AN APPRAISAL OF THE STRATEGIES FOR MAXIMUM TAX ASSESSMENT AND COLLECTION IN TARABA STATE, NIGERIA

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

In the recent times various strata of government in Nigeria are being faced with developmental challenges due to the dwindling and insufficient revenue at its disposal. Taraba state is without exception. The meagre sum collected as revenue allocation cannot complement fully the state statutory allocation from the federation account. Thus, the need to strategize toward improving non-oil tax revenue sources which are independent revenue sources available to states and local governments in Nigeria. Perhaps the efforts of government and tax agencies to improve tax administration and tax revenue yield will be meaningless except on appreciable level of voluntary compliance of taxpayers and effective enforcement of tax laws that can propel taxpayers’ behaviour to obey tax laws. Modugu et al., (2012) conclude that voluntary compliance is significantly increased when government fulfil the social/fiscal contract with the governed. While, Akpo (2009) argued that citizens are reluctant to pay tax due to the failure of government to provide essential physical and social infrastructure for her people and therefore a failure of good governance. This implies that government failure to fulfil her promises to the citizenry can induce negative taxpayers’ morale, apathy of taxpayers to pay tax perhaps due to lack of provision of essential amenities by the government of the day. An indispensable tax administrative policy measure for improving tax revenue performance of state government is building a comprehensive and articulated plan of action designed to induce voluntary compliance and effective implementation of tax enforcement program. Tax compliance is behavioural and requires strategies that can induce behaviour to succeed. Oyedele, (2016) identified why Nigerians are tax averse which include incoherent fiscal policies, complex and inefficient tax management system, high level of tax leakages, complex tax laws, lack of transparency on utilization of tax revenue and visible development. How to improve tax revenue potentials of Rivers state governments in Nigeria through the instrumentality of consolidated and comprehensive tax compliance strategies so as to reduce the wide tax revenue gap is the concern of the researcher. There seems to be wider disconnection between tax compliance system and revenue growth in Nigeria due to perceived weak application of a comprehensive and all inclusive plan of actions by government and tax authority that can propel voluntary tax compliance/self assessment, enforcement and penalties to resolve the lingering tax revenue yield problem of various governments Dandago (2015) identified the challenges of revenue collections in Nigeria to include neglect of many revenue sources, under utilization of some revenue sources, leakages, poor staffing and training, weak structural, legal institutional and personnel commitment. It is essential that the state quickly and vigorously laid good strategies to optimize non-oil revenue to enhance public service delivery. Relatively, using enforcement will in no small measure improve compliance level. However, James and Alloy (2010) contend that there is no doubt in the existence of sanctions in tax administration. However, the extent they are needed and the enthusiasm of enforcement raised questions. Using harsh enforcement as tax compliance strategy is beneficial for purposes of revenue drive and at the same time may have adverse consequences which may call for caution. In view of the above challenges is pertinent to carry out an empirical study to unravel the latent efficacy of voluntary compliance and tax collection strategies on tax revenue yield of Taraba state government, Nigeria.

STATEMENT OF PROBLEM

Another feature and problematic aspect of Nigeria’s tax system is the location of the assessment and collection functions within the tax administration. Problems also emanate from the frequent changes in the tax laws, every year the annual budget estimate introduces new measures and procedures, amends or cancels existing ones. These frequent changes can make the law confusing as well as complicate the tax structure. After a few years these changes and amendments become so many that the tax payer finds it difficult to know which laws are applicable. There is the need therefore, for the tax administration to undertake periodic codification of the tax laws so that it can have all the amendments and changes compiled into one statue to which both have easy and ready access. Another institutional arrangement that seems to impede the efficiency and effectiveness of tax administration in Nigeria is the linkage of the revenue administration with the civil service. The revenue administration, therefore, reflects the weaknesses and structural defects existing within the civil service organization, especially executive bureaucracy, low morale and inadequate resources. Other problems include: Non-Compliance Strategy: Mamud (2008) observes that the recurring problem with Personal Income Tax (PIT) is the non-compliance of employers to register their employees so as to remit such taxes to relevant authorities. This problem is not limited to PIT but also Pay As You Earn (PAYE), withholding taxes, and taxes paid by ministries and agencies in the three tiers of government. Multiple Taxes: The study group of 2009 highlighted the multiple taxes in the three tiers of government as the most serious problem for the country’s tax administration system. The group emphasized that companies are subjected to a wide range of taxes, levies and rates at the state and local levels in addition to the federal income tax. According to Odusola (2006), the imposition of multiple taxes in the system imposes restrictions on inter-state commerce and trade, making locally produced goods uncompetitive and in some instances causing business closure. The failure of government to address this issue has affected resources that could have accrued to it as some business organizations have folded up as a result. Some of those who have remained in business usually put up hostile and confrontational attitudes when approached to pay these taxes. This and many more leads to lack of proper accountability and paucity of funds as the resources available are not enough to cater for the well being of the country. This is more prevalent in the private sector where these organizations collude with tax officials to under assess their companies.

AIMS OF THE STUDY

The major purpose of this study is to examine an appraisal of the strategies for maximum tax assessment and collection. Other general objectives of the study are:

1. To examine the nature of tax and the level of compliance by those who are liable to pay tax.
2.  To examine the strategies for tax assessment and collection in Nigeria.
3. To examine the effects of revenue collection strategies on Taraba state board of Internal Revenue.
4. To examine the extent to which this strategic measures affects tax revenue yield in Taraba state.

5. To examine the relationship between strategic measures of assessment and collection and tax revenue yield.

6. To examine the challenges that hinders effective assessment, collection and remittances of tax in Taraba.

RESEARCH QUESTIONS

1. How are the nature of tax and the level of compliance by those who are liable to pay tax?
2.  What are the strategies for tax assessment and collection in Nigeria?
3. What are the effects of revenue collection strategies on Taraba state board of Internal Revenue?
4. To what extent does this strategic measures affects tax revenue yield in Taraba state?

5. What is the relationship between strategic measures of assessment and collection and tax revenue yield?

6. What are the challenges that hinder effective assessment, collection and remittances of tax in Taraba?

RESEARCH HYPOTHESES

1. There is no significant effect of revenue collection strategies on Taraba state board of Internal Revenue.
2. There is no significant relationship between strategic measures of assessment and collection and tax revenue yield.

SIGNIFICANCE OF THE STUDY

Practically the study will assist the Taraba State Board of Internal Revenue in positively administering their responsibilities in raising revenue through taxation and conducting other tax duties. It will also help policy makers in adopting appropriate policy on tax and sanctions against violation or evasion of taxes by individuals, groups or companies. It will also help the officers of the Board of Internal Revenue to adopt new strategies in ensuring compliance of individuals, groups and companies in fulfilling their responsibilities as citizens of the country. Theoretically, it will help in the education of the management, administrators and tax officers on the need for continuous tax assessment towards increasing the revenue base of the government. It will also assist in the education of the general public and tax payers on the need to carry out their responsibility as citizens of the country. The study will be of great importance in providing information to readers, especially those involved in financial administration to gain knowledge on the administration of taxation. It will increase the data base for scholars and practitioners interested in the field of revenue generation through taxation. Finally, it will serve as a reference point to scholars, and students who want to conduct research in future in the field.

SCOPE OF THE STUDY 

The study is based on an appraisal of the strategies for maximum tax assessment and collection in Taraba State.

LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

DEFINITION OF TERMS

Tax: This is the money which government has legislated that adults should pay for the development of the country.

Tax Assessment: Tax assessment, or assessment, is the job of determining the value, and sometimes determining the use, of property, usually to calculate a property tax. This is usually done by an office called the assessor or tax assessor.

Tax compliance:  Refers to fulfilling all tax obligations as specified by the law freely and completely. Tax compliance means submitting a tax return within the stipulated period, correctly stating income and deductions, paying assessed taxes by due date and paying levied taxes.