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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Tax is a compulsory monetary contribution to the states’ revenue, assessed and imposed by a government on the activities, income, expenditure, occupation, privilege, property of individuals and organizations. The first need of a modern government is revenue which is a pivot and potent tool in encouraging its expenditure. When you pay tax, your contributions are invested in the community and benefit everyone. Akwa Ibom state government, the federal government has many ways of raising its revenue for the purpose of meeting its expenditure. Akwa Ibom state pay tax so that the government can provide important services to the community, including access to hospitals, welfare, allowances, schools, roads, national and parks. Ola (1985:8) enumerates various forms of taxes. These include personal income tax, capital gain tax, company income tax and petroleum profit tax. But one of the determinants factors in achieving the optimum revenue realization is the taxable capacity of a country which is embedded in the administrative competence of the tax collecting organs of the government.
The prospect of tax administration ranges from increase in tax yield, new revenue opening, and buoyancy in government, which will enhance government ability to meet up with expenditure. However, this much needed prospects are not feasible because tax administration is plagued with many problems. As a result, tax administration in Akwa Ibom State in recent time has been criticized in many quarters. Okoruen (1997:15) also sees tax administrative machinery is stated as inadequate tax payers do not keep proper books of account of their business transaction.
1.2 STATEMENT OF THE PROBLEM
The statement of the problem is that, the Akwa Ibom State Internal Revenue Service should identify the critical tax administration challenges in Akwa Ibom state and measures required to meet challenges will not only guarantee improved revenue base for the state but also position the state properly to take full advantages offered by the new millennium. They should examine the tax administration and compliance in Akwa Ibom State by analyzing the tax gap in the system over the years thereby revealing the critical challenges that needed to be tackled.
1.3 OBJECTIVES OF THE STUDY
The study is conducted to achieve the following specific objectives:1. To determine the difference criteria for assessment used by tax administration in Akwa Ibom state.2. To identify the challenges that is facing the tax administration in Akwa Ibom State3. To examine the tax gap in Nigeria tax system4. To identify factors that influence tax administration in Akwa Ibom state5. To recommend ways through which these problems can be solve or minimized.
1.4 SIGNIFICANCE OF THE STUDY
1.   It would be serve as a reference material for future research.
2.   It would identify the critical challenges such as corruption and fraud that are confronting the tax system so that appropriate measure could be taken to tackle the menace.
3.   It would serve as a powerful fiscal weapon to plan and direct the economy by shaping the economy growth and development of a state.
4.   It would serve as national debt and to provide retirement benefits.
1.5 SCOPE/LIMITATIONS OF THE STUDY
The study is limited to Akwa Ibom state Internal Revenue Service, Idongesit Nkanga secretarial Abak Road Uyo, Akwa Ibom state, focuses on evaluating Tax Administration, problems and prospects. The ranging from increase in tax yield new revenue openings, buoyancy in government while will enhance government ability to meet up with its expenditure. The inability of the manager of Akwa Ibom state Internal Revenue Service to diverge certain information which they consider sensitive. The publication of which might be detriment to their operation proves to be a limitation on the study. Distance and its attendants cost of travel in order to obtain information with which to write this study has also a major limitation.
 1.6 RESEARCH QUESTION/HYPOTHESES
The study intends to seek answers to the following research questions:
1.    Does tax administration have any significance impact on the economy
 2.   Is there any tax gap in Akwa Ibom state, tax system
Ho: Tax administration in Akwa Ibom State has not impacted on the economy
Hi: Tax administration in Akwa Ibom state has impacted on the economy
Ho: There is no tax gap in Akwa Ibom State, tax system
Hi: There is tax gap in Akwa Ibom State tax system
1.7 DEFINITION OF TERMS
TAX: is a percentage of persons’ income or of the price of goods takes by the government to help pay the benefit received. (R.A.I Anyanwuocha.1959)
.DIRECT TAX: Tax levied directly on the income of individual and business entities. They can be proportion regressive or progressive. (Okoruen U. U.1993 process of tax administration in Nigeria).
INDIRECT TAX: these are taxes charge with price of goods bought at a particular time. These are tax that are levied in goods and services (Okoruen U.U.1992)
TAX POLICY: Is a particular course adopted in this caseline of action adopted by the government in respect of taxation. (James S and Nobles.C.1978)
ASSESSMENT YEAR: Means the year in which the profit of a business are assessed to tax (Okoruen U.U.1992).
TOTAL INCOME TAX: The aggregate assessable income for the relevant year after additional and allowance deduction have been made (Ola C.S.1995) Nigeria income tax law and practice Macmilliam publishers ltd London.
PROPORTIONAL TAX: all tax payers pay the same percentage of their income and relative difference between the difference income remain approximately the same (Umoh G.A. 2005).
 1.8 ORGANIZATION OF THE STUDY
The study is organized into five chapters, chapter one is the introduction while chapter two deals with the review of Related Literature. Chapter three discusses the Research Methodology. In chapter four the data collected in presented, analyzed as interpreted while chapter five is the summary, conclusion and recommendation.

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