The purpose of this research work is to describe the practical
approach to an appraisal of pay-as-you-earn system of taxation with
referee to Nssuka local government area. To guide this study, two
hypotheses were formulated. A review of literature was down to ensure
solid conclusion for the study. A structural questionnaire was developed
and administered by the analysis adopted in this research work was
chi-square, this method by researcher to ensure that result obtained
were real and not by chance.
Based on the above statement some of the major findings include
presentation of data and their analysis. The chapter five is discussing a
bout the findings made by the researcher and recommendation as well as
Conclusively, the researcher will add to the existing
literature on an appraisal of pay-as-you0-earn system of taxation. Scope
of study and limitation talk about the areas the researcher is going to
touch when discussing on the appraisal of pay-as-you-earn system of
taxation system are place or area that have been unable to by researched
upon to time.
The global economic recession, which started in 1980’s as a result of
decline in the economic growth of industries nation, high rate of
inflation, dramatics rise in price of crude oil, increase cost of
important a massive building-up of liquidity in the international
capital market and unusual fluctuation in commodity prices was not fully
felt in Nigeria until 1982, when the developed countries applied a
series of restructure monetary and fiscal policies to curtail the a
Seventeen years ago, precisely in 1983, the worldbank report that the
continuing recession in the industrial world several constrained
developed countries growth in 1982. Weakness in the price of oil created
difficulties for oil exporting developing countries’’.
Reporting specifically on Nigeria, the bank stated that`` foreign
exchange resource declined in 1982 from a level equivalent to three
month worth. Investment, equal to about a third of gross domestics
product (GDP) in 1980 –1981, has been radically reduced as both foreign
exchange and government resource contract (85% of government revenue,
both federal and states are direct generated from oil export).
An attempt to wriggle the country out of its financial predicament
led to the initially of series of belt-tighten measure since 1982 to
These measure include:
Ban on import of a large number of goods, specially taxes on luxury
goods, enforcement of trick exchanges control reputation liberalized
during the earlier boom, wages and ban on employment in the public
sector, increased external borrowing in anticipation of oil income and
of late the introduction of value added tax (v.a.t). The impact of the
dwindling revenues to the federal government and this ever decreasing
portion of statutory allocation to states, has aroused tremendous
interest in other source of revenue. Therefore, the hitherto relaxed tax
laws are vigorously being enforced while levies of various descriptions
are also being in various state of the federation.
Nsukka local government area of Enugu state is not exempted from this
nation economic recession. One of the major sources of revenue to the
local government, second to statutory allocation from the state and
federal government, is the personal income tax (PIT) impose on all
taxable persons in the local government. The personal income tax is
allocated either through the Pay-As-You-Earn (PAYE) system in which
employers of labour deduct tax due from the income of their employees
and remit it to the division
In this study, my interest lies in appraising the effective and
efficiency of Pay-As-You-Earn (PAYE) as a system of tax collection. The
examination of the weakness interest in the system will be carried out
and based on empincal observation, make suitable recommendation as to
how loopholes in the system could be plugged especially at this time of
wide spread awareness of the great potentials of internally generally
- STATEMENT OF PROBLEM
The expectation of the public from governments (local, state and
federal) in the developing countries are such that the later are saddle
with responsibilities for the provision of various services. The 1979
nigeria constitution sec.16 (a) state. Quite clearly that ``the state
shall control the national economy in such manner as to secure the
maximum welfare, freedom and happiness of every citizen as the basic of
social justice and equality of status and opportunities’’.
It is in an attempt to fulfill these expectation and sometimes
constitutionals requirement that government rely on, among either
source, the imposition of various taxes, weather direct or indirect on
the defined taxable persons in their territory. Such tax and poll tax
These taxes are collected at source at source include
taxes on dividend interest and rates. Also induction is tax on personal
income tax through the Pay-As-You-Earn (PAYE) system has been effective
in achieving its objectives of minimizing collection costs and reduction
tax evasion while increasing revenue to the local government. We will
all look into the problem of the pay-As-You-Earn system and suggest
measures to solve such problems that might be identified.
- PURPOSE OF THE STUDY
The purpose of the study can be broken down vas follows:
- to ascertain the impact of Pay-As-You-Earn system effectiveness on personal income tax revenue over a period of ten years.
- To educate the truthfulness of the data provided by tax – payers
in their tax return and ascertain the percentage of those who do not
provide the information there in.
- To find out weather there is any relationship between the
truthfulness of information provided by tax payers in their tax returns
and their age.
- To identify the problem (if any) encountered by the internal
revenue division and the employers of labour in the application of the
- To find out how the employers perceive the PAYE system and the likely improvement that they would recommend.
On the basis of my findings, suggestion and
recommendation will be made which I hope would be benefit to the local
government it is also hope that future researcher in the area of the
public finance would find the work a valuable source of literature.
The significance of adequate revenue for a developing economy such as
that of Nigeria cannot be over emphasized. This study is being
conducted with a view to exposing the inherent weakness on the
Pay-As-You-Earn system of taxation.
The suggestion and recommendation made on how loopholes in the system
could be plugged. Especially at this time of widespread weakness of the
great potential of internally generated revenue would be very
beneficial to the governments.
The local government will find it very useful in drawing up revenue
and other methods of taxation which will in turn check the ever dividing
revenue to the government.
- STATEMENT OF THE HYPOTHENSIS
A hypothesis is a rational assumption, which subject to fast could be true or false
The following hypothesis were made as a guide for this research ho
(i) The effectiveness of the Pay-As-You-Earn system has not affected
personal income tax revenue.
Hi (ii) the effectiveness of the Pay-As-You-Earn system has affected personal income tax revenue
1.5 SCOPE OF STUDY
The study shall be confined to an examination of the Pay-As-You-Earn
system as in weather it is an efficient and effective method of personal
income tax (PIT) collection in NSUKKA local government. It thus
excludes any other system of tax revenue through Pay-As-You-Earn system
with other tax revenue shall be evaluated only for the purpose of
- LIMITATION OF THE STUDY
The study was limited by the following constraints:
- there was shortage of relevant texts journal and documentaries on the subject of Pay-As-You-Earn system.
- Some of the answer givens an opinions expressed in response to
question were subjectively based due to different personal experience.
- A study of this nature require longer period of time than was actually available to me.
- There is this general problem that many Nigeria do not like to disclose their earnings.
- Finance available for this study was inadequate considering its scope and my financial standing as a student.
- DEFINITION OF TERMS
- BASIS PERIOD: the period in which the income of a taxpayer is assessed for the purposes.
- ASSESSABLE INCOME: income of a taxpayer from all sources in a
given basis period less all allowable deductions and nontaxable income.
- PRECEEDING YEAR BASIS: A basis period by which income of a tax payer in the year proceeding the year of assessment is assessed.
- ACTUAL YEAR BASIS: a basis period by which income of a tax payer
in the proceeding the year of assessment is assead in that year.
- YEAR OF ASSESSMENT: the government financial year in which the income of a taxpayer is assessed for tax purpose.
- CHARGEABLE INCOME: assessable income less all reliefs.
- RELIEFS: deductible allowance granted to a taxpayer by the law in a relevant year of assessment.
- TAX EVASION: an illegal act of paying less tax than ought to pay.
- TAX AVOIDANCE: a legal act by a tax payers to pay less than he ought to pay.
- TAAX SRETURNS: relevant data supplies by a tax payer for the purpose of assessing income.
- TAX DEDUCTION CARD : a document used in the Pay-As-You-Earn scheme in which total allowed relief’s are stated.
- TAX EMERGENCY CARD: the card temporarily used before the tax
deduction card are made available to the employer by internal revenue