assembly (state),

as against this federal law. This is one of the constitutional

issues that should be addressed, especially vendor a federal

system of government.

Composition

The Revenue committee (LGRC) shall comprise;

a. The supervisor for finance as chairman

b. Three local Government councilors as members

c. Two other persons experienced in revenue matters to be

nominated by the chairman of the local government on their

personal merits.

55
Functions

The Revenue committee (LGRC) shall be responsible for the

assessment and collection of all taxes, fines and rates, under its

jurisdiction and shall account for all amounts so collected, in a

manner to be prescribed by the chairman of the local

government.

The revenue committee shall be autonomous of the local

Government Treasury Department and shall be responsible for

the day-to-day administration of the Department, which forms its

operational arm.

Joint State Revenue Committee (JSRC)

Section 92 of PITA establishes the Joint State Revenue committee

for each state of the federation

Composition

It comprises:

a). The chairman of the State Internal Revenue Service as the

Chairman.

b. The chairman of each of the local government Revenue

committee.

c. A representative of the Bureau in local government Affairs

not below the rank of a Director

56
d. A representative of the Revenue mobilization Allocation and

Fiscal commission, as an observer.

e. The state sector commander of the federal Road Safety

Commission, as an observer.

f. The legal Adviser of the State Internal Revenue Services

g. The secretary of the committee who shall be a staff of the

State Internal Revenue Services.

Functions

The functions of the Joint State Revenue committee shall be to;

a. Implement the decisions of the joint tax Board

b. Advise the joint Tax Board and the State and Local

Government on revenue matters.

c. Harmonies tax administration in the state

d. highlighting members of the public generally on state and

local government revenue matters.

d. Carry out such other functions as may be assigned to it by

the joint tax board.

2.5.5 Procedures of Tax Administration

This is a series of processes followed in tax administration before

tax revenue is received by government the processes are

information collection (Returns) assessments, objection and

57
Appeals and collection, recovery and repayment procedures.

(Agbetunde, 2004).

Returns

Returns is a statement of income and expenditure of a tax payer

mode in respect of his income source to the tax authority. It is a

sort of information gather procedure it can be made by the tax

payer himself or his agent in respect of tax.

Assessment

Assessment is the process of determining the amount of tax

payable by a tax payer for a year of assessment (Agbetunde,

2004). It is the act of determining the exact amount subject to

taxation under a given status. (Kuye, 2003). In the words of

Ijedire (1998), assessment involves the process of and procedures

for determining the taxable value of property on which the tax

burden is calculated in accordance with the enabling law.

Method of Assessment

Tax assessment is carried out by all the three tiers of government

under the following statutory bodies: federal Board of Inland

Revenue, state Board of internal Revenue, and local Government

Revenue committee.

Tax assessment could be carried out using the following method

58
a. Best of Judgment method:

this could be carried out where it is discovered that the taxpayer

is in the habit of not giving adequate information as regards the

true position of sources of income or where there is an obvious

case of tax evasion

b. Tax assessment based on previous years income; under this

agreement, income assessment may be based on lost year‟s

income with a slight income margin over the proceeding year. The

applicable tax rate is then applied as appropriate to determine

tax liability.

c. Assessment based on Standardized Income: here, the

relevant tax authority employed a standard income in the tax

assessment process to counter the tendency of the taxpayers to

evade tax by way of under-deterring their incomes.

d. The actual year basis of assessment method:

this method is based on the current or the actual year income.

This method is synonymous with petroleum profit tax and

companies income tax (Kuye, 2003).

59
Objection and Appeal

Objection

If a taxpayer disputes an assessment made on his income, he

may apply to the relevant tax authority within 30 days from the

service of notice of assessment for his income to be reviewed and

revised. The objection notice must contain the ground of

objection (Agbatunde, 2004)

Appeal

Any tax payer being aggrieved by assessment made on his income

after objection to tax authority may appeal in writing within 30

days from date of service of notice of refused to amend. Such

notice of appeal should be given to the secretary to the appeal

commissioners and the Board.

Collection, Recovery and Repayment

Tax charged by an assessment not objected to or appealed

against must be paid within two months from the date of service

of assessment notice.

Self Assessed Tax: Any taxpayer filing self assessment returns to

the tax authority must pay such tax within two months from the

date of filling such self-assignment in one lump sum. However,

60
such taxpayer is entitled to installment payment (not more than

six times if approved by the relevant tax authority.

Place of Payment and Currency of Payment

Payment of taxes should be made at the place indicated in the

assessment notice and be made to the Board in the currency in

which the income giving rise to tax is derived and paid to the

taxpayer.

Recovery of Tax

The Board can sue for and recover, in a court of competent

jurisdiction, the full amount of chargeable tax and the cost of

action from a person charged as a debt to the Board or to the

government section 96(1) PITA allows tax authority, in order to

enforce tax payment, to detrain taxpayer of his goods or other

chattel bonds or other sanities, land premises or places. On

satisfaction of some conditions can seal such detrained property

to recover the tax due after days of detrain (Agbetunde, 2004).

2.6 Problems of Tax Administration in Nigeria

In the context of the Nigeria Tax policy, the salient issues in tax

administration include the following;

In the content of the Nigerian Tax policy, the salient issues in tax

administration include the following;

61
Intelligence and Information Gathering

As a first step in the tax administration process, tax authorities

requires adequate and correct information to carry out their

duties of assessment and collection of taxs ideally, such

information should be provided voluntarily by taxpayers.

However, this s not always the case and in a large number of

instances, tax authorities have to source for and obtain

information other than voluntarily from the tax payer. In addition

even in instance, where taxpayers voluntarily provide

information, such information, may either not be complete or

accurate (MASHI, 2012).

Registration of Taxable Persons

In order to have an effective tax system in which all taxpayers are

covered, every taxable person must be registered for tax

purposes. Registration is a fundamental step in the tax

administration process but this is not done efficiently as manual

process are still in use (BECANS, 2007).

Payment Processing and Collection

This is the culmination of the core tax functions carried out by

tax officials and usually signifies the successful conclusion of a

filing and return circle. The process of collection is made rigorous

62
by some tax agents who collect forecly and also the accuracy of

the amount being paid as tax is doubtful.

Record Keeping

Record keeping is another core and integral function in tax

administration. It is a sustainable system for the retention and

retrieval of information gathered by tax authorities. As important

as this process is, it is poorly executed because manual record

keeping systems are still in sue

Enforcement of Tax Laws (in issues of evasion and avoidance)

It is acknowledged that in every system there are bound to be

leakages. In this regard, two of the major means by which

leakages occur in the tax system are tax evasion and avoidance.

2.7 Information Technology

The evolution of Information Technology

Information technology has been around or a long time.

Basically, as long as people have been around, information

technology has been around because there were always was of

communicating through technology available at that point in

time. There are 4 main ages that divide up the history of

information technology. Only the latest age (electronic) and some

of the electromechanical age really affects us today.

63
 These (4) four stages are, the premechanical stage,

mechanical state, electro mechanical state and electronic state.

Only the age (electronic) really affects us today.

Information Technology can be defined as the technology

involving the development, maintenance and use of computer

systems, software, and networks for the processing and

distribution of date. It is concerned with the use of electronic

technology in managing and processing information, especially in

large organization.

Information Technology (IT) deals with the use of electronic

computers and computer software to convert, store, protect,

process, transmit and retrieve information.

As with other industrial processes, commercial it has moved

in all respects from a custom craft-based industry, where the

product was tailored to fit the customers, to multi-use

components taken off the customers, to multi-use components

taken off the shelf to find the best fit in any situation. Mass

production of these products had greatly reduced costs and IT is

available to even the smallest company, a one man band or a

school kid.

64
2.7.1 Application of IT in Tax Administrations

1. In the process of intelligence and information gathering, in

order to get complete and accurate information, the proper use of

information technology will help in the realization of this goals. In

other words the use of data gathered through the use of

computerized collection system provides more accurate result.

2. In order to have an effective tax system in which all

taxpayers are covered, every taxable person has to be registered.

An efficient way of registration is in the issue of the unique tax

identification Number (U-TIN) by the federal Inland Revenue

Service. This will provide easy and complete access to taxpayer

information nationwide, which can be achieved by the efficient

use of information technology.

3. To enhance the filing and returns processing, structures

that will enhance and simplify compliance should be developed

such as the creation of a reliable taxpayer data base, electronic

compliance system, automation and standardization of the filing

and returns process.

4. In order to ensure an effective payment and collection

system, tax authorities shall embrace the use of electronic

payment (e-payment) system in all transactions to drive

65
automatic and improved remittance and collection. The use of e-

payment system safeguards the integrity of the tax payment and

collection system.

5. In a bid to achieve an efficient tax administration, manual

record keeping systems should be de-emphasized in favour of

electronic systems. It is expected that where processes such as

registration of tax payers, filing and processing of returns and

payment are already automated record keeping system.

In summary, the tax authorities should ensure uniform

deployment of technology in the aid of all aspect of tax

administration. This would aid effective and efficient tax

administration in Nigeria, Enugu State in particular. Automated

process would minimize or eliminate leakages in system,

safeguard the integrity of the system, lead to greater

specialization and reduce the cost and time required in the tax

administration process. (MASHI, 2012).

2.7.2 Benefits of IT in Tax Administration

Given the peculiar nature of tax administration especially in

developing economies such as ours (Enugu State) where date

accuracies may be a hindrance to effective tax administration,

66
the following benefits occur from the effective application of

information technology in tax administration.

1. Speed and improved efficiency on the part of tax

administration

2. Accuracy of tax computation since all forms of manual

computations will be eliminated.

3. Reliability of date used, since the bulk of the information

used in tax computations are generated using information

technology or automated process

4. Consistency in the information generated

5. Improved productivity.

67
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BECANS (2007), Business Environment Report 1(15) pg 10-13,

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Black‟s Law Dictionary (1999), 7th Edition, West Group.

Igwe-Kalu, A. (1998), Landed Property Taxation and Rating, Port

Harcourt: JITA Concepts.

Kuye, O. (2003), Fundamentals of Real Estate Taxation, Lagos:

Olusegun Kuye and Associates.

Newbery, D. (1987), “Taxation and Development”, in Newbery and

Stern (Eds.), The Theory of Taxation for Developing countries
Oxford: Oxford University press

Ogbuefi, J.U (2004), Comparative Property Rating and Taxation,

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Ojo, S. (1998), Elements of Tax Management and Practice in

Nigeria, Ibadan: Sagibera Tax Publications Ltd.

Ola, C.S (1999), Income Tax Law and Practice in Nigeria, London:
Macmillian Publishers Ltd.

Ola, C.S (2004), Income Tax Law and Practice in Nigeria, London:
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Tilley, J. (1970), Revenue Law, London: Butterworth.

Tomori, M.A. (2003), Property Taxation, Lagos; The Department

Estate Management Publication, UNILAG

White house, C and Stuart-Battle, E. Revenue law,

Winfry, J.C. (1964), The Impact of Taxation in Nigeria, New York:

Irwin Publishers

68
 CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1 Research Design

Research design simply means on explanation of the

method adopted in carrying out the research.

Anikpo (1986) defines research design as a plan or structure of

any aspect of the research procedure.

For the purpose of this study, the researcher adopted the

method of survey research design. Survey research design refers

to a process of eliciting data or information from a large

population through the use of questionnaire and interview.

3.2 Sources of Data

In the course of gathering data, two sources were consulted to

obtain information. These are primary and secondary sources.

3.2.1 Primary Source

Provides first hand information from the authorities

themselves. The personnel interviews and questionnaires

administer are aimed at achieving this.

Personnel Interviews: These were conducted on a one-on-one and

orally. Questions were asked and the respondents being

interviewed answered the questions as best as they could.

69
Questionnaire: This was divided into (2) two section, section A

and B. section A contains the bio-statistics while section B

consist of the questions formulated to answer the research

question.

3.2.2 Secondary Source:

Provide second-hand information which were collected by other

authorities in the tax system which is relevant to the research

work. These pieces of information include. Information gotten

from the library, various textbooks, newspapers articles etc.

3.3 Research Instruments

The researcher used questionnaire for the purpose of

obtaining the desired result. Multiple choice and opened question

were used in the questionnaire. They were use to assist the

respondents in expressing their which in turn helped this study

to obtain the needed information

3.4 Reliability/Validity of Research Instrument

This is designed to measure the degree to which the research

instrument produce consistent result or the consistency between

independent measurements of the same research phenomenon.

This is achieved through the Retest test method. Generally, this

implies that despite variances in time, the some set of elements

70
must yield fairly the same result. Therefore, the instrument is

valid and reliable because its measurements are accurate.

3.5 Population of the Study

The population of the study covers the total workforce of

Enugu State Board of Internal Revenue numbering up to one

hundred and thirty-for (134) workers spread across the following

departments in the table below:

Table 3.5.1

Departments Number of Staff

a) Policy & management 20
b) Assessment 30
c) Collection 48
d) Legal 10
e) other taxes 26
Total 134
Source: Field Survey (2013)

3.6 Sampling Technique and Sample Size

Due to the fact that there is no way the researcher would

have reached the entire population, the researcher made use of

simple Random Sampling Technique to obtain information

gathered.

Hence, the researcher adopted Yaro Yamane formula to

determine the sample size. Thus, the sample size was derived

using the formula stated below;

71
 N
n 2
1 N e

Where n = appropriate sample size

N = population size

e = co-efficient or confidence margin or error unit

e = 5% pr 0.05

thus the sample size is calculated as

134
n 2
1 134 0.05

134
n
1 134 0.05

134
n
1 0.335

134
n
1.335

N = 100.375

N = 100

Therefore, the sample size is (100) one hundred and researcher

issued the same questionnaire to the staff of the departments for

responses in the study.

The researcher used Bowley‟s proportional formular to

indicate the number of personnel chosen for the sample size from

each department. The formular is given below

72
 nxNh
nh
N

Where:

nh= Number of questionnaire allocated to each department

n = total sample size

Nh = Number of employees in each section of population

N = Population size

Policy and Management

100x 20
nh 15
134

Assessment

100x30
nh 22
134

Collection

100x48
nh 36
134

Legal

100x26
nh 8
134

Other Taxes

100x26
nh 19
134

Total 100

73
Departments Number of Staff No of sample
a) Policy & management 20 15
b) Assessment 30 22
c) Collection 48 36
d) Legal 10 8
e) other taxes 26 19
Total 134 100
Source: Field Survey (2013)

3.7 Administration of Research Instruments

Questionnaires were designed and administered to the

department of Enugu State Board of Internal Revenue. The

questionnaire were administered through self and hand delivery

to the selected respondents of each department. The researcher

made sure that each section gets the complete number of

questionnaire in each section that were systematically selected

and of which questionnaires was delivered and returned to the

researcher.

3.8 Method of Data Analysis

The data collected will be analyzed based on the simple

percentage method. This will be done by comparing the total

percentage with individual percentage of each reply results of

these analyses will be presented in a tabular form. The formula

used in the simple percentage method is stated below:

F 100
x
N 1

74
Where F = frequency of responses

N = Total Number of Responses

The ANOVA (Analysis of variance) statistical method was used in

testing the hypotheses.

Test Statistic (ANOVA) F= Distribution

TMS TRSS / r 1
F
EMS / N r

TSS
Where: EMS = Error Means Square =
N r

2
x
TSS = Total Sum of Square = x 2

TRSS = Error Sum of Square = TSS – TRSS

TRSS
TRMS = Treatment of Mean Square =
r 1

R = Number of rows of distribution

N = Number of sample Observation

DF = Degree of freedom = (r-1) (N-r)

Level of significance to test (X) = 5%

Note:

Let SA = X1, A = X2 D= X3. SD = X3, UD = X5

Where SA = strongly Agree

A = Agree

D = Disagree

75
 SD = Strongly Disagree

UD = Undecided

3.9 Decision Criterion for Validation of Hypotheses

The decision criterion employed by the researcher for the

validation of the hypotheses is to accept the alternative

hypothesis and reject the null hypothesis if the value of F

calculated is grater than F tabulated.

76
 CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1 Data Presentation

The Presentation of data collected means the way of

presenting and arranging the different techniques to enable

obtained through various data collecting techniques to enable the

researcher perform analysis and exact new meanings from it. The

data collected will be presented in a simple table. The date

analysis was based on the answers to the key questions received

from the various departments. The key questions in the

questionnaire will be analyzed by the use of simple percentage.

These responses gotten from the questionnaire are

presented in a tabular from, analyzed in percentage and

expressed on the 5 point rating scales (Leakert scale).

The analysis of variance (ANOVA) was used in testing the

hypotheses and the interpretation of the outcome of these data.

4.1.1 Question 1

The sex of the respondents.

77
Table 4.1.1

Showing the responses of the respondents on their sex.

Table 4 Frequency Percentage%

Male 58 58%
Female 42 442%
Total 100 100
Source: Field Survey (2013)

The table above shows that the majority of the staff are male at

58% while 42% of the staff are female.

4.1.2 Question two (2)

The age-range of the respondents

Table 4.1.2

Showing the frequency of the responses of the respondents

regarding their age range.

Table 4 Frequency Percentage%

21-30 30 30%
31-40 35 35%
41-50 20 20%
5o and above 15 15%
Total 100 100
Source: Field Survey (2013)

The table above shows that the percentage of staff within the age

of 21-30 years are 30% within 31-40year are 35% within 41-50

years are 20% and the members of staff above the age of 50 are

15%, being the least amongst the staff. The majority of the staff

are those within the range of 31 -40 years.

78
4.1.3 Question Three (3)

The marital status of the respondents.

Table 4.1.3

Showing the frequency of the responses of the respondents

regarding their marital status

Marital Status Frequency Percentage%

Single 35 35%
Married 55 55%
Divorced 2 2%
Widowed 8 8%
Total 100 100
Source: Field Survey (2013)

The table above shows that the percentage of the staff are single

are 35%, married ones are 55%, the divorced staff are 2% and the

8% of the staff are widowed. This is to say that the majority of the

staff are married

4.1.4 Question Four (4)

The length of service of each respondent

Table 4.1.4

Showing the frequency of the response of the respondents

regarding their length of services

Length of service Frequency Percentage%

Below 5 years 30 30%
5-10 years 35 35%
Above 10 years 20 20%
Total 100 100
Source: Field Survey (2013)
79
The table shows that the percentage of staff that have served

below 5 years is 28%, those that have served between 5-10 years

are 35% and the percentage that have served above 10 years is

42% which is the majority of the staff

4.1.5 Question Five (5)

The qualification of each respondent

Table 4.1.5

Showing the frequency of the response of the responded

regarding their qualifications.

Qualification Frequency Percentage%

Below „O‟ level 5 5%
SSCE 8 8%
OND/NCE 13 13%
HND/B.Sc 54 54%
MSc and others 20 20%
Total 100 100
Source: Field Survey (2013)

the table above shows that 5% of the staffs qualification is below

„O‟ level, 8% of the staff have SSCE as their qualification, 13% of

the staff have OND/NCE, 54% of the staff have HND/BSc. And

20% of the staff have MSc. And above the majority of the staff

have HND/Bsc

80
4.1.6 Question six (6)

The department of the respondents

Table 4.1.6

Showing the frequency of the responses of the respondents

regarding their departments.

Department Frequency Percentage%

Policy & management 15 15%
Assessment 22 22%
Collection 36 36%
Legal 8 8%
Other taxes 19 19%
Total 100 100

The table shows that 15% of the staff are in policy and

management department, 22% of are in Assessment department,

36% are in collection department, 8% are in legal department and

19% are in other taxes with the majority of the staff being in the

collection department.

4.1.7 Question Seven (7)

The administrative bodies of taxation are not adequately

equipped

Table 4.1.7

Showing the responses for “the administrative bodies are not

adequately equipped

81
Table 4.1.7 (A)

Respondents SA A D SD UD Total
Policy & management 4 6 2 1 2 15
Assessment 8 11 2 1 - 22
Collection 10 20 4 2 - 36
Legal 3 4 1 - - 8
Other taxes 7 10 1 1 - 19
Frequency 32 51 10 5 2 100
Source: Field survey (2003)

Table 4.1.7 (B)

Respondents Frequency Percentage%

SA 32 32%
A 51 51%
D 10 10%
SD 5 5%
UD 2 2%
Total 100 100
Source: Extract table 4.1.7 (A) Field Survey (2013)

4.1.8 Question Eight (8)

Tax officials are poorly remunerated

Table 4.1.8

Showing the responses for tax officials are poorly remunerated”

Table 4.1.8

Respondents SA A D SD UD Total
Policy & management 4 8 2 1 - 15
Assessment 15 5 2 1 - 22
Collection 11 20 4 - 1 36
Legal 3 4 1 - - 8
Other taxes 5 12 - 2 - 19
Frequency 38 49 9 4 1 100
Source: Field Survey (2013)

82
Table 4.1.8 (B)

Respondents Frequency Percentage%

SA 38 38%
A 49 49%
D 9 9%
SD 4 4%
UD 1 1%
Total 100 100
Source: Extract Table.1.8 (A) Source: Field Survey (2013)

The table 4.1.8 shows that 38% of the respondents strongly

agree, 49% of the respondent, being the majority, agree, 9% of

the respondents Disagree, 4% of the respondents strongly

disagree and 1% are undecided.

4.1.9 Question Nine (9)

Potential taxpayers have been effectively drawn into the tax net

Table 4.1.9

Showing the responses for “potential taxpayers have been

effectively drawn into the tax net‟

Table 4.1.9 (A)

Respondents SA A D SD UD Total
Policy & management 7 8 - - - 15
Assessment 11 9 1 1 - 22
Collection 12 20 1 2 1 36
Legal 3 3 2 - - 8
Other taxes 7 10 - 1 1 19
Frequency 40 49 4 4 2 100
Source: Field Survey (2013)

83
Table 4.1.9 (B)

Respondents Frequency Percentage%

SA 40 40%
A 50 50%
D 9 4%
SD 4 4%
UD 2 2%
Total 100 100
Source: Extract Table.1.9 (A) Source: Field Survey (2013)

Table above shows that 40% of the respondents strongly agree,

50% of the respondents agree, 4% of the respondents disagree,

4% of the respondents strongly disagree and 2% are undecided,

with the majority at 50% of who agree.

4.1.10

Showing the responses for frequent changes in tax laws facilitate

evasion”

Table 4.1.10 (A)

Respondents SA A D SD UD Total
Policy & management 8 4 1 2 - 15
Assessment 7 8 3 1 3 22
Collection 12 18 1 - 5 36
Legal 5 3 - - - 8
Other taxes 7 8 2 1 1 19
Frequency 39 49 7 4 9 100
Source: Field Survey (2013)

84
Table 4.1.10 (B)

Respondents Frequency Percentage%

SA 39 39%
A 41 41%
D 7 7%
SD 4 4%
UD 9 9%
Total 100 100
Source: Extract Table.1.10 (A) Source: Field Survey (2013)

The table above shows that 4% of the respondents strongly,

disagree, 7% of the respondents disagree, 9% of the respondent

are undecided, 39% of the respondent strongly agree and 41% of

the respondent, being the majority, agree.

4.1.11 Question Eleven (11)

Information technology is commonly applied in the day-to-day

activities of the board.

Table 4.1.11

Showing the responses for information technology is commonly

applied in the daily activities of the board”

Table 4.1.11 (A)

Respondents SA A D SD UD Total
Policy & management 5 7 1 1 1 15
Assessment 8 10 2 1 1 22
Collection 12 23 - - 1 36
Legal 5 3 1 - - 8
Other taxes 9 2 1 1 - 19
Frequency 39 50 5 3 3 100
Source: Field Survey (2013)

85
Table 4.11 (B)

Respondents Frequency Percentage%

SA 39 39%
A 50 50%
D 5 5%
SD 3 3%
UD 3 3%
Total 100 100
Source: Extract table 4.1.11 (A) Field Survey 2013

The table above shows the majority agree at 50%, 39 of strongly

agree, 5% of the staff disagree, 3% strongly disagree and 3% are

undecided.

4.1.12 Question (12) Twelve

The application of information technology improves the efficiency

of tax administration

Table 4.1.12

Showing the responses for the application of Information

Technology improves the efficiency of tax administration”

Table 4.1.12 (A)

Respondents SA A D SD UD Total
Policy & management 6 8 1 - - 15
Assessment 8 10 3 1 - 22
Collection 20 10 4 1 1 36
Legal 3 3 1 1 - 8
Other taxes 8 7 2 1 1 19
Frequency 45 38 11 4 2 100
Source: Field Survey (2013)

86
Table 4.1.12 (B)

Respondents Frequency Percentage%

SA 45 45%
A 38 38%
D 11 11%
SD 4 4%
UD 2 2%
Total 100 100
Source: Extract table 4.1.12 (A) Field Survey 2013

The table above shows that 45% of the staff, being the majority

strongly agree, 38% of them agree, 11% of them disagree, 4% of

the respondents strongly disagree and 2% are undecided.

4.1.13 Question Thirteen (13)

Effective tax administration leads to an increase in tax base.

Table 4.1.13

Showing the responses for “affective tax administration leads to

an increase in tax base.

Table 4.1.13 (A)

Respondents SA A D SD UD Total
Policy & management 4 9 1 1 - 15
Assessment 9 12 - - 1 22
Collection 18 10 5 2 1 36
Legal 5 2 - 1 - 8
Other taxes 8 10 1 - - 19
Frequency 44 43 7 4 2 100
Source: Field Survey (2013

87
Table 4.1.13 (B)

Respondents Frequency Percentage%

SA 44 42%
A 43 43%
D 7 7%
SD 4 4%
UD 2 2%
Total 100 100
Source: Extract table 4.1.13 (A) Field Survey 2013

The table above shows that 44% of the staff strongly agree, being

the majority, 43% of the respondents agree, 7% of them disagree,

4% of the staff strongly disagree and 2% are undecided.

4.1.14

Inefficiency in tax administration creates an avenue for tax

evasion

Table 4.14

Showing the responses for “inefficiency in tax administrator

creates an avenue for tax aversion”

Respondents SA A D SD UD Total
Policy & management 8 6 1 - - 15
Assessment 12 8 2 - - 22
Collection 20 12 2 1 1 36
Legal 4 3 1 - - 8
Other taxes 7 9 2 1 - 19
Frequency 51 38 8 2 1 100
Source: Field Survey (2013

88
Table 4.14 (B)

Respondents Frequency Percentage%

SA 51 51%
A 38 38%
D 8 8%
SD 2 2%
UD 1 1%
Total 100 100
Source: Extract table 4.1.14 (A) Field Survey 2013

The above table shows that the majority which is 51% strongly

agree, 38% of the respondents agree, 8% of them disagree, 2% of

the respondents strongly disagree and 1% is undecided.

4.2 Test of Hypotheses

For the purpose of this study, three (3) hypotheses had been

formulated in chapter one. Therefore, in order to test these

hypotheses, the figures /data derived from the analysis tables

4.1.12. 4.1.13 and 4.1.14 would be computed and tested using

the one –way ANOVA (Analysis of variance) model.

Table 4.2

ANOVA Table (Extract)

Source of Variation SS DF MS F-value

Between Treatment TRSS (r-1) TRSS TMS
DF
Within Treatment ESS (N-r) ESS EMS
DF
Total TSS

89
4.2.1 Test of Hypotheses One

Ho; Effective tax administration does not lead to an increase in

tax base.

H1; Effective tax administration leads to an increase in tax base.

To test hypothesis one, it will be based on the response to

question (13) thirteen.

Table 4.2.1 (A)

Contingency Table (Responses & Scoring)

Respondent X1 X2 X3 X4 X5 Total
Policy & 4x5=20 9x4=36 1x3=3 1x2=2 - 61
management
Assessment 9x5=45 12x4=48 - - 1x1=1 94
Collection 18x5=90 12x4=40 5x3=15 2x2=4 1x1=1 150
Legal 5x5=25 2x4=8 - 1x2-2 - 35
Others taxes 8x5=40 10x4=10 1x3=40 - - 83
x 220 172 21 8 2 423
X 44 34.4 4.2 1.6 0.4
x2 12750 6864 243 243 2 19883
x 2
510 429 27 6 2 974
Source: Extract table Field Survey (2013).

423
x = 16.92
25

25 = Number of Rows x Number of Columns = N

2
x
TSS = Total Sum of square = x -
2

2
423
Where n = 19883 - 25
25

= 19883 – 7157.16 = 12725.84

90
TRSS = Treatment of Sum of square

TRSS = r where r =5
2
k, x

= [(44-16.92)2 + (34.4-16.92)2 + (4.2-16.92)2 +(1.6-16.92)2 +

(0.4-16.92)2]

= 5 (733.3264 +305.5504+161.7984+234.7024+272.9104)

= 5(1708.288) = 8541.44

Error Sum of Square (ESS) = TSS – TRSS

= 12725 – 8541.44

= 4184.4

Table 4.2.1 (B)

Source of Variation SS DF MS F-value

ms
x
Between Treatment 8541.44 4 2135.36 2135.36
Within Treatment 4184.4 30 209.222 209.222
Total 12725.84 10.21
Source: Extract table 4.2.1 (A)

TMS TRSS / r 1
:. F =
EMS / N r
F calculate = 10.21

Foo (V1, V2) = Fo.05 (4,20) = 2.87

Rejection
Acceptance
region
region

10.2
91
Decision

Since F cal is greater than E tabulated, that is 10.21> 2.87, it

therefore holds that the null hypothesis (HO) is rejected and the

alternative (H1) is accepted therefore concluding that effective tax

administration leads to an increase in tax base.

4.2.2 Hypothesis Two

HO ; inefficiency in tax administration does not create an avenue

for tax evasion

H1; inefficiency in tax administration creates an avenue for tax

evasion.

The hypothesis stated will be tested using the responses to

question (14) fourteen in the questionnaires distributed.

Table 4.2.2 (A)

Responses and Scoring

Respondent X1 X2 X3 X4 X5 Total
(SA) (A) (D) (SD) (UD)
Policy & 8x2=40 6x3=24 1x3=3 - -
management
Assessment 12x5=60 8x4=32 2x3=6 - - 64
Collection 2x5=100 12x4=48 2x3=6 1x2=2 1x1=1 98
Legal 4x5=20 3x4-12 1x3=3 - - 157
Others taxes 7x5=35 9x4=36 2x3=6 1x2=2 - 35
x 255 152 24 4 1 436
X 51 30.4 4.8 0.8 0.2
x 2
16825 5344 126 8 1 22304
Source: Extract table Field Survey (2013).

92
 x
x were n = 25
n

436
= 17.44
25

2
x
TSS = x 2

2
436
= 22304 -
25

= 22304 -7 603-84

= 14 700.16
2
TRSS = r xj x where r = 5

2 2 2 2 2
51 17 .44 30 .4 17 .44 4.8 17 .44 0.8 17 .44 0.2 17 .44

= 5 (1 126.2736 + 167.9616 +159.7696 +276.8896 +297.2176)

= (2 038.112)

TRSS = 10 140.56

ESS = TSS –TRSS

= 14 700.16 -10 140.56

= 4 559.6

Table 4.2.2 (B)

ANOVA TABLE

Source of Variation DF SS MS F-Ratio

Treatment 4 10 140.56 2535.14 2535.14
Error 20 4559.6 227.98 227.98
Total 24 14 700.16 11.12
F cal = 11.12

93
 Foo (V1, V2) = Fo.05 (41,20) = 2.87
F(p)

Rejection
Acceptance
region
region

11.12
Decision:

Since the t cal is greater than f tabulated, that is 11.12> 2.87, it

is therefore held that the null hypothesis is rejected and the

alternative hypothesis (H1) is accepted. Therefore, we conclude

that inefficiency in tax administration creates an avenue for tax

evasion.

4.2.3 Hypothesis Three

Ho; the application of information Technology does not increase

efficiency in tax administration

H1; the application of information Technology increase efficiency

in tax administration

The hypotheses stated above will be tested using the responses to

question (12) in the questionnaire distributed

94
Table 4.2.3 (A)

Responses and Scoring

Respondent X1 X2 X3 X4 X5 Total
(SA) (A) (D) (SD) (UD)
Policy & 6x5=30 8x4=32 1x3=3 - - 65
management
Assessment 8x5=40 10x4=40 3x3=9 1x2=2 - 91
Collection 2x5=100 10x4=40 4x3=12 1x2=2 1x1=1 155
Legal 3x5=15 3x4=15 1x3=3 1x2=2 - 35
Others taxes 8x5=40 7x4=28 2x3=6 1x2=2 1x1=1 77
x 255 152 33 8 2 420
X 45 30.4 6.6 1.6 0.4
x 2
14325 5152 279 16 2 19774
Source: Extract table Field Survey (2013).

x
x where n = 25
n

420
x 16.8
25

2
x
TSS = x 2

2
x
= 19774-
n

2
420
= 19774 -
25

176400
= 19774 -
25

= 19774 – 7056

TSS = 12718
2 2 2 2 2
45 16 .8 30 .4 16 .8 6.6 16 .8 1.6 24 0.4 16 .8

95
 = 5 (795.24 + 184.96+104.04+231.04+268.96)

= 5 (1 585.24)

TRSS = 7 921.2

ESS = TSS – TRSS

= 12718 -7921.2

ESS = 4 796.8

Table 4.2.3 (B)

ANOVA TABLE

Source of Variation DF SS MS F-Ratio

Treatment 4 7921.2 1980.3 1980.3
Error 20 4776.8 239.84 239.84
Total 24 12 718 8.26
F cal = 8.26

Foo (V1, V2) = f (0.05 (4,20) = 2.87

F(p)

Rejection
Acceptance
region
region

0.26

Decision:

Since the f calculated is greater than the t tabulated, that is

8.26>2.87, it therefore holds that the null hypothesis (Ho) is

rejected and the alternative (H1) is accepted. We therefore

96
conclude that the application of information technology is

increases efficiency in tax administration.

97
 CHAPTER FIVE

Summary of the Findings, Conclusion and Recommendations

This is the final stage of the research work where all the contents

are summarized, the findings are collected and recommendations

are made to ameliorate the present state of tax structures in

Nigeria. The conclusion drawn here is a function of the research

findings and the analysis conducted

5.1 Summary of Findings

In the course of the research conducted, certain points were

deduced from the responses. These points include;

a. Effective tax administration leads to an increase in tax base

as more potential taxpayers are drawn into the tax net when

there is a conducive environment or situation for a taxpayer.

b. Tax evasion can be reduced to the barest minimum if the

administrative bodies are fully and promptly equipped with

contemporary materials and equipment to carry out their duties

and if they are duly authorized to penalize defaulters severely

c. The application of information Technology is of the major

key to facilitating the effectiveness and the efficiency of tax

administration in any given society or Enugu state as a case

study.

98
d. When tax officials are adequately motivated due to better

remuneration, only then can they exercise their duties with

utmost diligence and perseverance.

5.2 Conclusion

Tax administration in Nigeria has been plagued with series

of problems over the years. Problems such as poor remuneration

of staff, that is tax officials can lead to inefficiency in tax duties

being carried out. Other salient issues include manual

compilation systems and discrepancies in tax law formulation.

These and other problems have resulted in reducing

taxpayers compliance thereby creating an avenue for tax evasion.

The adoption of information technology has therefore been

proven to alleviate the effect of inefficiency of tax administration

in Nigeria.

5.3 Recommendation

It is worthy of note to recommend tat anal out inculcation of

information technology in the daily activities of tax

administration be adopted as this will radically transform out tax

management system, giving the tax administration in Nigeria a

complete overhaul. An efficient and effective tax administration

with the use of modern technologies will not only guarantee an

99
increase in revenue base for the government but also position the

country properly to take full advantages offered by the minimal

development.

Furthermore, the acceptance and full application of

information technology in tax administration cannot be over-

emphasized as the federal board of Inland Revenue (FBIR) has

not over looked the importance and relevance of information

Technology. According to the Ag. Executive Chairman of FBIR,

Alhaji Kabir M. Mashi, the board has found a way to identify all

taxable persons and monitor their compliance by issuing a

number to all taxpayers known as unique tax identification

Number (U-TIN) this is done in a manner so that no two persons

can have the same number.

Therefore, for effective tax administration using information

technology, the following actions are recommended;

a. There should be periodic enlightenment campaign for the

masses

b. Adequate training of tax officials on the use of the modern

technologies and equipping them with those modern systems to

keep abreast of the Global travel.

100
c. Adequate record keeping of the taxpayers information using

modern technology

d. Application of stiff penalties on tax evaders to serve as

examples and ward off any attempt by the prospective tax

evaders.

101
 BIBLIOGRAPHY

Agbetunde, L.A. (2004). Principles and Practices of Nigeria

Personal Income Tax, Lagos: Feetal Consulting Publishers

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 APPENDIX I

Department of Accountancy,
Caritas University,
Amorji –Nike, Emene,
Enugu State
23rd July, 2003

Dear Sir/Madam

REQUEST FOR THE COMPLECTION OF QUESTIONNAIRE

I am a final year students of Caritas University, carrying out
a research on the overview of “The effect of information
Technology on the Efficiency of Tax Administration in Nigeria”, a
case study of Enugu State Board of Internal Revenue”.
This study is purely for academic purpose. Therefore your
response or opinion will be treated in strict confidence.

Thanks for your anticipated co-operation

Yours faithfully

Agusiy Brenda A.

104
 APPENDIX II

Please tick (√) as appropriate in the box for your response.

Section A: (Bio-Statistics)

1. Sex. Male ( ) Female ( )

2. Age: 21-30yrs ( ) 31-40 ( ), 41-50yrs ( )

3. Marital Status: Single ( ), Married ( ) Divorced( )

widowed ( )

4. Length of service: Below 5 yrs ( ), 5-10yrs ( )

above 10 yrs ( )

5. Qualification: Below „O‟level ( ) SSCE ( ), OND/NCE ( )

Legal ( ) others taxes ( )

Section B:

SA – Strongly Agree

A – Agree

D – Disagree

SD – Strongly Disagree

UD – Undecided

SA A D SD UD
7 The administrative bodies of taxation
of taxation are not adequately
equipped
8 Tax officials are poorly remunerated
9 Potential taxpayers have been
effectively drawn into the tax net
10 Frequent changes in tax laws
105
 facilitate evasion
11 Information Technology is commonly
used by the board
12 Information Technology improves the
efficiency of tax administration
13 Effective tax administration lead to an
increase in tax base
14 Inefficiency in tax administration
creates an avenue for tax evasion

106