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1.1 Background of the Research
Property taxation is one of the major source of revenue in Nigeria especially in local government. Governments around the world rely to some extent on property taxation (Dzulkanian, 2008). Similarly, it is one of the main sources of income for Nigeria local governments (Dzulkanian, 2008). According to Kuppusamy (2008) local government is a public agency that provides urban services to its communities. State and local government have always been enjoined to look inward in generating revenue, this is in responses to the state of nations increasing cost. Bryon (2007) defined local government as an administrative set up which has an area smaller than a state, which comprises of county fire protection district, school districts, towns, cities and villages.
More so, property tax is a form of tax levied on property in lieu of services provided by the local authority (Nor Azriyat et al., 2007). Similarly, property taxes dominate local tax revenues according to (Fox, 2010). The income generated from property tax is used in the provision of basic infrastructure such as water supply, street lightening, and disposal of refuse, communication halls, market stalls and roads among others is to be performed by the local governments being the third tier of government. Therefore, local governments are expected to harness resources towards rapid development to supplement government statutory allocation (Kuye, 2002). The overview of the researchers clearly proved that property tax is a good and effective alternative for complementing grants. Equally, the local governments in Nigeria derives its revenue mainly from assessment taxes, therefore it is financial accounts are always of interest to the public that is why it is very important for the local governments to justify the revenues generated. In addition, the financial resources derived largely from property taxes accounted to about 70-80% of the total revenue obtained not including licenses, rentals, parking compounds, development charges, and the provisions of the state and federal government grants and other sources (Pawi et al, 2011). Therefore, it can be established that property taxation forms the bedrock of local government internally generated funds.
The major existing problem in property tax collection is non-compliance behavior exhibited by the taxpayers, which resulted in low property tax revenue generation. This prompted the researcher to investigate the reasons for such actions, so as to determine the nature and extend of the persistent problem with a view to proffering a sustainable solution to the problem. Nevertheless, some of these issues may be associated with the tax system/structure. The property tax collection performance is still under unsatisfactory level (Pawi et al, 2011). Similarly, according to the performance collection assessment report (PGMC, 2012) revealed that tax arrears from 2008-2012 accumulated to about RM 19. 2 million.
It is observed that there is and increasing pattern in arrears accruing. Therefore, there is a need for a sustainable local government reform in order to address this issue otherwise the local government would lose a potential source of revenue generation, to support this assertion of the need for local government reform. Kelly (2011) stated that, reform measures must be undertaken to create an enabling environment to empower local governments to effectively enhance local governance and improve local public service delivery. Through implementation of local government property tax reform, the developmental objectives set-forth by local governments would be achieved which involves transportation, provision of social services and amenities, infrastructural development and education (Olowu, 2002; Bird & Slack, 2002).
In the context of this study property tax and property rating are synonymous in meaning, but for the purpose of this study property tax is used. Also, local government and local authority have the same meaning but in order to be consistent in the use of words local government is used in this study. Similarly, local council and municipal council have the same meaning. More so, revenue generation and tax collection are used concurrently in this study to represent the same practice
1.2 Statement of the Research Problem
Tax collection in local governments in Nigeria had been experiencing a decline in revenue generation owing to the increasing trend of non-compliance behavior exhibited by the taxpayers. A pilot study carried out re-affirmed that there are issues regarding property tax. The study is triggered by a research work on issues on property tax in local authorities at Johor, which revealed that the amount of revenue generated is decreasing due to the unpaid tax by the homeowners (Pawi et al., 2012). However, property tax revenue generation is executed under inadequate level (Pawi et al, 2011). This means that, the process of property tax collection is facing various issues. Some of these issues involved the process of property tax bill distribution, organizational policies on property tax and lack of evaluation of performance. Therefore, the study investigates the cause of these in-adequacies which leads to the issue of non-compliance behavior exhibited by the taxpayers in Imo state. These problems constitute the barriers to property tax revenue generation as discovered by Zodrow (2001) and Dzulkanian (2008). Furthermore, a review of related literatures on property tax revealed the contributions of Ladd (1998), Kuye (2002), James and Nobes (2008) had established the negative effects of poor property tax administration to the economy of a nation. However, effective policies and measures can transform the entire property tax system, because it will make the system operational and the taxpayers responsive especially on the issue of enforcement. Similarly, societies behavior is guided by the common perception of the public authority, upon this expectations are based and choices of behaviors is made (Sour, 2004).
1.3 Research Questions
1.How would the property tax collection be generated by the Government of Imo state?
2.Who are the stakeholders involved and their roles in the process of property tax collection in Imo state?
3.Why is the property tax collection not successfully generated in Imo state?
4.What are the taxpayer’s expectations from the property tax generated in Imo state?.
1.4 Research Aim and Objectives
The aim of this research is to investigate the problems associated with low property tax revenue generation in Imo state.
While the research objectives are:
To study the existing process involved in property tax revenue generation in Imo state.
To identify the stakeholders involved and their roles in the process of property tax collection in Imo state.
To evaluate the barriers that attributed to low property tax revenue generated in Imo state.
To investigate the taxpayers expectations from the property tax revenue generated in Imo state.
1.5 Scope of the Study
Imo is one of the 36 states of Nigeria and lies in the South East of Nigeria. Owerri is its capital and largest city. Its other major cities are Orlu and Okigwe. Located in the south-eastern region of Nigeria, it occupies the area between the lower River Niger and the upper and middle Imo River
The scope of the research is restricted only to residents in Imo state and the issues surrounding residential property tax collection at municipal council. The scope is restricted to matters arising from low property tax collection generation in Imo state. The case study area is basically one of the Local Government council facing issues in property tax collection. Through pilot survey, it is discovered that the council have tried to resolve the problem through implementing different policies but the situation is not yet contained. Hence, the researcher is inspired to find out the nature and extent of the persisting problem.
1.6 Significance of the Study.
The existing gap is widening between the aspirations of the public authority and its capacity to generate resources internally through property tax so to satisfy the growing need for sustainable social service provision. Property tax has long been the major source of own revenue at the local government level ( Zodrow, 2007). The income that is generated from property tax is used to supplement the supply of facilities and services. So therefore, the study examines low property tax revenue generation with special emphasis on property tax collection in Nigeria with a view to evaluate the performance of the collection system which primarily generates revenue and channel it towards the supply of basic social services. This means that the revenue generated from property tax would enhance infrastructural development. The significance is that the study determines the imperative of property tax as a source of income generated by the government. Mohamed (1998) stated that, it is important for local government to improve their revenue generating capacity to satisfy the needs of their community through efficient provision of services with income generated from rents and property tax and allocations from government. The major sources of income to PGMC are shown in Table 1.1 below.
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