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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Government be it in federal, state or local has ways of raising revenue for the purpose of meeting it’s financial obligations to the people it governs. One of the direct ways is personal income tax (PIT). Personal income tax is an income tax levied on the wealth or income of Individuals, Corporate and Public Companies, Trustees and Partnership. This tax imposed must be backed by legislation, as nobody would agree to pay tax without being convinced that such tax is authorized by law. The law that empowers the imposition and collection of tax on Individuals, Companies and Trustees is the INCOME TAX MANAGEMENT ACT (ITMA)
1961. This act has been amended several times and the most recent amendment is act 104 of PIT 1993, which is now applicable throughout Nigeria. The development of taxation in Nigeria can be traced under three distinct period before the advent of British administration (Pre colonial era), colonial era, and postcolonial era. Ever since the nation Nigeria came into existence, the assessment and collection of personal income tax (PIT) has been an uphill task and there has been widespread avoidance of this many states. Lagos state accommodates a high population whose personal income tax (PIT) are collected from source through PAYE and therefore there is an observed difference in disposable revenue of Lagos state and other states in Nigeria. According to the Act, the following categories of people are assessable to personal income tax (PIT)
(1) Individual
(2) Trustee
(3) Person
(4) Executor
(5) Settlement
(6) Community
(i) Individual : - This includes a corporate sole, and body of individuals other than a company, partnership, trustee or executor. (ii) Person : - This include an executor, trustee, company could be used jointly, singly or together and where this occur, the intention is to use the word together.
(iii) Trustee : - Is any person who handles the administration of a trust is a conveyance of real and or personal property(ies) to persons to be applied for the benefit of named person called beneficiary.
(iv) Executor : - This includes any person on administering the estate of a deceased person. This person is held responsible for payment of taxes due from a deceased taxpayer and his estate where applicable.
(v) Settlement : - This is an agreement made in writing in which money is made available to another person for his/her use without any interference whatsoever.
(vi) Community : - This represent tax charged on either the estimated total income of all members or the amount of any communal income which is impracticable to apportion with certainty among its members.
In accordance with section 3 of the PITA of 1993, income chargeable or assessable to tax for a relevant year of assessment are income accrued in, brought into, derived from or received in Nigeria irrespective of any salary, wages, fee, allowance, divided interest or discount, pension charged or annuity and 1. Gains or profit from trade, business, profession or vocation 2. Gains or profit including any premium arising from a right granted to any person for the use or occupation of any property. 3. Gains or profit from employment including gratuities, compensation, bonuses, premiums, benefit or other than
 (a) Any sum reimbursement to the employee on expenses incurred by him in the performance of his duties and from which the employee is not expected to make any gain or profit. (b) Medical or dental expenses incurred by the employee (c) Compensation for loss of employment (d) Cost of any postage to or from Nigeria incurred by the employee.
1.2 STATEMENT OF THE PROBLEM
Personal Income Tax is a global and wide topic that undisputedly requires investigation and provision of possible solution to the problems associated with effective administration of the tax some of these are:
(1) Development of unskilled tax management personal in administration.
(2) Ineffective tax system which makes government unable to implement its tax policies.
(3) Unreliable tax monitoring system of tax payers and evaders
(4) Acute shortage of man power and working equipment
(5) Improper and insufficient enlightenment of tax payers
(6) Misunderstanding of tax legislation and purpose
(7) Non availability of complete and accurate data to the tax administrations
(8) Incomplete and inaccurate returns made by tax payers
(9) Misinterpretation of vital aspects of the decree by tax authorities in the effect that expected benefit to the tax payers or giants to government are not realized
(10) Multiplicity of tax system
(11) Penalties attached to non-companies with PIT regulation are too soft and
(12) Recovery procedure is cumbersome and counter productive
1.3 OBJECTIVES OF THE STUDY
The general objective of this study is to appraise the problems, prospect, and contribution to the economic development of Lagos State. The specific objectives are to:
(i) Analyse the PIT assessment and collection (PIT AC) machinery for the state based on perceived and verified economic predominance in each area of the state.
(ii) Examine the machinery designed to enhance revenue planning and control in the system.
(iii) Identify a system, which will ensure equity and fair play so that the citizens will respond to it positively.
(iv) Recommend how tax legislation could be administered efficiently.
1.4 SIGNIFICANCE OF THE STUDY
This research work will be relevant because of the need to alleviate the pressure on the resources of the Lagos State which account for the shortage in the provision of services and the present stagnation in the overall development of the assessment and collection which will lay a solid foundation for the generation of income for the government.
1.5  RESEARCH QUESTIONS
The important parts that will be examined in the research question are:
(i) What is Personal Income Tax?
(ii) Are there any relationship between Personal Income Tax and the Total Revenue of Lagos State?
(iii) What are the composition of the Total Revenue of Lagos State
(iv) What proportion of the Total Revenue of Lagos State is the Personal Income Tax?
(v) What is Economic development and how is it measured? (vi) Is there any direct relationship between Personal Income Tax and Total Revenue.
(vii) Is PIT a reliable source of revenue to the government?
(viii) Is PIT an equitable system?
(ix) Can PIT be considered as a key factor for promoting government overall economic and social objective?
1.6  RESEARCH HYPOTESIS
The hypothesis to be tested is as follows
(i) Null Hypothesis
(Ho) : PIT is not a major source of the total revenue of Lagos State.
(ii) Null Hypothesis : There is no significant relationship between Personal Income Tax and Total Revenue of Lagos State. Hence it does not contribute to the economic development
1.7   SCOPE OF THE STUDY
The personal income tax (PIT) is applicable to a very range of people in Lagos State and hence cannot be researched into within the conferment of a single sector of Lagos State. The scope of this study is based on the Personal Income Tax and Total Revenue of Lagos State. Thus, the scope of this study covers basically two sectors of employees in Lagos State.
1.7 LIMITATIONS OF THE STUDY
The major limitations however envisaged in the course of research work is the inavailability of absolute correct appropriate and needed information to be provided by the respondent, time to cover a large and cost to run them. An appreciable amount of co-operation on their part will be paramount importance to the success of this project. The major limitations are:
(i) Inadequate relevant literature on the topic i.e. past research works carried out on the topic.
(ii) Conferred access to required and relevant information.
(iii) Inadequate time to cover a large area
(iv) High cost of running a large area.
1.8 DEFINITION OF TERMS
PIT - Personal Income
Tax PIT - Personal Income
Tax Act YOA - Year Of Assessment
PAYE - Pay As You Earn
ITMA - Income Tax Management
BIR - Board of Internal Revenue
IRS - Internal Revenue Services. 

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