The Problems and Prospects of Tax Collection

What is Tax?

Tax can be defined as a compulsory levy by government on goods, services, income and wealth. Primarily to obtain revenue. In other word, it is levy or dues on the income of persons and companies. It provides definite source of revenue of person for government expenditure. It is the way by which government obtain extra money it spends from income of individual or companies.

Tax in Nigeria

In the Stone Age, tax was collected in Nigeria long before the coming of Europeans. It was collected by the Local Chiefs for the purpose of administration and defense. Every person was expected to give part of his or her proceeds from cultivation of land to the state. Those who were cultivations were required to give their sources for public work such as clearing the bush, digging the pit latrines, wells etc for the benefit of the community as a whole. Failure to render such services usually resulted in loss of properties, which might be reclaimed after payment of line.

With the coming of Europeans, taxes were collected from individual through local chiefs. In 1946, a legislative council was set for the whole country, which obliged the regional council with a large measure of financial responsibilities.

After independence state government were to find out other sources of generation revenue. The first tax was introduced in 1904 in the northern region by Lord Lugard known as community tax.

According to the tax laws the board can revised the assessment if it deems necessary, and can institute legal action against any tax defaulters in respective of his status in the community such legal rights have been derived by politician and poor administration of tax laws.

Types of Taxes

1. Direct Tax
2. Indirect Tax

Direct taxes in Nigeria consist of the following:

1. Personal Income Tax (PIT)

1.  
   • Company Income Tax (CIT)
   • Withholding Tax (WHT)
   • Capital Gain Tax (CGT)
   • Capital Transfer Tax (CTT)
   • Petroleum Profit Tax (PPT)

1. Indirect taxes in Nigeria consist of the following:

1. Custom Duties
2. Excise Duties
3. Value Added Tax (VAT)

Problems Encountered in Tax Collection

According to Lawal (1982) posits that the following are the problems of tax collection in Nigeria.

1. Inadequate Staff

   Lack of adequate staff or manpower to carryout the assignment efficiently and this has contributed to the low revenue generated for the country

2. Mismanagement of Tax Collected

   Where taxes collected were not been utilized for the purpose for which it was collected. This makes taxpayers not to give out their wealth for the nation.

3. Bribery and Corruption

   In this day, tax collected personal interest has over ride their official interest in the performance of their duties, consequently affect revenue generation for the nation

4. Poor accounting record

   Most businessmen, traders, professionals do not keep proper records of their income and expenditure

5. Inadequate Facilities

   The facilities like motor vehicle and motorcycle to carry out the assignment effectively is inadequate

6. Lack of voluntary compliance from the taxpayers

   This attitude of taxpayers cause tax avoidance, evasion and delinquency

Prospects of Tax Collection

Adam Smith (1968) identified the following prospects of tax collection.

1. The administration of tax collection will be strengthened to ensure more efficient tax collection, through training of staff, awareness, campaigns & computerization.
2. Government should continue to ensure that the tariff policy enables our local industries to be competitive.
3. Specifically, aggressive action should be taken to block revenue leakage on high duty goods and bulk items.
4. VAT has become a veritable source of revenue earnings for the government and therefore needs to be strengthened and expanded. To broaden the tax base and to bring the VAT administration closer to the taxpayers, new local VAT offices should be established all over the country.
5. Government should also ensure fair tax administration based on the principle of derivation of tax proceeds; it is recommended that the tax law should be enacted.