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RESEARCH PROPOSAL ON:

TAXATION AND ITS COLLECTION MECHANISM PROBLEMS AND PROSPECTS


(A case study of Ogun state Board of Internal Revenues)




BY

KAYODE OLADIPUPO OLAYEMI
A PROJECT ANALYSIS OF
DIPSON KAYUS COMPUTER PALACE
SANGO, IBADAN

2014

08058573347; 07063796484









1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The world is recently focusing on employing taxation not only as modifier in an
inflation-ridden economy but also a measure of access and control of informal businesses
that dominate developing economies of the world. The fact is that these informal
activities collectively have a large share of gross national product sprayed in piece-meal
manner in the streets, market places and some times, even in our houses.
The process of Nation-building is slow and complex but is now increasingly
recognized as the necessary condition for effective socio-economic development. An
effective state requires a social contract between a ruling elite and its population, based
on a political settlement that allows the elite to collect taxes without excessive coercion in
return for delivering basic security and essential public goods. The state-building
approach to taxation, therefore, recognizes tax as one of the few core capabilities that any
state needs in order to function effectively.
In Nigeria, the tax reform is spear headed by the Federal Inland Revenue Service
in its quest to achieve greater revenue Collection, encourage voluntary and willing
compliance and breaking the long piercing phobia between taxpayers and tax collectors.
This started with the introduction of Value Added Tax (VAT) in 1993. Though it has
emerged rapidly to become one of the main modes of revenue generation worldwide.
First introduced in France in l914 and in Brazil in 1967, VAT is now in place in more
than 130 countries. During the 1 990s, the number of African countries levying a VAT
increased from 2 to 30. Although it has not been introduced in the United States. VAT
accounts for around a quarter of the worlds tax revenue (Ebrill, Keen, Bodin and
summers, 2002). In richer nations, it has in part replaced other sales and consumption
taxes. Because it is such an efficient means of sucking in revenue from economies with
good written or electronic records of economic transactions, VAT has facilitated trade
liberalization, by replacing import and export taxes, and also contributed significantly to
the steady increases in governments shares of rising national incomes. At introduction,
value added tax delivered a promising revenue generation in Nigeria of over N800 billion
in the first year and since then every year is a success story of stead increase that
necessitated review of the sharing formula between federal, states and local governments.
Similarly, the administration of personal income tax requires a more dynamic
approach in assessing and exploring both the formal and informal sector of the economy
otherwise known as the hidden economy. Most often the activities in this obscured sector
go unnoticed to the tax collectors and hence under taxed or not taxed at all. Most
countries measure their tax as a percentage of the national income over time to
understand the contribution of the citizens in societal development. Sweden and Belgium
have the highest of about 50.6% and 45.4% in 2003 while Australia and United States of
America collects 31.6 and 25.6% of their national income as tax respectively, (OECD
2008).
Nigerias heavy dependency on oil is the cause of neglect in the quest to maximize
revenue generation. The issue of expanding taxable capacity does not only maximize
revenue but increase the level of patriotism and feeling of concern the citizen has for the
nation whose individual contribution of hard earned income is used to build. Lagos state
for example, imbibed this culture in the state revenue authority, by formalizing its
informal sector of the economy. It is clearly evident that every informal economic
activity in Lagos has its daily tax tag, for example a shoe shiner as is often called is made
to pay N30 every morning he comes out for his shoe shining, other businessmen like
Commercial motorcyclist, petty traders, mechanics and other engineering workmen are
made to extend their kindness by dropping peanuts or a token of their daily take home to
the state pool to be used in improving the general well being of the society. And this
makes them to appreciate their importance in the process of rebuilding a modern and
healthier Lagos State. What impact will it be to Kano if the several unreported economic
activities that take place daily on the streets or in the markets are subsumed into tax net
by imposing a fair, simple and direct system of taxation? The paper examines the impact
of taxation as an aid to economic development with reference to OGun State, Nigeria.

1.2 STATEMENT OF THE PROBLEM
Although tax evasion is a problem that faces every tax system, the Nigerian
situation seems unique when viewed against the scale of corrupt practices prevalent in
Nigeria. Under direct personal taxation as practiced in Nigeria, the major problem lies in
the collection of the taxes especially from the self-employed such as the businessmen,
contractors, professional practitioners like lawyers, doctors, accountants, architects and
traders in shops among others. As observed by Ayua (1999) these persons blatantly
refuse to pay tax by reporting losses every year. According to him, many of these
professionals live a lifestyle inconsistent with reported income, which is usually
unrealistically low for the nature of their businesses. Civil Servants and other salaried
workers are the only class of people that actually pay tax in Nigeria. However, even
among the salaried workers, he added, many have turned the statutory personal
allowances and relief into a fertile ground for tax evasion.
Almost all Nigerian taxpayer is married with four children! Similarly, despite the
tax provision meant to plug loopholes through which taxable persons can minimize tax
liability the self-employed persons employ all kinds of avoidance schemes to minimise or
escape tax liability and makes you wonder whether there are still any tax officials
working in that capacity. Such scenarios, no doubt, say a lot about tax administration
system in Nigeria both in its design and in the disposition of some taxpayers towards
taxation. While it immediately presupposes that there are legal framework put in place to
punish tax evaders it perhaps raises a poser on the efficiency and effectiveness of tax
laws and tax administration in Nigeria. Some state governments in an effort towards
solving this problem had even gone to the extent of engaging the services of tax
consultants. This government effort, notwithstanding, the problem of tax evasion and
avoidance still persists (Alabi, 2001). There is no doubt that revenue due any government
will be reduced by the unpatriotic act of tax evaders.
1.3 OBJECTIVES OF THE STUDY
The major aim of the study is to examine the impact of taxation as an aid to
economic development with reference to Ogun State in revisiting its tax policy and
operation guides to counter the challenges forced by the modern economic development.
Other subsidiary objectives include;
1) To assess the contribution of taxation in the process of societal development,
2) The correlation or causality between tax compliance and good governance.
3) To determine and estimate the size of those informal economic activities that often
escape the tentacles of the tax net,
4) To provide the recommendation of the mannerism of adoption to tackle of revenue.

1.4 RESEARCH HYPOTHESES
Hypothesis one
Ho: Taxation has no significant impact on economic development in Ogun state.
Hi: Taxation has significant impact on economic development in Ogun state.
Hypothesis two
Ho: There is no significance relationship between tax compliance and good governance.
Hi: There is significance relationship between tax compliance and good governance.

1.5 SCOPE OF THE STUDY
The study will focus the impact of taxation as an aid to economic development in
Nigeria, using Ogun state Board of Internal Revenues, as a case study. This is to enable
the researcher draw relevant conclusion from the study. The study will make use of
questionnaires to draw data/information from the respondents which would be tested to
ensure validity and reliability.

1.6 SIGNIFICANCE OF THE STUDY
The impact of taxation on the economic development of Ogun State is a very
important topic to study because of the following reasons:
To expand the knowledge on taxation as to provide useful information to scholars,
practitioners and government that would assist them in understanding the causes, effects
and consequences of tax evasion and possible ways of creating environment conductive
for tax administration in Nigeria.
It will enable students to understand the causes, effects and the usefulness of
taxation in Nigeria.
To the management of Ogun state Board of Internal Revenue and other States
Internal Revenue Authorities in Nigeria. It is expected that management of the
management of Ogun State Internal Revenue Board would be guided by the findings of
Tax evasion in order to curb inequality in the society. Since this is one of the major
driving force that enable government to render essential services adequately.
To The Polytechnic, Ibadan for academic purpose, the study will be useful for
providing knowledge for all students at all levels and lecturers.
To any individual or group that may want to carry out research on similar issue in
the Nigerian environment and other part of the African continent with the overall
objectives of persuading tax payers (self-employed & salary earners) and organizations to
be more committed in tax payment.

1.7 LIMITATIONS OF THE STUDY
The researcher will encounter problems while conducting the research work. Some
of it is that, he will be face with hostility from the respondents. The respondents might
refuse to grant the researcher all the require attention needed to gather enough data for
the study due to security reasons.
The escalating cost of transport and financial impediments might also limit the
extent of the research work. Lastly, academic stress and time factor will also add to the
problems but the researcher will make the best efforts in optimizing the available
resources and information without allowing the limitations to make the researcher lose
sight of the quality of the final output. In essence, these limitations will not impinge on
the validity of this work.

CHAPTER THREE
3.1 RESEARCH METHODOLOGY
This chapter will give detail of the research design to be employed, and examine the
procedure for the selection of the subject through sampling approaches, the instruments
of data collection will be extensively discussed and end with a brief highlight of
techniques available for data processing and analysis.
3.2 POPULATION OF STUDY
The population of the study is entire staff members of Ogun State Internal
Revenue Service
3.3 STUDY SAMPLE
The sample size that will be used from the population of the study is 30 staff
members; this will represent the total population of the industry.
3.4 METHOD OF DATA ANALYSIS
The research study will utilize the descriptive research survey to generate primary
and secondary data for the research topic. The data collected will be analyzed through the
use of simple percentage, tables, descriptive analysis and Chi-square.
In analyzing the data, the analytical tools to be used are percentage descriptive
analysis and Chi-square. The Chi-square formula is as follows:
Formula: x
2
= (Fo - Fe)
2

Fe
Where x
2
= Chi-square
Fo = Frequency Observed
Fe = Frequency Expected
The frequency observed will be the data obtained from respondents through the
administered questionnaire which will be represented and interpreted into table and figure
to show a clear view of the agree and disagree option of respondents to questions therein.
The operational assumption of 5% level of significance will be utilized. The
method will be use in chapter four (4), which follows suit to the hypothesis formulated in
chapter one.
Decision rule to be employed is reject the null hypothesis if the calculated value is
greater than the table value and affect the alternative hypothesis generally.
CHAPTER FOUR
This chapter deals with the presentation and analysis of data collected during the
research work conducted. The effort here is to present the data collected from the
different respondents in a more meaningful ways to the readers.
CHAPTER FIVE
This chapter deals with the summary of finding of the whole discussion and
conclusion will be made from the same premises together with recommendations and
some suggestions for further studies on the research topic.
Thereafter, Bibliography and questionnaire that will be used for the research work
will be included.






TABLE OF CONTENTS
Title Page
Certification
Dedication
Acknowledgement
Table of Contents

CHAPTER ONE
1.1 Introduction
1.2 Statement of the problem
1.3 Objectives of the study
1.4 Research Hypotheses
1.5 Scope of the Study
1.6 Significant of the study
1.7 Limitation of the Study
1.8 Definition of Term
1.9 Historical Background of Ogun State Internal Revenue

CHAPTER TWO
Literature
2.1 What Is Tax?
2.2 Principles of Taxation
2.3 Taxes in Nigeria
2.4 The Meaning of Tax Evasion And Tax Avoidance
2.5 The Problems of Taxation In Nigeria
2.6 Why People Evade Tax in Nigeria
2.7 Ways by Which Tax Evasion Is Being Perpetrated
2.8 Effects of Tax Evasion on Government Revenue
2.9 Punishment for Tax Evasion
2.10 Possible Solutions To Reduce Financial Crime On Taxation

CHAPTER THREE
3.1 Research Methodology
3.2 Study Population
3.3 Study Sample
3.4 Method of Data Analysis

CHAPTER FOUR
4.0 Presentation and Analysis Data
4.1 Introduction
4.2 Questionnaire Results
4.3 Data Analysis and Interpretation

CHAPTER FIVE
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendations
References
Appendix
Questionnaire