TABLE OF CONTENT
Background of study
The need for effective personal income tax administration in Nigeria
Purpose of study
Significance of study
Scope and limitation of the study
Personal income tax and the tax payer
Merits of personal income tax
Legal history of personal income tax in Nigerian
Administration of personal income tax in Abia state
Composition of board of internal revenue
The joint tax board
Types of person chargeable to tax in Abia state
Income exempted from tax in Abia state
Income tax rate
Basis of tax assessment
Problem militating against the administration
of personal income tax
Recommendation / conclusion
BACKGROUND OF STUDY
Tax which is a major source of public revenue
has been defined as compulsory levy imposed on individual and firms by the
government. Payment of tax unlike payment of price for acquisition of something
of material value, implies the settlement of the tax payers civic liability to
Tax is one the most economic measure used by
the governments in both developing and developed countries to encourage or
discourage a particular type of activity.
The revenue accruing from income tax is the
government for its projects and expenditures tailored to its development plan
and budget implementation. Personal income tax is directly imposed on income of
individuals. It is usually progressive.
Furthermore, taxes act as an instrument of
social change and reform when used as creative force in economic planning and
development, can change the economic system. Taxes are also used to reduce the
inequality in income distribution.
The personal income tax in Nigeria is
regulated by income tax management. But the administration is vested in Joint
Tax Board. The Board exercises power and duties confirmed on in by Income Tax
Management Act (ITMA) and other powers agreed upon by the government of each
state. The functions of the Board are well explained in s.27 of the Income Tax
Management Act 1961.
In Abia State, the state board of internal
revenue is the administrative authority responsible for the administration of
the individual tax laws in the state. The duties of the board in relation to
income tax are to assess, collect, and account for the tax collected.
The assessment authority is appointed for
each administrative division in the state to do the job of assessment, while
tax collectors, collect, and account for tax collected. The collection are
divided into two; one is appointed to
collect income tax from their employees and the other category of tax
collectors is allowed 5% commission on tax collected. Tax collected are
transferred to the Board of Internal Revenue.
The Need For Effective Personal Tax Administration
A progressive personal income tax provides an
income elastics source of revenue-that is revenue grows more rapidly than GNP.
Secondly, as economics development occurs and
per capita income rises at a larger proportion of the country’s income earners
may enter wage employment where they can be taxed under Pay-As-You-Earn (PAYE)
There is need for improvement in the state
for record keeping so that direct assessment is easier and the administration
capacity of the tax authority may increase so that the use of personal income
tax becomes more feasible.
Furthermore, experience has shown that as
development proceeds, certain sources of revenue tend to diminished or do not
grow rapidly enough. It may be necessary to replace these other sources o
revenue with personal income tax.
Another factor that demand increased
attention is the growing realization that the tax potential status of the
agricultural sector in Nigeria has been tapped. A greater proportion of Nigeria
earn their income in agricultural engagement and many people are going into
large scale farming. There is need for effective personal income tax
administration to realize a lot of revenue from this source.
PURPOSE OF THE STUDY
The purpose of conducting this study is to
review the administration of personal income tax in Abia State with intent of
finding solution to the problem associated with the administration and
also to examine the adequacy of relief
and allowance granted to tax payers in the state and loopholes in the tax
SIGNIFICANCE OF THE STUDY
The study recommendation, the government
would be able to
establish better administrative machinery in
Furthermore, this study will help the
government in amending the tax laws where there is any ambiguity or loopholes.
And finally, this study will also help the
tax payers to know their rights and obligations as regard to payment of tax and
administrative machinery on the assessment of tax is based. Thus enabling the
tax payer to ascertain the amount to be paid, when, where, how and to whom it
should be paid.
SCOPE AND LIMITATIONS OF THE STUDY