TAX CONSULTANT AND EFFECTIVE REVENUE MOBILIZATION AT THE GRASSROOTS LEVEL

CHAPTER ONE 

Introduction

Many African countries have adopted decentralization as the main instrument for transforming the rural areas. The forms adopted range from a high degree of central control to extensive devolution of powers to local government1.

In Nigeria, Local Government has long been recognized as a veritable agent of local service delivery, mobilization of community based human and material resources, and organization of local initiative in responding to a wide variety of local needs and aspirations2. As the tier of government closest to the grass roots local government is in a better position to create wealth for the rural poor through the initiation of various programmes that will increase local incomes and thereby expand local revenue base. For the local government system to continue to be relevant in the scheme of thing in Nigeria, they must evolve strategies for generating revenue base.

Local Governments in Nigeria in their present form started in 1976 “the guidelines for the 1976 local government reforms in Nigeria (1976) is comprehensive and aptly captures the essential features of local governments.

According to the guideline.

“Local government is government at the local level exercised through representative council established by law to exercise specific power within defined areas. Those powers should give the council substantial control over local affairs as well as the staff and institutional and financial power to initiate and direct the provision of services and to determine and implement projects so as to compliment the activities of the state and federal government in their areas, and to ensure through active participation of the people and their traditional institutions that local initiatives and response to local needs are maximized”. 

Part of the explanation for the reform are the problems of inadequate funding to local government, lack of appropriate structure, operational deficiency, insufficient manpower owing to poor salaries and unattractive condition of service, corruption, nepotism and politicization of the whole local government system.

 Local government is justified on the ground that it is an efficient agent for providing services that are local in character. Local government exists to provide services and it must be judge…by its success in providing services up

to a standard measured by a national inspectorate3”. Because of its closeness to the grassroots, local government is in the best position to provide certain services for more efficiently than the federal and state government. Local

government is a veritable instrument for development4.

Local government also serves to promote democracy at the grassroots. This is the view espoused by the democratic participatory school which argued that local government functions to bring about democracy and to afford

opportunities for political participation to the citizen as well as to educate and socialize him politically5. Similarly, the 1976 “guideline for local government stated that one of the main objective of local government is to facilitate the exercise of democratic self-government close to the grassroots of our society

and encourage initiative and leadership potential.          

 Again, the 1976 “guideline for local government reform in Nigeria” states that local government exists for the following developmental reasons: 

(1)  To make appropriate services and development activities responsive to local wishes and initiatives by developing or delegating them to local representative bodies, and

(2)  Mobilization of human and material resources through the involvement of members of the public in their development.

Among the many potential roles of local government in the development

process are the following6.

(1)  Helping to inculcate in people citizenship altitudes such as

consideration, self control, community responsibility and identity.

(2)  Providing basic community services which both improve the quality of people lives and enable the community to generate and attract economic activities, and

(3)  Helping people, especially in the rural areas to organize themselves for the mobilization and effective management of community resources and central government programmes respectively.    

However, the aforementioned roles and objectives of the local government  to perform have not been easy to meet due to their low financial resourcefulness. This element of finance has remained a problem and has continuously disallowed local government to engage towards the executing their roles expected from them. Identifies finance as exist necessary to break what in his terminology is, “the vicious circle of poverty of local government”. And make local governments relevant in the country’s development process7. Although the financial position of local governments in Nigeria has improved considerable, due to enhanced allocation from the federation accounts regrettably, the assurance of getting regular and substantial allocations from the  federation account has made them to lose the incentive to explore new ways and method of boosting their revenue from domestic or independent sources. While statutory allocation remains the main source of revenue for funding development projects of the local level, internally generated revenue (IGR) remains critical for sustainable implementation of wealth creation at the grassroots by local government. The local government should improve their financial standings by

diversifying their internal sources of revenue.

In addition to diversifying its revenue base, local government should also recruit qualified and competent manpower particularly professionals. There is no doubt that the ability of any organization to achieve its goals depends, to a large extent on the calibre and motivation of its human resoruce.8 In the light of the above, Arewa local government must find better ways and means of generating adequate internal revenues which could at least cover all its recurrent expense and possibly other elements of capital projects.

 Arewa local government is one of the twenty one (21) local governments in Kebbi state. Arewa local government border will Niger Republic in the North-West Arewa local government has twelve major markets which facilitate business transaction  amongst the people and outside world. These are: Kangiwa, Gumki Amagwaro, Bui, yeldu, Dadin-kowa, bachaka and Hakimawa. And out of them (Bachaka, Dadinkowa, Gumki and Amgiwaro) are border markets with the Niger republic while the  remaining eight are inland market. 

 In order to boost their internally generated revenues, the Arewa local government signed an agreement with external tax consultant popularly known as Salih B & Co. Tax consultants. Chartered Tax practitioners & consultants, for improving the local government internally generated revenue through the proper harnessing of the various revenue sources available to the local government  and in particular the revenues occurring from Taxes, rates license levies etc. for the period of three years  effective from December 2014-2016).

Statement of the Research Problem 

 Local government grapples with a lot of challenges in carrying out its roles and functions. These challenges revolve around ways of generating more revenues and it’s efficient utilization for the overall development of their localities. The proceeds from the collections are specifically meant to finance general administration, execution of developmental projects   for the economic and social well-being of the rural populace, political mobilization and a host of others. These tasks cannot be accomplished without the necessary resources. In Nigeria, majority of the local governments cannot generate substantial amount of revenues from their internal sources. Local governments have been experiencing very poor finances and these made it very difficult for the local government executive their functional roles in terms of provision of basic amenities to the general populace. It is with a view to increasing its internally generated revenues through efficient tax administration and improving its finances and reducing fiscal imbalance that Arewa Local government employed the services of external tax consultant known as Salih B. and Co tax consultant.

 This research work seeks to examine the existing local government revenue sources and to analyse their viability economically, and also identify other resourceful sources that have remained un-generated by the local government.

  This research work seeks to appraise the challenges and prospects of the use of tax consultant in generating revenues at the grassroots level.  

 The study assesses the effects of the use of consultants for tax revenue generation in Arewa local government within the stipulated time, with a view to confirming the contribution of the consultants to accelerated tax revenue generation during the period.

Objectives of the Study 

The study has the following objectives:

1.           To assess the continuous relevance of tax consultants in the  Arewa local government tax system.

2.           To determine the pattern of tax revenue collection profile relevant to the appointment of the tax consultant by the local government under study during the stipulated time.

3.           To determine the conformity of the tax consultant to the principles of taxation in Arewa Local government.

4.           To discuss major challenges against tax compliance and effective tax administration in Arewa local government.

5.           To suggest ways of improving the revenue generation capacity of Arewa local government.

6.           To identify the problems associated with revenue generation with use of tax consultants in Arewa Local Government Area.

7.           A more efficient ways of generating the revenue locally and at least cost.

8.           To ensure continuous community mobilization for prompt payment of taxes, rates and levied on the when due.  

Research Questions 

 In order to achieve the above objectives, the answers to the following research questions are relevant:

1.           How efficient and sustainable revenues generation and its impact on the development of Arewa Local Government area? How is revenue

generation conducted in Arewa local government.

2.           What are the factors responsible for the success or failure of the revenue generation in Arewa local government.

3.           Are tax consultants continuously relevant for the Arewa Local

Government to re-engage for tax revenue generation.

4.           Are tax consultants conforming with principles of taxation in providing their services to Arewa Local government.

Significance of the Study

The ultimate aim of this research work is to identify the problems that militate against effective mobilization and generation of internal revenue that were left hidden and not generated by the local government.

The study may as serve as a standard for assessment of performance and also ascertain the effectiveness of local government regard to their main purpose and objective.

The study will be a great important to these who wish to know other sources of revenue available to the local government beside the statutory allocation from the federal account. The research will be a great assistance to the revenue section of Arewa local government.

The study also serve as reference material for tax practitioners, students, researchers and the general public on the subject matter.

 Scope and Limitations of the Study 

 The research work is limited to management of internal revenue generation in Arewa Local Government in Kebbi State. The  work actually centers on Arewa local government due to accessibility of the researcher who is indigene of the local government. This research study is an attempt to examine and analyse the effect of using tax consultants for tax revenue generation by Arewa local government for the stipulated period. The research work would analyse the revenue generation of the local government under study. And also the research would cover the importance of the use of external tax consultants in the affairs of the generation of revenues in the local government. 

 This research work also brings to the fore the role of relevant stakeholders in Arewa local government tax system, such as the revenue department tax payers, tax consultants. The study also serves as reference material for tax practitioners, students, researchers local government and the general public on the subject matter. The research work has the following limitation; the major constraints  encountered in the study include: 

1.   Time constraint- considering the limited time give for the study, the researcher could not get all the information needed for the study.

2.   Financial constraint the researcher did not have sufficient money to carryout the study due to financial constraint, the researcher could not visit all the places where information relevant to the study could be obtained.

3.   Attitude of the respondents: Some of the respondents were reluctant to cooperate with the researcher as they felt there is nothing to benefit from the study.

Hypotheses of the study

Inorder to make the research analytical in nature, the following hypothesis have been advanced. It was purposed that:

(1)  The inability of local government to adequately exploit their internal revenue sources is due to the inadequate trained revenue personnel.

(2)  The low level of the local government internally generated revenues is due to correction and crook method or tax collection. 

(3)  The use tax consultant had expected to provide adequate revenue generation to local government and provide ways of sourcing of unhidden revenue generation.

(4)  People evade paying their taxes because of the inability of local government to provide them with the necessary amenities 

(5)  Local government show lack of concern on the generation of their internal revenues because of the regular flow of the federal statutory allocation that accrues to them.

Research Methodology and Characterization

 The research would work on two source of data. These are the primary and secondary sources of data. The primary source of data was mainly through oral interviews with the administrative staffs of finance  department and other staff engaged in revenue generation of the Arewa local government. the other are the Salih B & Co Tax consultants, marketers, shop owners and other who believes that they are in position of having information of revenue generation in Arewa local government area. The responses of the respondents would analysed. The secondary data on the other hand was sources from some documented literature on revenue generation and related statistical data obtained from the related journal and account books would also been analsyed.

This research work will contain five (5) chapters-chapter one serves as the main introduction to the project. It gives the general background to the study, objectives of the study, statement of the problems, significant of the study and definition of the concepts.

 Chapter two(2) is the literature review that is the views of work of other authors as to what local government internal revenue and how it was managed.

It also comprise the roles or functions of the external tax consultant that is Salih B and co tax consultant, and various sources of revenues to the local government and ways of improving the internal revenues in the local government. The chapter also examined the problems of revenue generation in

Arewa local government and contribution of tax consultants in Arewa Local Government.

 The chapter three (3) consist of the historical background of Arewa local government area of kebbi state.

Chapter four (4) deal with data presentation and major finding and also analysis. While chapter five comprising summary conclusion and

recommendation.    

Definition OF the Concepts 

 There are some important concepts which need to be defines for clear understanding:

(1)          Revenue Generation: This is the ability of both revenue collectors and the management to collect the due while on the hand the ability to pay tax payer when it is due for payment.

(2)          Internal Revenue: This refers to all money that is receivable from the existing sources of revenue of revenue by the local Government area.

(3)          External Source of Revenue: This is the statutory allocation from the federal government and 10% state contribution from its internal generated revenue (I.G.R) to local government stipulated by Nigerian constitution on monthly basis and other aid by the non governmental organization i.e UN, UNICEF and other agencies in support of the development programme by the local government.