PROBLEMS OF TAX COLLECTION IN NIGERIA: A CASE STUDY OF UYO LOCAL GOVERNMENT AREA
federal structure in Nigeria, a case study of Uyo LGA constrains local
governments’ ability to mobilize and use revenue to meet their obligation in a
sustainable way. Local government system as the third-tier of government
deserves adequate finances to enable it cope with numerous developmental
activities within its jurisdiction. This paper is divided into five segments.
Part one is the introduction of the theme, while part two deals with
theoretical issues. Part three concentrates on the local government finances
and revenue utilization. In order to finance some viable projects, local
government must be given adequate tax power and also share major tax bases with
other tiers of governments. Part four highlights the problems and prospects of
local governments, Revenue, Mobilization, Utilization and Corruption.
of the Study
One of the recurrent problems of the three-tier system
in Nigeria, a case study of Uyo LGA is dwindling revenue generation as
characterized by annual budget deficits and insufficient funds for meaningful
growth and viable projects development. Local governments are the nearest
government to the people at the grassroots in Nigeria, a case study of Uyo LGA;
they are strategically located to play a pivotal role in national development.
Since they are responsible for the governance of about 70 percent of the
population of Nigeria, a case study of Uyo LGA, they are in vantage position to
articulate the needs of the majority of Nigeria, a case study of Uyo LGAns and
formulate strategies for their realization (Ekpo and Ndebbio, 2001).
Local administration in Nigeria, a case study of Uyo
LGA can be traced to the colonial period. Available record shows that the first
local administration ordinance was the Native Administration Ordinance No. 4 of
1916 which was designed to evolve from Nigeria, a case study of Uyo LGA’ s old
institutions the best suited form of rule based on the people’ s habits of
thought, prestige and custom (Bello-Imam 1990). These local administrations
were used in the north eastern and western parts of the country while the
indirect rule was introduced in the rest of the north.
For example, in
1926, a centralized budget system was introduced. Following the creation of
Northern, Western and Eastern regions in 1946, a decentralized public revenue
structure began to emerge. The first revenue commission was set up in 1946.
During the colonial period, four revenue commissioners were created. The
principles, criteria and allocation formulas recommended by the commissions are
well documented (Ekpo, 2004).
constitution of 1948 initiated some remarkable changes; the regions introduced
some reforms in their local administrations in the 1950s which aimed at
enhancing performance. Though, the reforms gave local administrations to collect
rates and levy pools and income taxes to finance their activities, the regions
had overall control of the taxes. Local administration lacked
self-determination, hence their resource were inadequate. Though, the local
authorities were partially successfully in the North but unsuccessfully in the
Eastern and Western regions.
Adedeji (1990) blames the ineffectiveness of local
administration on the following reasons:
(a) Lack of mission or lack of comprehensive functional
(b) Lack of proper structure (i.e. the role of local
governments in the development process was not known).
(c) Low quality of staff; and
(d) Low funding.
According to him, these problems led the local
governments into a vicious circle of poverty because inadequate functions and
powers lead to inadequate funding which result in the employment of low skilled
and poorly paid staff.
Local government administration in the country
experienced fundamental changes in 1976. The 1976 local government reform
created for the first time, a single-tier structure of local government in
place of the different structure in the various states. Our interest in the
1976 reform hinges on the restructuring of the financial system. The reforms
instituted statutory allocation of revenue from the federation account with the
intention of giving local government fixed proportions of both the federation
account and each state’s revenue. This allocation to local government became
mandatory and was entrenched in the recommendations of the Aboyade Revenue
Commissions of 1977.
constitution empowered the national Assembly to determine what proportion of
the federation account and revenue form a state to allocate the local
government. In 1931, the National
Assembly fixed these proportions at 10percent of the federation account and 10
percent of the total revenue of a state. In 1985, the state’s proportion was
reduced to 10 percent of the internally-generated revenue; local governments’
allocation from the federation account was later adjusted to 20 percent. It was
further increased to 25 per cent with the arguments that local governments are
expected to take on larger developmental responsibilities. The revenue
allocation has continued to vary in proportion over time.
At present, local
government receive 20 per cent of the federation account. In addition, proceed
from the value added tax (VAT) are also allocated to them. Presently, VAT’s
allocation is 35 per cent based on equity of states (50 per cent), population
(35 percent) and derivation (2 percent). The 1976 local government reforms
states the internal revenue sources of local governments to include:
(a) Rates, which include property rates, education rates
and street lighting.
(b) Taxes such as community, flat rates and poll tax.
(c) Fines ad fees, which include court fines and fees,
motor park fees, forest fees, public advertisement fees, market fees, regulated premises fees,
registration of births and deaths and licensing fees; and
(d) Miscellaneous sources such as rents on council estates,
royalties, interest on investment and proceeds from commercial activities.
clear demarcation, states and local government still clash over sources of
internal revenue. There has been a
significant increase in the number of Local Governments over the years. There
were 96 divisions in 1967. By 1976, they had increased to 300. The number was
increased to 774 after five yeas (Adedokun A.A. 2004) we will like to emphasize
here that the rise in the number of Local Governments as implications on the
assignment of public revenue responsibilities among the tiers of government.
And more importantly, have effect on local government development.
Development is highly associated with fund, much revenue is needed to
plan, execute and maintain infrastructures and facilities at the local
government level. The needed revenue collected for such developmental projects.
Like construction of accessible roads, building of public schools, health care
centers, construction of bridges among others are soles generated from taxes,
royalties, haulages, fines and grants from states, national and international
Thus, the Local government cannot embark, execute and possibly carryout
the maintenance of these projects and other responsibilities without adequate
This is the basic reason why development is skeletal at some Local
Government councils in Nigeria, a case study of Uyo LGA. The issue of poor tax
collection is not exceptional to local governments in both Ikpoba Okha and
Oredo Local Government of Edo State. This has been one of the problems
encountered by most local council’s administration in Nigeria, a case study of
This however pronouncedly affected development negatively in local
government councils. In this research project, the issue to address is how far
this poor tax collection can affect revenue generation and more importantly
developmental implications for Ikpoba Okha and
Oredo Local Government Area of Edo State.
OF THE PROBLEM
The Local Government Council takes direct care of the
grassroots people that is the people in the rural areas. These groups of people
sometimes lack essential facilities and condition of modern civilization. They
lack pipe bore water to drink, do not have electricity, accessible roads, poor
educational infrastructure and facilities to mention but a few.
This is one of the major reasons of rural – urban
migration of movement. This has made our cities to be congested and increase in
many criminal activities. Based on the above and foregoing assertions, it is
obvious that local government has to adopt an effective taxation system which
will enhance revenue generation. This no doubt is no doubt over the years has
become a serious problem. the local government administration has not live up
to the expectation in terms of grass root
development. This might be as a result of poor revenue generation or tax
collection. If Nigeria, a case study of Uyo LGA is to achieve her desired goal
of vision 2020 and possibly meet the millennium development goals (MDGS)
target, the issue of tax collection must be addressed squarely. Hence, the
researcher is bothered to find out the importance of taxation as a source of
government revenue in Nigeria, a case study of Uyo LGA..
OF THE STUDY
The broad objective of the research is to examine the problems of taxation as a source of government revenue in Nigeria,
a case study of Uyo LGA. The other
objective of this study includes:
To determine the
level of modern social amenities available in Etsako West and Etsako East Local
Government of Edo State.
To find out the
level of poverty associated with the rural people as a result of poor
To find out the
degree of rural-urban migration.
To make useful
suggestions to solve the problem of poor tax collection as development depends
on revenue generated.
taxation has any effect on local government revenue
ii. Does effective taxation system enhance local
can revenue generation in Ikpoba Okha
and Oredo Local Government of Edo State be improved?
taxation is a viable source of local government revenue
H1: taxation is a viable source of local government
There is no significant relationship between taxation and development in local
governments in Nigeria, a case study of Uyo LGA
H1: There is a significant relationship between
taxation and development in local governments in Nigeria, a case study of Uyo
Poor taxation policies have negative effect on local government revenue
H1: Poor taxation policies have positive effect on
local government revenue generation.
OF THE STUDY
The significance of any human endeavour is measured by
its relevance to solving human problems. The findings of this study would help
Local Governments in Nigeria, a case study of Uyo LGA to identify the problems
associated with revenue generation and its consequences on development.
However, this study
will be of great significance to managers of organizations, entrepreneurs, and
investors especially those whose organizations’ tax are within the purview of
the local government administration; as it reveals the irregular tax policies
and practices that can jeopardize the effectiveness and sustenance of their
businesses. It as well enable local councils capitalizes on their gains while
focusing on areas of comparative advantage.
beneficiaries of this study are auditors and accountants, as well as financial
analysts, government personnel and the revenue taxation board will benefit from
The study is focused on the importance of taxation on
government revenue. The study focus on the impact of revenue of Ikpoba Okha and
Oredo local government, and how it affects development of the local government
areas. It will also involve the analysis of problems associated wit revenue
generation and its impact on the development of the local government councils.
OF THE STUDY
The study is confined to local government in Edo
State, particularly Ikpoba Okha and Oredo local government, the study only
identify with the taxation as it affects
revenue of the local government areas stated above. It will also involve the
analysis of problems associated wit revenue generation and its impact on the
development of the local government councils.