Effect of Taxation on Revenue Generation in Nigeria” a case study of the Federal Inland Revenue Service (FIRS)
This study examined the Effect of Taxation on Revenue Generation in Nigeria. The study adopted descriptive research design. A total number of one hundred and seventy four (174) copies of questionnaire were administered to the respondents during the study, while one hundred sixty eight (168) copies were properly filled and returned to the researcher. Data analysis was undertaken at five percent (5%) level of significance. The result of the empirical study showed that taxation has significant effect on revenue generation in Nigeria. To this end, the study recommended that there is an urgent need for all state governments to clearly state the basic objectives of its tax system and the relationship between these objectives. This will assist to give the tax administrators a sense of direction and make the tax payer see clearly the reasons he should pay his/her tax as at when due.
1.1 Background to the Study
of the Problem
The increasing running cost of government coupled with rapid infrastructural requirements to meet expanding social needs of citizenry has left various governments with formulating strategies to improve revenue generation; one of which was the establishment of the Federal Inland Revenue Service (FIRS). Nevertheless, the contending problems of tax evasion, collusion of tax officers and diversion of revenue belonging to government into private pockets remain insurmountable.
Moreover, the procedure of tax administration in Nigeria is inadequate and lacking efficiency. The procedures are orthodox in nature, in which staff of the board of Federal Inland Revenue Service (FIRS) are used as sole tax collectors and remitted to the government. The problems related to the procedures are primarily associated with inadequate skills and inefficiency with enormous bribery and corruption among the tax officials (Afuberoh and Okoye, 2014). Accordingly, levies collected as income to the government (tax revenue) are as a result, not been accurately accounted for, therefore, the under-performance in tax revenue is predictable over the years.
Inadequate tax personnel, fraudulent activities of tax collectors and lack of understanding of the importance to pay tax by tax payers are some of the problems of this study. It is against this backdrop that this study seeks to explore the Effect of Taxation on Revenue Generation in Nigeria with a special reference to the Federal Inland Revenue Service (FIRS).
1.3 Purpose of the Study
The primary purpose of this study was to evaluate the effect of taxation on revenue generation in Nigeria. Other purposes include:
§ To examine the contribution of taxation on revenue generation in Nigeria.
§ To ascertain the extent to which tax evasion and tax avoidance have affected negatively on revenue generation in Nigeria.
§ To explore the relationship between taxation and public service delivery in Nigeria.
§ To identify current problems and challenges to taxation in Nigeria.
§ To provide plausible recommendations on how to improve revenue generation in Nigeria.
1.4 Research Questions
This study was guided by the following research questions:
i. Is taxation related to the quantum of revenue generated in Nigeria?
ii. To what extent has tax evasion and tax avoidance impacted negatively on revenue generation in Nigeria?
iii. What is the relationship between taxation and public service delivery in Nigeria?
iv. What are the current problems and challenges to taxation in Nigeria?
v. How can the current problems and challenges facing tax collection in Nigeria be resolved?
1.5 Research Hypotheses
The under mentioned hypotheses were tested in the course of the research study at 5% level of significance in order to uncover the relationship between the dependent and independent variables in each of the hypothesis.
a) H01: There is no significant relationship between taxation and the quantum of revenue generated in Nigeria.
H01: There is a significant relationship between taxation and the quantum of revenue generated in Nigeria.
b) H02: Tax evasion and tax avoidance are not having negative effect on revenue generation in Nigeria.
H02: Tax evasion and tax avoidance are having negative effect on revenue generation in Nigeria.
Significance of the Study