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Reports have shown that despite the numerous efforts of government and its relevant agencies in the administration of tax in Nigeria, there are still problems in the system such as under assessment of tax payers, tax evasion corruption among tax officials etc.  as a result, this study was conducted, analyzing the areas the system has thrived in improving the standard of living and as the source of government revenue for developmental purpose.  But the system so adopted shows lots of loopholes and there are needs to be strengthened for better results.  This study among other things recommended that more experienced staff should be employed, more training should be given to officials and adequate welfare and remuneration package should be done to sensitive the payers-on the need for them to respond to their civic obligation.  Generally, taxation has been recognized as the most effective instrument of fiscal policy.  The administration and operation of taxation in Nigeria as well as other nations of the world are guided and regulated by lows enacted as an Act of parliament or promulgated by decree such that their amendment may be subject to the provision of the constitution on any other legislation of that country.  



1.1      Background of the study

Traditionally, taxation is a main source of revenue to government all over the world, tax thus becomes a burden that every citizen must bear to support the government.   According to Olaofa (2008), the government has certain functions to perform for the benefits of those its government.  The scope of these functions will depend on the political and economical orientation of the members of the society, their needs aspiration, unwillingness and ability to pay amongst others.  Among the traditionally functions of the government is the provision of collective or public goods, goods that cannot be divided among the separate members of the society but which must be used for the benefit of all.  Such goods include the maintenance of law and order, defence against external aggression, regulation of trade and business to ensure social and economic justice.  As the functions of government increase, the revenue to finance that institution must necessarily increase.  Thus, tax is a fact of life which is as old as the institutions of government for a fact, it is said, “tax is as certain as death” (Olarfe 2008). Abubakar (2008) posits that tax policies represent key resource allocation between the public and private sectors in a country.  It is usually imposed on individual and confities that make up a country.  The fund provided by tax are used by the state to support certain state obligations such as education system, health care system pension for the elderly, unemployment benefits and public transportation.  A nations tax system is often a reflection of its commercial values of the values of those in power.  Adekaula (1997), state that in Nigeria the taxation system dates back to 1904 when the personal income tax was introduced in Northern Nigeria before the unificiaries of the implemented, through the Native revenue ordinance to the western and eastern regions in 1917 and 1928 respectively.  Among other amendments in the 1930’s it was later incorporated into direct taxation ordinance No. 4 of 1940.  The need for personal income tax promoted the income tax management tax Act.  (TIMA) 1961.  An amendment followed in 1993 of section 27 now called section 85 other amendment, of PITA were that on 1996 and 1998.  Apart from the personal income tax (PIT) other taxes charged in Nigeria include companies income petroleum profit tax, education tax, capital grains tax, information and technology tax etc.  Those taxes are collected by different levels of governments depending on their areas of jurisdiction.  The essences of amending tax laws is to amend for the loopholes existing in the tax system and to improve on the system of taxation in the country


 Several difficult affect the present day tax administration in Nigeria as will be revealed by this research work.  The following difficult appear outstanding.

-             Many people who collect taxes in Nigeria are not well trained for the job and this lead to huge leakage in revenue generation.

-             Ignorance sometimes due to high level of illiteracy of the part of payers, ask why they should pay tax.

-             Shortage of efficient manpower in the revenue department.

-             There are loopholes in the laws governing the tax administration, the effect or loss of revenue to the government.

-             Many self employed persons if at all, they pay tax but they do not pay the amount commensurate with their income as generated from business, trade, vocation or as the case may be incidence of tax evasion on the part of some individuals and corporate bodies.

-             There is loss of government revenue through insuring of take receipts.  Many people have been duped and government made power by the sharp practices of the operators.

Therefore, the researchers want to examine the difficulties


The objective of the study includes:

-             To find out the proportion of taxable adults from both the salary earners and the self employed that pay their taxes and if they do, whether they pay correct amounts.

-             To find out if the amount of taxes collected are correctly and promptly remitted the government coffers.

-             To identify the loopholes in the administration of tax in Nigeria the total revenue collected.

-             To find one the root causes of nonpayment or inadequate payment of taxes.

-             To evaluate the extent to which tax proceeds have improved the revenue base of the state.

-             To offer policy recommendations that shall enhance the efficiency of tax system in the state.


For the successful completion of the study, the following research hypotheses were formulated by the researcher; 

H0:   There are no root causes of nonpayment or inadequate payment of taxes.

H1:there are root causes of nonpayment or inadequate payment of taxes

H02:  there is no extent to which tax proceeds have improved the revenue base of the state

H2:  there is extent to which tax proceeds have improved the revenue base of the state


The study could be of significance of the tax authority since it highlights the difficulties of tax administration and the recommendation will help them improve their performance thereby increasing revenue yielding to government.

-             Tax payers shall know their rights and obligation as with regards to tax.

-             It is common to discover that a majority of taxable individuals do not understand the whole concept of taxation and this ignorance may be a major reason for their reluctance to pay taxes.  This work will in no doubt help to clear such ignorance.

-             This study shall be great importance to self-employed persons because it will encourage them to keep adequate accounting records of their enterprises and makes tax assessment processes easier.


The scope of this study will be administration of tax in Nigeria during which the problems and prospects will be looked at.  Also the machinery of tax collection will be covered in brief.  This study is limited to Abia State board of internal revenue.The researcher encounters some constrain which limited the scope of the study;

a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study       

b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities


Fiscal Policy: This is the use of government expenditure taxes borrowing and financial administration for further national economics objectives.

Hypothesis: These mean an assumption about a certain population parameter which would be tested in order to accept or reject the assumption.

Research: It is an investigation undertaken to discover something or get additional information about something.

Background: This explains the organ of a concept.

Tax Liabilities: These are the taxes payable.

Capital Gains: These are gains arising on the disposal of changeable assets.

Deferred Taxes: These are tax liability attributed to timing differences.

Value Added Tax: These are taxes paid on valuable and services.

Tax Payer: This refers to an individual or a body corporate.

Tax Credit: This is the credit provided based on the qualifying capital expenditure acquired by a tax payer.

Tax Authority: This refers to the apex of agency uncharged of tax assessment and collation in a state or at the federal level.

Investment Allowance: This is given as incentives to certain category of companies for incurring some qualifying capital expenditure especially in the area of agriculture.

Withholding Tax: This refers to a kind of tax paid through a deviation at some (i.e during payment to supplier’s contractors, consultants or other professionals.


This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study 

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