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PERSONAL INCOME TAXS ADMINISTRATION IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1     Background to the Study

For development and growth of any society, the provision of basic infrastructure is quite necessary. This perhaps explains why the government shows great concern for a medium through which fund can be made available to achieve their set goals for the society. Government needs money (fund) to be able to execute its social obligations to the public. These social obligations include, but are not limited to the provision of infrastructure and social services. According to Murkur (2001), meeting the needs of the society call for huge funds which an individual or society could not contribute alone. It becomes the responsibility of government to source for the funds to enable her provide these basic amenities to the citizenry who are the beneficiaries. One of the medium through which fund is derived is through taxation. Therefore, the citizens are expected to discharge their civic responsibility by paying their taxes as these contribute to the development and administration of the society at large. (Murkur, 2001:7)

Nigeria is richly blessed with oil and gas among other mineral resources, but the over dependence on oil revenue for the economic development of the country has left much to be deserved. According to Ariyo (1997) Nigeria's over dependence on oil revenue to the total neglect of other revenue source was encouraged by the oil boom of 1973/74. This is unsustainable due to the fluctuation in the oil market which have in most cases plunged the nation into deficit budgets. It was the view of Popoola (2009) that Nigerian tax administration and practice be structured towards economic goal achievement since government budget for the year centers on the oil sector. While decrying the low productivity of the Nigerian tax system, “deficiencies in the tax administration and collection system, complex legislations and apathy on the part of those outside the tax net” were identified as some of the root causes says Ijewere 1991 and Ndekwu 1991 as cited in (Ariyo 1997).

Sanni (2007) advocate the use of tax as an instrument of social engineering, to stimulate general and/or sectoral economic growth. In that regard, taxation could have a positive or negative effect on both the individual and on government. To the individual, low income tax rate constitutes an incentive to work or save, while high income tax rate represents a disincentive to work or save. To the government, high tax rates provides the most reliable, important and dominant source of government revenue, for promoting the economic development of the nation.

The tax rate is often a major consideration in the choice of organizational form of business (Okafor, 2008), and may also be associated with varying levels of foreign direct investment (Desai et. al., 2004).

Tax is defined as money that has to be paid to the government by the people according to their   profits on goods and services provided. Chris and Elizabeth (2001) also defined taxes as a forced proportional contribution from persons and property levied by the state by virtue of its sovereignty for the support of government and for all public needs.

Other definitions can also be gleaned from judicial precedents. In Matthew V. Chikory Marketing Board of Victoria Australia, C. J. Latham defined tax as a compulsory exaction of money by a public authority for public purposes. Tax in this regard is seen as a means of raising money from the public by the government by means of contributions from individual persons. In the case of USA V. Butler, Justice Robert defined tax in

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