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Title page-       -           -           -           -           -           -           -           -           -           -           i

Declaration-    -           -           -           -           -           -           -           -           -           -           ii

Certification -  -           -           -           -           -           -           -           -           -           -           iii

Approval -       -           -           -           -           -           -           -           -           -           -           iv

Dedication -    -           -           -           -           -           -           -           -           -           -           v

Acknowledgments-     -           -           -           -           -           -           -           -           -           vi

Table of contents -      -           -           -           -           -           -           -           -           -           vii

CHAPTER ONE: Introduction

1.1       Background of the Study-      -           -           -           -           -           -           -           1

1.2       Statement of the Problem -     -           -           -           -           -           -           -           5

1.3       Objective of the Study-          -           -           -           -           -           -           -           6

1.4       Research Questions          -     -           -           -           -           -           -           -           6

1.5       Statement of Hypotheses -     -           -           -           -           -           -           -           6

1.6       Significance of the Study-      -           -           -           -           -           -           -           7

1.7       Scope of the Study-    -           -           -           -           -           -           -           -           7

1.8       Limitation of the Study-         -           -           -           -           -           -           -           7

1.9       Definition of Terms    -           -           -           -           -           -           -           -           8

CHAPTER TWO: Literature Review

2.1       Introduction-   -           -           -           -           -           -           -           -           -           10

2.2       Concept and Nature of Taxation        -           -           -           -           -           -           10

2.3       History of Local Government Administration in Nigeria-     -           -           -           20

2.4       Tax administration in Nigeria -           -           -           -           -           -           -           23

2.5       Challenges and solutions to Tax administration in Nigeria -  -           -           -           26

2.2       Prospects of Tax Collection-   -           -           -           -           -           -           -           33

2.6       Empirical Literature Review - -           -           -           -           -           -           34

2.7       Theories of taxation -  -           -           -           -           -           -           -           -           37

CHAPTER THREE: Research Methodology

3.1       Introduction-   -           -           -           -           -           -           -           -           -           39

3.2        Research Design -       -           -           -           -           -           -           -           -           39

 3.4       Area Of Study -         -           -           -           -           -           -           -           -           39

3.5        Population Size-         -           -           -           -           -           -           -           -           39

3.5       Sample Size and Sampling Techniques-         -           -           -           -           -           39

3.6       Sources of Data Collection -   -           -           -           -           -           -           -           40

3.7       Method of Data Collection -  -           -           -           -           -           -           -           40

3.8       Validation of Instrument -      -           -           -           -           -           -           -           40

3.9       Test For Reliability of Instrument-     -           -           -           -           -           -           40

3.10     Method of Data Analysis -     -           -           -           -           -           -           -           41

CHAPTER FOUR: Data Presentation, Analysis and Interpretation

4.1       Introduction-   -           -           -           -           -           -           -           -           -           43

4.1       Data Analysis -           -           -           -           -           -           -           -           -           43

4.2       Test of Hypotheses-    -           -           -           -           -           -           -           -           54

4.3       Interpretation Of Data-           -           -           -           -           -           -           -           56                     

4.4       Summary of Findings-            -           -           -           -           -           -           -           56

CHAPTER FIVE: Summary And Conclusion And Recommendations

5.1       Summary  -      -           -           -           -           -           -           -           -           -           58

5.2       Conclusion-     -           -           -           -           -           -           -           -           -           58

5.3       Recommendations-     -           -           -           -           -           -           -           -           59

Bibliography-  -           -           -           -           -           -           -           -           -           -           61



The economic development of any country depends on the amount of revenue generated for the provision of infrastructure in that given country. However, one means of generating the amount of revenue for providing the needed infrastructure is through a well structured tax system. It is in the light of the above that this study assessed the problems and prospect of taxation in Edo State Nigeria. The descriptive research method was adopted for this study and data collected through questionnaire and oral interview. The data was analyzed and presented using tables and percentages while chi-square was used to test the hypotheses formulated for the study. The problems identified by the study include poor staffing, lack of facilities, poor record keeping and poor conducive environment. The findings shows that insufficient public awareness, lack of training, poor working condition, poor remuneration and lack of motivational incentives are among the issues lead to low tax generation. The study recommends that training should be provided, working condition should be improved and good salary structure may set for tax officials. Also, need to employ competent and qualified staff with background knowledge of accounting and tax discipline. The finding of the study is in line with previous studies of its kind.



1.1       Background of the Study

One of the recurrent problems of the three-tier system in Nigeria 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; 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, they are in vantage position to articulate the needs of the majority of Nigeria, and formulate strategies for their realization (Ekpo and Ndebbio, 2001). 

Taxation is the means by which the government of nations generates revenue to finance their expenditure through the imposition of compulsory charges on citizens and artificial persons (corporate entities). In Nigeria, all persons in employment, individuals in business, non-residents who derive income from Nigeria as well as companies that operate in Nigeria are liable to pay tax. Tax policies are used by Governments to regulate the economy by encouraging or discouraging certain economic decisions. The Nigerian tax laws have witnessed significant changes over the period. There has been various tax incentives introduced, occasioned by tax reforms which have implications for the economy.  The economic development of any country depends on the amount of revenue generated for the provision of infrastructure in that given country. However, one means of generating the amount of revenue for providing the needed infrastructure is through a well structured tax system. ( Ogbonna & Appah,2012)

Tax is a major source of government revenue all over the world. Government use tax proceeds to render their Traditional functions, such as the provision of public goods, maintenance of law and order, defense against external aggression, regulation of trade and business to ensure social and economic maintenance (Azubike, 2009).   A tax system offers itself as one of the most effective means of mobilizing a nation’s internal resources and it lends itself to creating an environment conducive to the promotion of economic development. Thus, it is evident that a good tax structure plays a multiple role in the process of economic development of any nation which Nigeria is not an exception (Appah, 2010). The fiscal power of the Nigeria government is divided into three-tiered tax structure between the federal, state and local governments, each of which has different tax jurisdictions. (Odusola 2006; okauru 2011; Okoyeuzu 2013). According to Nzotta (2007), taxes constitute key sources of revenue to the federation account shared by the federal, state and local governments.

Gloria (2012) observe that although taxes may not be the most important source of revenue to the government in terms of magnitude of revenue derivable from it as compared to revenue from petroleum proceeds, fines and royalties, grants and advances, et cetera, its importance stems from the point of view of certainty and consistency.

Four key issues must be understood for taxation to play its functions in the society. First, a tax is a compulsory contribution made by the citizens to the government and this contribution is for general common use. Secondly, a tax imposes a general obligation on the tax payer. Thirdly, there is a presumption that the contribution to the public revenue made by the tax payer may not be equivalent to the benefits received. Finally, a tax is not imposed on a citizen by the government because it has rendered specific services to him or his family. Nzotta (2007) cited in Ogbonna and Appah (2012). It is paid by any citizen whether or not the citizen benefits from the government projects and programmes financed by the taxes (Rosen, 2004). Consequently, the usefulness (effectiveness and/or efficiency) of taxes can be measured by several parameters, some which are its revenue generating capacity and its impact on the consumption and savings patterns in the economy. Even if the totality of tax system cannot be comprehensively measured, the various types of tax can be subjected to this measurement. In Nigeria, there are at least three types of taxes that are commonly applied to qualifying citizens and items. These are the Personal Income Tax, the Company Income Tax, and the Value Added Tax.

Development and growth of any society is tied to the ability of government to provide basic infrastructure. This perhaps explains why government show great concern for a medium through which funds can be made available to achieve their set goals for the society .Therefore, one medium through which needed fund for infrastructural development can be derived is through taxation. Taxation unarguably could be taken to be one of the most potent fiscal instruments which reduce private consumption, increases investment and income inequality. It enhances the transfers of resources to the government for needed economic development.

 However, a country’s revenue generation primarily depends on its capacity to tax more in both economic and administrative terms. It is also a fact that developing countries receive a very low amount of revenue from taxation because these countries face quite a number of institutional problems, one of which is poor administration of the tax system. Nigeria operates a federal system of government and hence, its fiscal operations also adhere to the same principle. This has serious implications on how the tax system is managed in the country; the government’s fiscal power is based on a three–tiered tax structure divided between the federal, state and local governments, each of which has different tax jurisdictions. The majority of tax powers are under the control of the federal government while the lower tiers are responsible for less buoyant ones. However, for the past four decades, oil has continued to account for at least 70% of Nigeria’s tax revenue which indicates that traditional tax revenues does not assume a strong role in the management of fiscal policy in the country. The need to address these problems led to the enactment of several tax policy reforms aimed at providing effective administration of tax system in Nigeria.

Within the last decades issues of domestic resource mobilization has attracted considerable attention in many developing countries including Nigeria. In the face of unabated debt difficulties, coupled with the domestic and external financial imbalances confronting them, it is not surprising that many developing nations have been forced to adapt stabilization and adjustment policies and increase revenue which demand better and more efficient methods of mobilizing domestic financial resources with the view of achieving financial stability and promoting economic growth. Taxation plays a significant role in achieving this purpose.

Before a country considers how best to administer its tax system it must possess a clear picture of the scope of its tax system. The quantity and quality of resources required by tax administrators are to a large extent determined by the type of tax system which is introduced. A nation’s tax goals are not achieved by designing a tax system which is fair. Any fair system which is not administered as planned becomes inequitable. Thus, a good tax system is capable of financing the necessary level of public spending in the most efficient and equitable way possible. It should also (1) raise enough revenue to finance essential expenditures without recourses to excessive public sector borrowing, (2) raise the revenue in ways that are equitable that minimized its disincentive effects on economic activities, (3) do so in ways that do not deviate substantially from international norms. (Tanzi & Zee, 2000). The Nigerian Tax system is lopsided and dominated by oil revenue and therefore the establishment of effective and efficient tax systems faces some formidable challenges. The first of these challenges is non availability of tax statistics. The second is the inability to prioritize tax effort. The third is poor tax administration. The fourth is the multiplicity of taxes. The fifth is the structural problems in the economy that affects the maximization of VAT.  Therefore, the main objective of this study is to critically analyze tax administration in Nigeria.

1.2       Statement 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 borne 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 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. It is in the light of the above that this study assessed the problems and prospect of taxation in Edo State Nigeria.

1.3       Objective of the Study

The main objective of this study is to examine the problems and prospect of tax collection  in Edo state, Nigeria. The specific objectives are to:

i.                    Determine the effect of taxation on local government revenue generation in  Edo State.

ii.                  Find out how taxation system enhance local government development in    Edo state

iii.                Find out how revenue generation can be improved in Edo State?  

1.4       Research Questions         

i.           Does taxation has positive effect on local government revenue in Edo State?

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