1.1 Background to the Study

The desire to uplift one’s society is the first desire of every patriotic citizen. Tax payment is the demonstration of such a desire. The payment of tax is a civic duty and an imposed contribution by government on their subjects and companies to enable her finance or run public utilities and perform other social responsibilities. Taxes, thus, constitute the principal source of government revenue (Kaibel and Nwokah, 2009). However, one of the greatest problems facing Nigeria tax system is the problem of tax evasion and tax avoidance. While tax evasion is the willful and deliberate violation of the tax law in order to escape payment of tax which is unquestionably imposed by the law of the tax jurisdiction, tax avoidance is the means by which taxpayer seeks to reduce or remove altogether his liability to tax without actually breaking the law. These “Twin devils” have created a great gulf between actual and potential revenue (Kaibel and Nwokah, 2009). The tax administrations in Nigeria are weak, corrupt and non-transparent (kiabel, 2009). This inefficiency reflects on the mix of taxes and the faulty design in their structure and in there operational systems (Kiabel, 2009).

The tax administration is also affected by policies relating the salary, the attitude, the reward and the punishment system of personnel. The tax administration in Nigeria is driven by detailed revenue targets not by the tax laws and accounting records. The tax officials are allowed to earn money and still meet their revenue targets. Many things are done through negotiation rather than basis of information processing (chartered Institute of Taxation of Nigeria). In addition, low tax compliance is a serious issue in Nigeria, limiting the capacity of the government to raise revenue for development purposes. It is commonly acknowledged that many factors contribute to this weakness such as corruption, weak legal system, high marginal tax rate, paucity of adequate information, accounting system and ineffective tax administration (chartered Institute of Taxation of Nigeria Website). However, it has never been easy to persuade tax payers to comply with requirement of a tax system.

Furthermore, taxpayer tends to have low level of literacy, low tax morale and negative attitude towards government. (UNSW Law Research paper no 2009-17). It is therefore felt that personal income taxation in Nigeria requires radical handling to ensure that a large chunk of the taxable population does not escape tax. An effective tax system, aside from maximizing revenue for development is expected to be well structured and managed with a feeling of common purpose, joint responsibility or obligation amongst the taxable person in a country. From the foregoing, the future prospects of the study can be established. A key component of any tax system is the manner in which it is administered. No tax is better than its administration, so tax administration matters a lot. An essential of objective tax administration is to ensure the maximum possible compliance by tax payers of income. In summary therefore, according to Chris and Elizabeth (2001) tax has three basic features namely; a compulsory levy imposed by government, or local authority, for public purpose and to encourage social justice. A tax according to Ayua (1996) is not a voluntary payment but a compulsory pecuniary burden placed on taxpayers for the benefit of the society. Generally, taxation can be described as a form of levy imposed on all residents living and non-residents doing business within a tax jurisdiction. It is a civic and patriotic responsibility of citizens to pay taxes imposed which also come to the government as income or revenue yielding device to finance the provisions of socio-economic and infrastructural amenities and also to enhance industrial efficiency.

1.2 Statement of the Problem

Over the years, the assessment and collection of personal income tax from taxable individuals has been difficult in the various states in Nigeria. There is apathy not only on the part of the educated but also the uneducated (Kiabel and Nwokah, 2009). The illiterates refuse to pay tax because they are unaware of the purpose of taxation and therefore regard the tax collector or a tax officer as an instrument of oppression; the rich ones refuse because they are not encouraged, not only by the government which wastes tax payers’ money on white elephant projects, but also the tax officials who live above their means (Kiabel, 2009). The Nigerian tax system also lacks competent and honest administrators. The problem of tax avoidance and evasion has reached an alarming proportion. The need to improve the administration of our tax system cannot be over emphasized.

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