CHAPTER ONE

INTRODUCTION

1.1 Introduction

The relevance of electronic income collection has increased in emerging nations like Nigeria.

The e-tax system was launched globally about 30 years ago (Cobham, 2010); since then, it has

developed into a common network and annually assists a number of taxpayers all over the world.

The electronic tax filing system is known as e-taxation. Taxpayers must pay their obligations

online using either their personal or company bank accounts (FIRS, 2015). E-taxation was

defined as online tax system administration by Okoye and Ezejiofor (2014). They pointed out

that as e-taxation is a mechanism for submitting taxes electronically, e-tax payments can be

made immediately through a bank account or by using an ATM with a debit card or credit card.

Although it is thought that the goal of introducing e-taxation is to advance revenue collection

inside the system.

For many of the nations that make up Nigeria, revenue creation continues to be a key challenge

(Okauru, 2011). This is due to the fact that revenue is what the government uses to deliver open

products to the people (IMF, 2010). The government receives money in the form of taxes. The

government receives its regular income from a variety of sources, including fees assessed on the

benefits and growth of individuals and organisations, fees assessed on the properties and offices

made, fares and imports, non-assessable bases such as government-claimed organisations'

benefits, national bank pay, and capital receipts as outside credits and obligations from

international financial institutions (Ofurum et al., 2018).

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The main goals of the Nigerian tax system are to improve policy formulation, use tax income

earned for the benefit of the populace, and directly or indirectly contribute to the well-being of

all Nigerians. However, over the years, Nigeria’s tax system has not been able to reach these

perceived objectives as a result of some setbacks. Lack of taxpayer stewardship, a variety of

taxes, a complicated tax payment system and tax offsetting, a lack of technological exposure, tax

evasion, corruption, and unstable governments are a few of the drawbacks (Azubike, 2009).

Succinctly, the poor contribution of tax revenues to total federally collected revenue in Nigeria

and the ratio of tax revenue to gross domestic product are alarming. Whereas other African

countries such as Ghana, Tunisia, Morocco, and so on, have

Their tax income makes up a large amount of both their overall revenue and GDP. Despite being

the largest economy in Africa, Nigeria has a significantly lower tax-to-GDP ratio than these

nations (Awodipe, 2018). For example, Ghana (16%), Egypt (16%), Morocco (22%), and South

Africa (27%) all have lower tax revenue as a percentage of GDP than Nigeria (Awodipe, 2018).

According to IndexMundi (2016), Nigeria's tax-to-GDP ratio peaked at 5.46 over the previous

ten years.

The Nigerian government, working through the tax boards, made an effort to rebuild the tax

system in a well-organized and coordinated way as a response to these threats. The restructure

gave birth to the integrated tax administration system, an electronic tax system, which if

implemented properly would enhance compliance and eliminate the problem of tax information

and statistics. With the implementation of Electronic Taxation, it is expected that there will be a

significant improvement in tax revenues, which will in turn affect total federally collected

revenues and the economic growth at large as witnessed in other countries.

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Without sugarcoating it, electronic taxation has proven to be a master tool in overcoming some

of the difficulties that any tax system faces. This is because it offers taxpayers information,

education, and support while also making it easier for them to comply with the law and manage

their finances. Fundamentally, the Nigerian tax system's e-tax system is intended to encourage

effectiveness, accountability, and compliance, and also to stop leaks. However, empirical studies

have not produced much of a quantitative assessment of the impact of e-taxation on the level of

revenue productivity in the nation since it was implemented in Nigeria in 2015 (Okunowo,

2015). This research aims to examine the Effect of E-taxation on revenue generation in Nigeria.

Specifically, it will investigate the impact of e-company income tax payment, e-capital gain tax

payment, and e-value added tax payment on revenue generation in the country. The study will

focus on the implementation and effectiveness of the integrated tax administration system, the

electronic tax system, which was introduced to enhance compliance and address the challenges

faced by the Nigerian tax system. By exploring the relationship between e-taxation and revenue

productivity, this research seeks to shed light on the potential benefits and contributions of

electronic tax systems in improving revenue generation and economic growth in Nigeria.

1.2 Statement of Problem

Alarmingly low tax revenue contributions to the overall amount of money collected in Nigeria

(Okauru, 2011). African nations like Ghana, Tunisia, Morocco, and others rely heavily on tax

revenue as a portion of their overall income, with Nigeria serving as the continent's economic

powerhouse.

Compared to comparable countries, it has a significantly low tax share of total revenue (Ofurum

et al., 2018). According to the OECD (2014), tax revenue accounted for 73% of Ghana's total

revenue, 31.3% of Tunisia's total revenue, and 28.5% of Morocco's total revenue in 2014.

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However, Nigeria's tax share of total revenue in 2014 was 5.2% (Federal Inland Revenue

Service, 2015; CBN, 2016). The E-tax was implemented with the primary goal of eliminating

vices including tax evasion, filing false tax returns, and claiming ill-gotten tax refunds that were

primarily connected to the collection of taxes (Wamathu, 2014). Tax revenue has remained at

relatively low levels and no genuine physical development occurred, hence the impact on the

underprivileged is not being felt. A few of the challenges of tax income include inadequate tax

workers, dishonest behaviour of tax collectors, and taxpayers' lack of knowledge of the

importance of paying taxes (Afuberoh & Okoye, 2014).

According to a prior study by Onuiri et al. (2015). Nigeria's tax system is plagued by a variety of

issues, ranging from the lack of adequate archives keeping systems to the lack of data on the

history of tax revenues or taxpayers. The federal republic of Nigeria, lack of sufficient manpower

and other necessary capitals into redundant parts and job purposes, problem of repetition of taxes

and its bad influence on taxpayers a problem resulting from a conflict between the

administration's fiscal accountability and its fiscal power; and deliberate efforts by taxpayers to

evade taxes ( odusola, 2003). After empirical research, it is projected that the adoption of e-

taxation will boost Nigeria's revenue generation. Although it is assumed that the goal of

introducing e-taxation is to boost income generation within the system, there is a dearth of

empirical data demonstrating the extent to which the new technology has achieved this goal with

regard to company income tax, value-added tax, and capital gain tax, necessitating the need for

this study.

1.3 Research Objectives

The main objective of the study is to examine the Effect of E-taxation on revenue generation in

Nigeria. The specific objectives are as follows:

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 i. To determine the effect of e-company income tax payment on revenue generation in

Nigeria.

ii. To ascertain the effect of e-capital gain tax payment on revenue generation in Nigeria.

iii. To examine the effect of e-value added tax payment on revenue generation in Nigeria.

1.4 Research Questions

i. What is the effect of e-company income tax payment on revenue generation in Nigeria?

ii. How does e-capital gain tax payment effect revenue generation in Nigeria?

iii. In what way does e-value added tax payment effect revenue generation in Nigeria?

1.4 Research Hypotheses

H01: there is no significant effect of e-company income tax payment on revenue generation in

Nigeria.

H02: there is no significant effect of e-capital gain tax payment on revenue generation in

Nigeria.

H03: there is no significant effect of e-value added tax payment on revenue generation in

Nigeria.

1.5 Significance of the Study

The study on "The Effect of E-taxation on revenue generation in Nigeria" holds significant

importance due to several reasons. In recent years, the relevance of electronic income collection

has escalated in emerging nations like Nigeria, where the implementation of e-taxation has

become an essential tool in modernizing the tax system. This research delves into the impact of

e-taxation on revenue generation, addressing key aspects such as e-company income tax

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payment, e-capital gain tax payment, and e-value added tax payment. The significance of this

study lies in the potential implications it can have on the Nigerian economy and the overall

welfare of its citizens.

First and foremost, the findings of this study will provide valuable insights into the effectiveness

and efficiency of the integrated tax administration system, the electronic tax system introduced in

Nigeria in 2015. Understanding the strengths and weaknesses of this system will aid

policymakers and tax authorities in devising more robust tax policies and administrative

procedures. It will help them identify areas of improvement and optimize the e-taxation

infrastructure to streamline the tax collection process. Secondly, revenue generation plays a

pivotal role in any country's economic development and public service delivery. The study's

focus on e-taxation and its impact on revenue collection will shed light on the extent to which

electronic tax systems contribute to enhancing tax compliance among taxpayers. By determining

the correlation between e-taxation adoption and increased tax revenues, the research will

emphasize the role of technology in boosting government funds, which, in turn, can lead to

improved public services, infrastructure development, and social welfare programs for the

Nigerian populace.

Moreover, this research's significance lies in its potential to address the challenges faced by the

Nigerian tax system. Historically, Nigeria has struggled with a low tax-to-GDP ratio compared to

other African nations. By exploring the relationship between e-taxation and revenue

productivity, the study seeks to uncover opportunities to bridge this gap and enhance tax

revenues. This could contribute to reducing the country's reliance on oil revenue and create a

more sustainable and diversified revenue base, leading to greater economic stability and

resilience.

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Furthermore, the study's exploration of e-taxation's impact on tax compliance and reduction of

tax evasion can have far-reaching implications for governance and accountability. A transparent

and efficient tax system will not only foster taxpayer trust in the government but also curb

corrupt practices in tax administration. This, in turn, can boost public confidence in the overall

governance system and lead to increased voluntary tax compliance. Beyond the Nigerian context,

this study's significance extends to the global perspective on the adoption of e-taxation. As many

countries around the world are embracing digital transformation, understanding the impact of e-

taxation on revenue generation in Nigeria can serve as a case study for policymakers and tax

authorities in other nations. It can offer valuable lessons, best practices, and potential challenges

to anticipate when implementing similar electronic tax systems.

The significance of this research lies in its potential to contribute to the advancement of e-

taxation as a means to enhance revenue generation in Nigeria. By examining the effect of e-

company income tax payment, e-capital gain tax payment, and e-value added tax payment, the

study seeks to pave the way for more effective and efficient tax collection processes. Ultimately,

the findings from this research can inform policy decisions, promote economic growth, and

foster better governance in Nigeria and serve as a valuable reference for other countries

contemplating the adoption of e-taxation systems.

1.6 Scope and Limitation of the Study

The scope of this study on "The Effect of E-taxation on revenue generation in Nigeria" is limited

to a quantitative research approach. Quantitative research involves the systematic collection and

analysis of numerical data to draw statistical inferences and generalizations about a specific

population. This approach will enable the researchers to objectively measure and quantify the

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impact of e-taxation on revenue generation in Nigeria, providing concrete and empirical

evidence to support the study's objectives.

The study will primarily focus on data collected from various sources, such as government tax

agencies, financial reports, and relevant statistical databases. It will encompass a specific time

frame, aiming to examine the trends and changes in revenue generation following the

implementation of the integrated tax administration system in Nigeria in 2015. By employing a

quantitative methodology, the research will analyze the numerical data to identify patterns,

correlations, and significant relationships between e-taxation and tax revenues. The quantitative

approach will facilitate the use of statistical techniques to process and interpret the data

accurately. The study will employ statistical measures such as means, standard deviations,

regression analysis, and correlation coefficients to assess the strength and direction of

relationships between e-company income tax payment, e-capital gain tax payment, e-value added

tax payment, and revenue generation. By employing rigorous statistical methods, the research

aims to minimize biases and ensure the validity and reliability of the findings. The scope of the

study will be limited to examining the impact of e-taxation on revenue generation in Nigeria,

with a specific focus on the three selected tax payment categories (e-company income tax, e-

capital gain tax, and e-value added tax). It will not delve into qualitative aspects or subjective

interpretations of the data, as the primary objective is to present objective and quantifiable results

that can be used for evidence-based decision-making and policy formulation.

It is essential to note that the study's quantitative approach does have its limitations. While it

allows for a comprehensive analysis of numerical data, it may not capture the nuances and

complexities that qualitative research methods could provide. Additionally, the study's findings

will be limited to the data available within the chosen time frame and may not consider other

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factors that could influence revenue generation in Nigeria. Nevertheless, the quantitative

research approach will provide valuable and measurable insights into the impact of e-taxation on

revenue generation, contributing to the existing body of knowledge on tax policy and

administration in Nigeria.

1.7 Definition of Terms

E-tax: E-Tax is a digital tax administration solution designed to make it easier to send taxes

while also lessening the cost of compliance and enhancing the efficiency of tax administration.

Through the eTax site, it offers taxpayers a self-service digital platform where they can handle

their tax-related transactions.

Company Income Tax: CIT is a tax imposed on profit of a company from all sources. The rate

of tax is 30% of total profit of a company. Some profits are exempted from CIT provided they

are not derived from trade or business activities carried out by the company e.g. Cooperative

society (FIRS, 2023).

Capital Gain Tax: The Capital Gains Tax (CGT) Act, Cap. C1 LFN 2004 (as amended)

imposes a tax of 10% on the total amount of chargeable gains (after making such deductions as

may be allowed in the computation of such gains) accruing to any person on the disposal of

chargeable assets in a year of assessment (KPMG, 2023).

Value Added Tax: VAT is a consumption tax paid when goods are purchased and services

rendered. It is a multi-stage tax. VAT is borne by the final consumer. All goods and services

(produced within or imported into the country) are taxable except those specifically exempted by

the VAT Act (FIRS, 2023).

1.10 Organization of the study

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This study essentially consists of five chapters. Chapter one introduces the study which include

background of the study, statement of the problem, research questions, objective of the study,

research hypothesis and justification of the study. Chapter two deals with the review of the

related literature which include: conceptual review, theoretical review and empirical review.

Chapter three analyses the research methodology. It highlights sources of data, model

specification, description and justification of the variables as well as techniques of data analysis.

Chapter four deals with data presentation and data analysis results. Finally, chapter five focuses

on the summary, conclusion and recommendations.

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