THE IMPACT OF TAXATION ON THE INTERNALLY GENERATED REVENUE OF EBONYI STATE



CHAPTER ONE
INTRODUCTION
1.1       BACKGROUND OF THE STUDY
The first need of a modern government is revenue which is indeed the breath of its nostrils (Mephee, 1962:108). There are several ways by which government raises its revenue for the purpose of meeting its expenditure one of which is the process of taxation.
            Taxation refers to compulsory payments by individuals and organizations to the relevant inland or internal revenue authorities at the federal state or local government levels. Taxation is the most common method of financing government activities. The local taxation impose by the local government council is known as rates. According to Datton (1964.61), a tax by definition is a payment in return for which on direct an specific guide pro quo or benefit is rendered to the payer.

            Taxes are sums of money that government imposes in accordance with some established criterion such as net profit earned, property owned, and income received etc, in order to raise revenue to provide services which can be most efficiently provided by the state rather than by individuals themselves. The services provided in return are without charge but the payment of the tax does not in itself, enable the tax payer to receive any governmental services to which he would otherwise be eligible. The basic distinction between taxes and other sources of government revenue is the compulsory element involved.
            Government protects its citizens at home with a police force, and it protects them against attacks from enemies abroad by providing an army, navy and air force. Most governments also provide roads public transport, hospitals, educational facilities and postal services.
            Some of the key reasons for the imposition of taxes are:
·        To cover the cost of general administration internal and external defence, maintenance of law and order and the social services provided by the government.
·        To control the consumption of good and services considered non-essential or harmful.
·        To reduce the disparities that exist in the distribution of income in the economy.
·        To check inflation by reducing the volume of purchasing power.
·        To service national debt and to provide retirement benefits.
·        To provide subsidies in favour of preferred sectors of the economy, example agricultural sector and selected industries.
·        To implement government policy, since the budget is used as an adjunct to monetary policy, taxation has often been increased in order to provide a large budget supplies or reduced to stimulate demand. The government is also expected to provide relief to areas that has been affected by ecological disaster and contribute financial resources to assist public sector enterprises.
Under conditions of full employments when government diverts resources from private sector, output is reduced below the levels otherwise attainable. This reduction is the burden or real cost of the government intervention. From the standpoint of the society, however it is and perhaps more than, by whether or not taxes are used as they normally are, the type of tax will control the pattern of distribution of the burden among various persons in the society. The pattern is frequently called the incidence of tax.
The process of taxation, must have certain important attributes. Firstly, the levying authority must possess the legal capacity to do so since taxation is a legal process. Secondly, taxation involves an element of obligation and compulsion opposed to voluntaries. It may be imposed on income, profit or cost of production.
Taxation and taxes are essentially of two types; direct and indirect taxes. Taxes whether direct or indirect, are imposed for two principal purposes. The primary purpose is to raise revenue for financing various government projects and services. The second but no less important reason is that taxation is a major instrument of public policy.
Thus, taxation can be used as protective, allocation, distributive or stabilization instruments. Depending on the intended direction of public policy thrust, taxation maybe employed to expand, stimulate, restrict or regulate the whole economy or selected sector thereof.
Every function of the government is fund raising, from the traditional relations, regulation of the economy etc all require funds. In many third world countries including Nigeria, government is the largest single money spender in the whole system. The budget, carefully estimate the amount of revenue collectable and spendable. In Nigeria, as in many other developing countries, taxes constitutes the largest single source of funding public expenditure. Indeed, it can be said that the primary purpose of taxation is to raise revenue for financing the necessary functions of government. This need be so since government unlike company, has no shareholders, subsidiaries or promoters. It must therefore depend on the society for its funding. Taxation is the most consistent and regular way of funding government.
Narrowing down to the case study, Ebonyi State Board of Internal Revenue, Abakaliki, Ebonyi State was created on 1st October, 1996 out of existing Abia State and Enugu State by the President and Commander-in Chief of the Armed Forces of the Federal Republic of Nigeria, General Sani Abacha. It needed resources for accomplishing its social and economic goals. The state sources her revenue. The study will explore the ways in which the state can raise revenue through taxation which in turn help in economic development of Ebonyi State and Nigeria in general. In Ebonyi State, these are types of taxation we have; personal income tax, pay-as-you-earn (PAYE), companies income tax, capital gain tax and value added tax.
The researcher intends to go into more details about taxation and taxes and how they affect revenue mobilization and generation.
1.2       STATEMENT OF THE PROBLEM
            The Nigeria physical development project is dwindling for a long period of time. This has posed serious problem on the standard of living of the citizens.
This work was designed to uncover the factors responsible for low internally generated revenue by the government. This has been a glaring problems because, public expenditure increases without substantial increase or improvement in internally generated revenue. This problem sets back most of the physical development project and general administration in Nigeria.
Persistent inflation: This is one of the major problems that inspired the researcher to engage into this research. The country has experienced continuous increases in the price of goods and services in the country. The menace has posed serious problems on the poor masses. It has also continued to depreciate the value of naira and reduce the purchasing power of the consumers. This work was designed to reveal responsible factors that would be handle in order to bring a lasting solution to the problems.
Furthermore, most at times, the indigenous industries in Ebonyi State run into liquidation, this was a result of inadequate measures to protect those industries by the government. It has been on record that infant industries have not received adequate attention from the government to protect them from both foreign multi-nationals and big indigenous companies. This work will really show whether the government can achieve the protection of infant industries through taxation.
Lastly, there is proliferation of goods in Ebonyi State; the work was also designed to know reasons for not controlling entrance of certain goods or trades in Ebonyi State. This has led to trading or production and consumption of certain goods that are not for the interest of citizens and society at large.
Other problems associated with taxation in Ebonyi State includes;
a.               Administration on fiscal policy and its application to the economy.
b.               Poor and inaccurate records and implementations due to ineffective internal control system.
c.               Use of illiterate and unskilled personnel in tax operations in Ebonyi State.
d.               Embezzlement of internally generated revenue bye the tax government agents.
1.3             OBJECTIVES OF THE STUDY
The main objective of the study is to determine the Impact of Taxation on the internally generated Revenue of Ebonyi State.
The other specific objectives of the study includes:
1.                  To determine the impact of how poor implementation of tax policy is responsible for the low rate of revenue generate in Ebonyi State.
2.                   To investigate the effect of lack of adequate internal control is responsible for the poor performance of the Ebonyi State Board of internal revenue in the generation of revenue.
3.                  To identify the impact of evasion and avoidance of tax responsible for the low rate of revenue generated in Ebonyi State through tax.

1.4             RESEARCH QUESTION
During this research, certain questions arose but the most pertinent questions were answered. They are;
1.      To what extent does poor implementation of tax policy is responsible for the low rate of revenue generated in Ebonyi State?
2.      To what extent does lack of adequate internal control is responsible for the poor performance of the Ebonyi State Board of internal revenue in the generation of revenue?
3.      To what extent do the evasion and avoidance of tax responsible for the low rate of revenue generated in Ebonyi State through tax?

1.5             FORMULATION OF HYPOTHESIS
1.               Hoi:      Poor implementation of tax policy is not responsible for the low rate of revenue generated in Ebonyi State.
Hi:       Poor implementation of tax policy is responsible for the low rate of revenue generated in Ebonyi State.
2.               H02:     Lack of adequate internal control is not responsible for the poor performance of the Ebonyi State Board of internal revenue in the generation of revenue.
H2:      Lack of adequate internal control is responsible for the poor performance of the Ebonyi State Board of internal revenue in the generation of revenue.
3.               H03: The evasion and avoidance of tax has no significant contribution on the low rate of revenue generated in Ebonyi State through tax.
H3: The evasion and avoidance of tax has significant contribution on the low rate of revenue generated in Ebonyi State through tax.






1.6             SIGNIFICANCE OF THE STUDY
The importance of any research study lies in its ability to make significant contribution towards solving identified problems.
Furthermore, it will press for implementation of the existing laws and enforcement of the laws as difference to tax evasion
This study is significant to Chief Executives of various Ministries as well as Parastatals, and also, it will be relevant to Private Sectors and Investors because they are subject to tax and tax administration for government officials.
a.               It provides various agencies and individuals, especially the Ebonyi State Board of Internal revenue, Abakaliki with the awareness needed for the generation of revenue through the use of taxes.
b.               It will also provide ideas and solutions that will attract the attention of government in controlling as well as minimizing the deficiencies in the areas of tax collection and payment.

1.7             LIMITATION AND DELIMITATION OF THE STUDY
Some limitations were faced during the course of carrying out this research work. Some of the limitations include;
a.               Time factor
b.               Financial constraint
c.               Limited access to related literature
d.               Limited response from relevant authorities
e.               Libraries are not equipped with current information for easy research.
Delimitation of research refers to the definition of the scope.
The scope of this study will be limited to taxation as it affects revenue generation in Nigeria. Also concepts of taxation as well as the structure of the Nigeria tax system. The economic effect of taxation and tax system defects will be enumerated during the course of carrying out this research work.

1.8             DEFINITION OF TERMS
During the course of this research work some terms will be used. They are:
1.                  Tax: Tax is a compulsory contribution to the support of government levied on persons. Property, income, commodities, transaction etc, now at a defined rare mostly proportionate to the amount on which the contribution is levied.
2.                  Taxation: Taxation maybe defined as the imposition of an obligatory by a recipient public authority.

3.                  Government: Government can be defined as the group of people who are responsible for governing a country or state. It is also the organization and methods involved in governing a country or state.
4.                  Policy: Policy is defined as a set of plans that is used as a basis for making decision especially in politics, economics or business.
5.                  Revenue: Revenue can be defined as the financial value of goods and services sol to customers, it is also the money that a government receives from taxes or that an organization, etc receive from its business.
6.                  Pays: PAY AS YOU EARN: This is tax system which aims at taking every taxation individual according to the revenue or income made by such individual either in employment, vocation, trade or business.
7.                  Project: Is a developmental work set by the government in order to provide some essential goods and services to the general public for instance, pipe-borne water, electricity, health centres, roads etc.
8.                  Fiscal Policy: Refers to the government policy of taxing and spending to affect the equilibrium levels of the nations income. It can also be seen as guiding principle on taxation in Nigeria.
9.                  Inflation: Is the continuous rise of prices of goods an services in a country. This increases does not go with increase in individual’s income inflation can be case by excess money in circulation.

10.             Infant Industries: Are those domestic industries in the country that are struggling to survive in operations. Such industries embark on improvement techniques in order to get substantial market portion and to survive from foreign competition in order to grow.

CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1       HISTORICAL BACKGROUND
            The ability of the government to prosecute successfully. The policies and programmes of it’s administration, will depend largely on the finances available to the states and local government. Fundamentally, one of the well stated duties of any human and progressive government is essentially to provide among other things, motor able roads, hospitals, education etc. for any dedicated administration, to execute all this vital functions satisfactorily and more efficiently, the citizens are needed to contribute a convenient proportion of these resources to the government coffers.
It is rather disturbing that there is a consensus of opinion that a greater percentage of the populace in Nigeria evades tax payment. Certainly, it is also an agreed fact that everywhere in the world that the payment of taxes is among the inevitable ingredient very much needed for the survival of any growing society. Equally, various local government areas can hardly render any patriotic service to mankind, in a state such as ours, the unavoidable demand for an effective revenue generation cannot be overemphasized.
Admittedly, Nigeria in general is at a major transitory stage in industrialization, and this practically introduces enormous problems of which money is essential element. The hall-marks of technological advancement, economic growth social satisfaction, their meanings and value to society centers inclusively within the ambit of substantial financial contributions by everybody.
The present phenomena, therefore, presupposes a more pragmatic approach to revenue generation that will lead to a breakdown of the complexes of industrialization carbonization and the on going socio-economic and political activities to the level of understanding of the dominantly adamant taxable adults.
It is therefore, crucial that the board spectrum of the populace must fully exert themselves on truly nationalistic sense, so as to participate actively in the economic string thinning of the state and foster the attendant benefits of increase standard of living by supporting the government financially.
The use of taxation in generating revenue to finance government expenditure falls within the framework of public finance Press (1975) defined public finance to mean all the activities concerned with the income and expenditure of public authorities an with the adjustment of one to the other.
Bannock et al (1935) posit that public finance is a branch of economic concerned with the identification an appraisal of the effects of government of individual and institutions and to examine their impact on the economy as a whole. It also deals with examining the effectiveness of policy measures directed at certain objectives and with the development of techniques and procedure by which the effectiveness can be increased.
Economic literatures shows that as far back as the classical period of economic analysis and Adam Smith, the place of taxation in public finance has caught the attention of experts  David Ricardo, another classical economist, did in fact, argue that “an economic principle” could only be considered useful if it directs government to the right measures of taxation “Ricardo as well as Mill (1984) had put revenue first in the division of public finance into three-revenue, expenditure and public debt” the basic philosophy of government, that is, human being acting individually in society cannot alone, provide without restriction, certain crucial goods and services in a community. These include defense, justice law and order, roads, security, health facilities, education etc consequently government exists to provide these public goods.
A little drive into economic literature of both developed and developing countries reveals that taxation is an important weapon in the hands of government not only to generate revenue but also to achieve fiscal goals such as influencing the direction of investment and in taming the consumption of certain goods and services for public interest. A tax is simply a compulsory transfer of resources (money or occasionally goods and services) from private individuals, corporate bodies and groups to the government.

2.3       MEANING OF TAX
            Taxation can be defined as a compulsory levy imposed by government on income, expenditure or capital asset, for which the taxpayer receives nothing specific in return (Hancock, 1995:96).
            According to Ezelue (1994:74), tax is defined as a compulsory payment for which government need offer no service or explanation an obligatory transfer of money from private individuals or groups to a public authority.
Taxation can also be seen as a contribution imposed by the public authority irrespective of the exact amount of service rendered to the taxpayer in return and not imposed as a penalty for any legal offence.
            Taxation can also be defined as a compulsory payment by individuals and organizations to the relevant inland or internal revenue authorities at the federation, state, or local government levels (Okereke, 2003:137).
            Pigou and Dalton (1964:61), in their own contributions to the development of the subject matter or public finance, proposed taxation principles which are based on the theory of economic welfare. It was not unusual for some powerful kings and Emperors to raise money for their own personal use. Subsequently, it was realized that some services could be adequately provide for by the state rather by individuals, kings an Emperors (Lawal, 1978:121).
            Tax administration and management in Nigeria is aimed at improving an efficient and functional mechanism for the procurement of funds due to the government by accelerating the collection of tax, engender compliance and make funds promptly available for the business of the government. These taxes along with interests and repayments and licenses and fees constitute government revenue. Such taxes are imposed not only to generate revenue but also be provide incentives and/or disincentives in specific socio-economic activities. Tariff rates are also varied not only to regulate the external sector or the economy but also to encourage domestic production as well as to protect domestic industries.
Government expenditure on the other hand constitute an instrument for direct resource allocation while generating employment opportunities and influencing the general price level of well as determining the extent of fiscal deficit or surplus each fiscal year Anyanwu et al (1997:139).
Dalton (1994:64), opined that tax is a payment in return for which no direct and specific quid proquo or benefit is rendered to the taxpayer.
Based on the above definitions, tax could be summarily said to be a payment paid by individuals and organizations to the government in which the taxpayer receives nothing specific in return. Of special notes is that tax form part of national revenue and serves as economic instrument for stabilization of economy.

2.4       CONCEPT OF TAXATION
            Definition has been given to taxation by different authors but in real sense of it, the various definitions suggest the same thing. All these definitions contained the essential operating elements that give actual meaning to it. The tax system in Nigeria involves a tripartite aspect namely: tax administration, tax policy and tax laws.
Tax Policy: Refers to that part of government policy concerning the raising of revenue through taxation and other means and deciding on the level and pattern of expenditure for the purpose of influencing economic activities or attaining some desirable macro-economic goals. The major rates (on personal income, company income, petroleum profit tax, capital gain tax, import duties, excise duties, export duties, mining rate, royalties and NNP C earning) and government expenditure.
Tax Administration: may be seen as the control and/or the management of collection machinery of the revenue accruing from taxation to the government by its agencies (that is relevant tax authorities) in Nigeria (Okereke, 2003:162). Tax administration and management in Nigeria is aimed at improving an efficient and functional mechanism for the procurement of funds due to the government by accelerating the collection of tax. Engender compliance and make funds promptly available for the business of the government. Consequently, from the above explanations, it is clear that a tax has the following main characteristics, which distinguishes it from the other forms of payments. These features are:
Compulsory Levy: Tax is a compulsory payment by the taxpayer to the government. It is a compulsory payment, because, it is not like payment of purchase of goods and services on demand. If a taxable adult fails to pay his/her tax as at when due, the relevant tax authority reserves the right to sue the defaulter. It is legally backed up for such person to be panelized accordingly.
Tax is not a Quid Po Quo Exchange: Meaning that it is not a direct payment to government in exchange for any particular goods or services provided directly to an individual taxpayer by the government which collects the taxes. This shows that the services received from government by a taxpayer must not be commensurate with the quantum of tax paid. For instance, the case of poor people who pay little or nothing as tax, but receives as much protection an defence from the security agencies an free education an medical care for their children as the rich or wealthy citizens who pay heavy tax. It is meant to meet general expenses incurred by the state or the benefit of general public. This is benefits not a particular person but the society in general. That is, it is spent to promote public welfare. Payment of tax is a pper0onal responsibility of an individual and it has to be paid legally. This means that tax is backed up by laws any refusal to pay on demand attract legal sanctions or punishment stipulated by law.
Tax Avoidance: Is a legal attempt to escape or reduce liability by circumventing the law and not by breaking it. It involves crossing legal forms and handing affairs in such a way as to take advantage of legally permissible alternative tax rate or alternative to be smart and his action seen by many to be legitimate since it is not illegal but entails a taxpayer who exploits loopholes in the tax laws to reduce tax liability.
Tax Evasion: On the other hand is an illegal attempt to avoid the payment of taxes by breaking the tax law. It connotes a criminal act whereby a taxpayer principally undertakes to avoid tax by making false declarations such as over-reporting relief’s and allowances or understanding income.
Tax Credit: Tax credit is a legal provision warranting taxpayers to deduct specific sums from their tax liabilities. While tax deduction is a legal provision permitting taxpayers to deduct specific expenditure from the taxable income.
Tax Deductions: Could be made for allowance for maximum of four children, wife’s allowances and other dependents relatives (as provide by tax law) meanwhile, tax credit differs from tax deduction in that it is subtracted after the tax liability has been calculated whereas deduction is subtracted from income subject to tax.
Tax Base:  The objective basis on which a tax is levied is referred to as tax base. In Nigeria, the possible objects of taxation are numbers, which concludes some peculiar ones like the value of certain goods sold, income and the property owned by the taxpayer.   
Tax Shift: This is the process whereby one economic agent who bears the initial burden of the tax is able to pass the whole or part of the tax to another economic agent through changes in price. It would come in form of forward shift or back-ward shift so as to allow for a change in the last resting point of the tax burden.

2.5       PURPOSE OF TAXATION 
            At this juncture of this study, it is pertinent to answer this question “why do people pay tax at all?” In the modern welfare state, the functions and the responsibilities of the government have increase significantly. In the early days of public finance, government imposed taxes primarily to raise the revenue require to cover the cost of general administration and defense. But in recent rime, its expenditure on the developmental and non-developmental activities has assumed a greater dimension. At this point, the purpose of government imposition of various taxes in m0oern time could be summarized thus;
i.                 Redistribution of Income: Arguments to justify the imposition of the taxes on income distribution grounds, ensues where there is great disparity in income distribution resulting from inequality in factors of ownership in a society. Direct taxes especially personal income tax is made to be progressively high in order to redistribute income. Those who earn fat income pay heavy tax and vice-versa, such that the revenue could be used to provide subsidy for goods usually consumed by the low income groups. By levying taxes in a progressive manner, the gap is some what reduced and this may form the basis for levying taxes in some cases.
ii.              Protection of infant industries: Import duties are designed to serve this purpose. In most of the developed countries of the world, the industries are more efficient and their products sell at cheaper prices. It will therefore, be very cumbersome for the developing countries to compete with these advanced world economics. For instance, Nigeria industries are not so well developed as those in the Europe and if import duties are not imposed on imported goods, they will outsell Nigerian industries and thereby stifle their growth.
iii.            Regulation Argument:  Government imposes taxes on certain goods considered to be dangerous to health of the people, thereby discouraging and regulating the consumption and production of such goods. Government could wish to discourage the consumption of certain types of imported goods depending on whether it has elastic or inelastic demand by imposing high import duties on them. Since the prices of such goods are likely to rise with a resultant reduction in domestic consumption.
iv.            Provision of social and economic infrastructure: In order to provide those goods and services which are very essential for the well being of the society but cannot be provide by private individual businessmen, such as roads, electricity, water supply, security, education, etc. the government of any level therefore needs money to meet such social economic and political obligations basically through the imposition of taxes.
v.               Control of inflation: Inflation arises if the quantity of money in circulation is greater than the available goods and services which money can buy. During this period of inflation, government normally introduces heavy tax to reduce the excess income of people and this will in turn lead to reduction in demand, which will bring down the prices of commodities.
vi.            Stimulation of growth and development: The stimulation of growth and development in the economy is achieved through taxation. Tax policies adopted in a country like tax concession, tax holidays, suitable export and import duties help to achieve rapid industrialization and economic growth.
vii.          Export promotion: A country with balance of payment problems may see export promotion to be vital for BOP disequilibrium and the only way to realize this is through taxation. Export could be encouraged by reducing tax on exports, which will in turn serves as an incentive to export commodities to other countries.

2.6 PRINCIPLES/STANDARDS OF TAXATION
Ensuring voluntary compliance on the part of taxpayers has been the greatest problem before tax administrators. This means how to make sure that taxpayers pay their taxes as at when due; hence the tax administrators have over the years been striving hard to advance modalities in ensuring confidence between tax collectors and taxpayers.
By principle of taxation, we mean the appropriate criteria to be applied in the development and evaluation of tax structure. In order words, it is the guiding rules or principles governing the various tax systems. Some classical economists, mercantilists, and Physiocrats like Piguo, say, and Mill have long given much attention to the provision of appropriate canons or principles of taxation. Adam smith however in 1776 laid down what came to be known as the canons of taxation.
Furthermore, the principles of taxation will be considered in three progressions encompassing the Adam Smith’s canons of taxation or principles of taxation.

a.               ADAM SMITH’S CANONS OF  TAXATION
Adam Smith stated what he called four canons of taxation, these are:
i.                 The canon of equality or equity: Adam smith in this principle advanced that people in the same income level and having equal responsibilities ought to pay the same amount of money in tax, thus, horizontal equity. The idea embodies the ability to pay.
Equity relates that burden should be spread among the people according to their financial capabilities, which mean that the rich should contribute at a higher rate than the poor (progressive tax).
ii.                 The canon of Certainty: This means that any person  liable to be taxed, must know how much he is expected to pay which shall be fixed by law before the payment of made. This helps to reduce the public revenue system of arbitrariness doubtfulness, corruption, nepotism and order sorts of abuse of office. Such a principle will also on the part of government ensure easier predictability with greater accuracy the amount of tax revenue for budgetary consideration.
iii.               The canon of convenience: This canon advocates that those who are liable to be taxed must be easily located, their incomes accurately assessed and there must be little or no room for evasion. For instance, deducting the tax before the payment of the payer’s salary makes the payer not to fell the burden of such tax so much, which might be more convenient to him.
iv.               The canon of Economy: According to Smith (1776:78) economy should be employed so that the cost of collecting the tax must not be so high as to almost equal to the amount of tax to be collected. If the cost exceeds the amount collected as tax, it may wipe out any benefit to be derived from the tax revenue thereby rendering the exercise useless and the government will be in deficit.
b.               THE TRADITIONAL PRINCIPLES OF TAXATION  
The traditional principles of taxation are based on two different perspectives, these are:
i.                 Ability to pay principle: The ability to pay principle states that the amount of taxes an individual pays should be directly related to the individual’s income. This means that those people with the most should pay the higher taxes (Gbosi, 2002:207). Under the principle, a given total revenue is needed and each taxpayer is asked to contribute in line with his ability to pay. The ability to pay principle could be better understood by using two basic concepts that help to explain fairness (equity) in taxation. These include the horizontal and vertical tax equality or equity.
The horizontal equity suggests that equal sacrifices among taxpayer could be achieved in individuals of equal tax ability are taxed equally. While the vertical tax equally depicts that individual with unequal tax paying ability should as well be taxed unequally.
ii.              The Benefit Principle of Taxation: The benefit principle forms the second traditional principle of taxation. The principle suggests that those who benefit more from goods and services provided by the government should pay more in taxes (Solomon, 1980:420). Under this principle, tax justice is seen in terms of the individual paying for the benefit he derive from government services through the tax levied on him as price. The best aspect of benefit principle is that it stresses the resource allocation efficiency. Other advantages of the benefit principle are that it has intuitive appeal, since an individual only pays for the benefit he derive from consumption of its public goods through taxation and lastly, it interrelates public expenditure decision and taxation policy. In other words, the total supply of public goods will be determine through this principle by the demand for them as measured by what taxpayers are willing to bear (Buhari, 1993:321).
          
c.               THE MODERN PRINCIPLES OF TAXATION
Apart from Adam Smith’s four canons of taxation and the traditional principles, modern experts in public finance have brought in other principles that will sufficiently meet all the purposes of modern economy policy. These include:
i.                 Efficiency Principle: An efficient tax system connotes a situation where the tax authorities must experience little difficulty, in being able to access the liability of various taxpayers. A simple way of making a tax administrative efficient is to choose a tax base that is easily understood and observable.
ii.              Simple Principle: This requires that a good tax system should be sufficiently simple and easy to understand especially to the taxpayer. There should be on ambiguities nor hidden agenda in a tax law.
iii.            Flexibility Principle: A good system of taxation should be elastic in nature meaning that it should be capable to automatic change according to the taxable capacity of the taxpayer and the needs of the economy without any increase in the cost of tax collection. Thus, it should be capable of adjustment according to changes in taxes and circumstances like peace-time and war-time, etc, so that the state can meet its financial requirement.
iv.            Impartibility Principle: Impartiality principle of taxation implies that tax should not discriminate between taxpayers under similar circumstances. Such a tax system ensure that all persons similarly placed pay the same tax. Impartiality principle applies to both direct and indirect taxes. Notwithstanding, certain circumstances warrant the changing of discriminatory taxation, or discriminating duty by tax laws. For instance, certain mature industries could be targets of discriminatory taxation, which is aimed at enabling infant industries to compete more favourably against them.
v.               Minimum Social Sacrifice principle: The public finance includes both expenditure, which affect economic life of individuals or the community as a whole. The operations of expenditure and on the canon of minimum social sacrifice in respect of taxation, so that benefit and sacrifice are balanced against one another.      

2.7       FEATURES OF GOOD TAX SYSTEM
            According to Anyafo (1996:61-62), a good tax system for any developing country should have most of the following features:
i.                    Be highly canonical: This means that a good tax system should affect fully the principles or canon of taxation discussed in section 2.4 above.
ii.                 Be employment stimulating: A good tax system should not discourage labour and hard work rather it should aim at creating an enabling environment for raising the level of employment and for raising the standard of living of the people.
iii.               Be of common good and Confer Maximum Social Advantages: This means that proceeds from tax are not used for conferring benefits on the very persons or entities from whom the tax is collected. But utilized for the enhancement of common good of the society.
iv.               Minimum Sacrifice: A good tax system should always aim at minimizing the sacrifice on the part of the taxpayer since taxes are levied on incomes and wealth of person.
v.                  Make the Tax Burden tolerable: This means that a tax system should ensure that the tax burden on a community does not exceed its taxable capacity. Besides, a heavy taxation will imply a reduction in level of productivity.

2.8       CLASSIFICATION OF TAXATION
            We have so far dwelt on the concept of taxation, meaning of taxation, tax objectives, features of a good tax system and the standards of taxation. It is the therefore paramount at this juncture to examine the various types or forms of taxes imposed by government on the incomes of individuals, partnerships, or corporate bodies. Taxes are classified into two different approaches. One of the ways is to categorize them based on the variations in the rate of taxes (this recognizes the following types; proportional tax system, progressive tax system, and regressive tax system). The other approach is to categorize them with respect to the method of payment (this involves the following kinds of taxes: Direct taxation and indirect taxation). These two broad categorizes or types could further be broken in various sub-divisions as shown in the figure below. 




Tax Revenue
Fig 2.1
Direct tax system
Indirect tax system
Petroleum profit tax
Tax gain tax
Capital transfer
Company or corporation tax
Personal income tax
Custom duties

Purchase tax

Value added tax (VAT)

Sale tax

Excise duties

CATEGORIES OF DIRECT AND INDIRECT TAX
(a)           Direct Tax System: Direct taxes, in very broad sense, are those taxes levied on a specific individual or institution and the burden of the tax falls on the individuals or institutions concerned. Direct taxes are taxes on income as distinct from taxes levied on the goods and services. However, direct tax cannot be shifted, transferred or passed on someone else. This means that direct tax is a form of tax, the tax impact and the incidence are both on one and same person. Moreso, a direct tax system can be proportional, progressive or combination of any two or all of them.

DIRECT TAX SUB-TYPES
           In Nigeria and most developing countries, the following assortments of direct taxes are recognized;
i.                    Personal Income Tax (PIT): Personal income tax is a tax levied on an individual’s income earned during a certain period of time usually a year. In other words, it is a tax on all kinds of income; rent, wages, interest and profit. Besides, it is one of the oldest forms of tax.
In most West African Countries (Nigeria inclusive), unlike in other developed countries of the world, personal income tax accounts for a very little percentage of total government revenue (except in recent years). The reason for this situation is that, firstly, greater percentage of the population (farmers) engage in subsistence agriculture, hence it is difficult to access their income accurately. Secondary, high rate of illiteracy makes the filling of tax form problematic. Thirdly, too many transfer earnings occur as a result of the extended family system. Moreso, a substantial number of eligible taxpayers evade tax because of poor monitoring system. But with the introduction of PAYE (Pay-As-You-Earn) system, collection of income tax from salary earners becomes easier.    
ii.                 Corporation or Company profit Tax: This is a type of tax or levy imposed on the net profit of business organizations (companies). Company tax, unlike personal income tax provides substantial revenue to the government especially in advanced countries where the company’s tax is relatively easier to collect due to government insistence the submission of tax certificate in respect off any official obligation of government by companies. Corporation tax in Nigeria is within jurisdiction of the federal government. It should be noted that allowance usually granted for expenditure on some capital equipment, plants and machinery when levying company tax.
Corporation Tax includes:
·        Taxes on capital value of assets, exclusive of agricultural land, of individuals and companies, taxes on capital of companies.
·        Estate duty in respect of property other than Agricultural land.
·        Terminal Taxes on goods or passengers, carried by railway, sea or air, taxes on railway fares and freight.
·        Taxes other than stamp duties and transactions in stock exchanges and futures markets.
·        Taxes on sales or purchase of news papers and advertisements published therein.
·        Taxes on sales or purchase of goods other than news papers, where such sale or purchase take place in the course of Inter-State trade or Commerce.

iii.               Petroleum Profit Tax: Due to Nigerians endowment with petroleum and its significance in Nigeria’s public revenue performance, it is necessary to justify the taxation of petroleum profits. The Petroleum Tax Act 1959 No. 5 imposes with effect from 1st January 1959, a tax upon profits from the winning of petroleum in Nigeria. Only oil producing companies or companies engaged in oil exploration business are expected to pay this tax.
iv.               Capital Gain Tax: Capital gains tax was first introduced in Nigeria in 1976 through the capital gain tax decree 1967 No.44. Just as the name implies, it is a tax resulting from sales of capital assets. It is that portion of personal income earned through the sale of such capital items like stocks, bonds and land. Capital gain tax could be measured by the difference between the acquisition price and final sale price of the capital item. For instance, if Mr.


Ugwu buys a landed property for any N60,000 resells it for, say N150,000, for difference of N90,000 which is the gain, is subjected to capital gain tax in Nigeria.

OTHER CLASSIFICATION OF DIRECT TAX SYSTEM
Taxes may be classified with respect to show the burden falls on income earners. A direct tax system can be proportional, progressive and regressive.
i.                    Proportional Tax System: A proportional tax system is one in which the same rate (that is, a flat rate) is charged on every taxpayer irrespective of the amount or size of the income. In other words, the tax paid, irrespective of the type of tax remains a constant proportions of increasing income. Thus, if Mr. A earns say, N2,000 and is required to pay say, 6% of this income as tax, the same 6% will be required as tax to Mr. B. whose income level is N11,000. This implies that a proportional tax is a tax system where the rate of taxation is proportional to income. A proportional tax is shown graphically below.


Y
Fig. 2.2
Y=r
X
Income
Proportional tax function



 
ii.                 Progressive Tax System: Progressive tax entails that tax paid as percentage of income increase more than proportionately as income increases. It derived its argument from the principle of ability to pay and as such it is considerably more acceptable and equitable in the distribution of tax burdens. Due to its equitability, the rate of tax for each income group is different, such that the higher the income status, the higher the rate of tax. It may promote tax avoidance since it assigns greater burden on higher income earners. Supposed Onyiba Okeke who earns N10,000, is required to pay 5% of this income as tax,. Then such a tax system is regarded as progressive if Mrs. Ngozi who earns N25,000 is expected to pay, say 17% of this income as tax. Progressive tax is graphically shown below.
Y
Y=f(x)
Y = x2-1
X
Income
Proportional tax function

iii.               Regressive Tax System: A tax is said to be regressive if the tax paid as a percentage of income decreases as income increases. This means that people with smaller income, pay a greater percentage of their incomes as the compare with people relatively better of (high income earners). This is the opposite of progressive tax and is seen as a downward sloping curve as could be seen some indirect taxes seem to be regressive, most especially those imposes on foodstuffs. For instance, if tax of say, N50 is put on each unit of good and the goods is sold to each at the same price, then the poor as compared with the rich will be paying a higher proportion of their incomes as tax. It can be graphically represented below.
  
Y
Fig. 2.4

Y=f(r/x)
 
X
                                                                                                                                                                       
Income
Proportional tax function
 
 
iv.               INDIRECT TAX SYSTEM
Indirect tax is usually taxes levied on commodities or services as distinct from taxes on income. They are at times referred to as expenditure taxes, outlay taxes or consumption taxes. They are called indirect taxes because the incidence of taxation does not fall directly on the final payers. It could be specific, such that a fixed amount is levied on a commodity per unit or ad-valorem (when the tax imposed is a percentage of the cost of the commodities). Indirect taxes accounts for a greater chunk of the total revenue accruing to the federal government of Nigeria every year.
INDIRECT TAX SUB-TYPES: The subtypes of indirect tax include the following:  
i.                    Import Duties/Tariffs: Import duties or tariffs are taxes levied on imported goods. This accounts for a substantial
part of government revenue in West African. The reason for this is large, on the level of development with these areas. West African countries import variety of commodities, upon which import duties are levied. Import duties can be imposed on ad-valorem basis (when imposed on the basis of specific quantity, weight or size).
ii.                 Export Duties: These are taxes levied on goods, which is produced for exports. In developing countries (Nigeria), these taxes are levied on primary products like cocoa, palm produce, groundnut, hides and skin, cotton, timber and some mineral products. Although the tax yields revenue to the government, it may lead to loss of foreign exchange earnings as a result of reduction in demand following the higher price, which the tax brought. Secondly, it is being argued that high export duties can make producers shift their area of production to home consumed goods, which are free from taxation.
iii.               Excise Duties: These are levied on goods locally manufactured and consumed with the country. Cigarettes, beer, matches and sugar attracts excise duties but with the establishment of many industries in Nigeria reasonable amount is being realized through this form for direct tax.
iv.               Purchase Tax: This is imposed on a range of selected or specified consumer durable (such as car, radio, television etc). The tax is a percentage of the wholesale price and is levied on ad-valorem basis. Purchase tax is not generally common in West African countries but has a wide usage in developed economics.
v.                  Sales Tax: Sales taxes are imposed on specific group of commodities. In 1980s some state governments had introduced sales tax before it was replaced by value added tax in 1993. Sales tax decree 1986 No. 7 provides for a tax to be charged and payable on certain goods and services at rate set out in schedule of the decree. It also specified the mode of collection, remission and penalties for not paying the tax. There are different forms of sales taxes namely: turnover tax, value added tax, manufacturer’s sales tax, retail sales tax, and wholesales sales tax. The first two are multiple-stage taxes. This implies that taxes are levied at all transaction through which communities pass along at all transaction and distribution lines. In other words, the tax is imposed on the commodity each time it changes hand from one dealer to another. For instance, in the production of bread, a multi-stage tax will commence at flour sale stage, at bakery stage and at bread sales stage.
vi.               Value Added Tax (VAT): Value added tax, which is a French version of sales tax introduced in 1954 stated filtering into Nigeria only in 1991 when the federal government set up a group under the leadership of Prof. Edozien to study and review the Nigerian tax system.
Consequently, Dr. Sylvester Ugoh’s group was set up as a parallel group to study the feasibility of introducing VAT as an improvement on the existing sales tax.
According to Ijewere (1993:13) “Value added tax is the tax imposed on value which the supplier or seller of a good and service adds to the goods or services before selling it”. The Federal Inland Revenue Service (FIRS) in their information circular No. 9304 defined value added tax as a multistage tax which is imposed on goods and services as they pass through the various stages in the business chain, from the manufacturing, importation, through wholesale, to relating. The payment is borne be the final consumer because it is included in the selling price. “Value added tax constitutes the difference between the monetary value of output and changes on purchase of goods for resale and fixed assets termed input tax, hence the name input out tax” Jennings (1997:248).
Musgraue, (1980:338) from economic viewpoint defined value added tax “the firm’s gross receipts minus the value of all its purchase of intermediate products as well as its capital expenditure on plant and equipment”. Based on the above definition, value added tax could be summarily said to be a tax paid by a trader in respect of the value, which he adds to goods and services during his stage of the production or the distribution of those goods and services during his stage of the production or the distribution of those goods and services. Of special note is that VAT does not form part either of the cost of goods and services bought by a business or of the revenue earned. In other words, value added tax is the amount expended by the final consumer of goods and services.

2.9a. IMPACT OF TAXATION AND INCIDENCE OF
TAXATION
Taxes are usually levied on an organization or individual. The impact of such a tax falls squarely on the person that pays the initial tax to the tax collecting authority. Furthermore, it is taken to means the unit that bears that initial burden of the tax from its income or wealth. For instance, in the case of an income tax, the impact generally is on the one who finally bears the burden whereas in the case of excise duty, the tax burden is first borne by the manufacturer and so the impact is on him. Thereafter, the manufacturer shits the impact or burden to the consumer.
Once a tax is transferred, there is a final placement of the tax burden and this final resting place is what is referred to as the incidence of taxation. Somehow in this case, incidence of a tax may coincide with the impact of a tax as described above, if there is no shift in tax burden. By shifting the tax forward or backward, the burden of the original tax can be transferred either to the purchaser of the taxed goods of the seller. The tax incidence of a tax falls on a person who cannot shift it any further but rather reimburses the initial taxpayer by paying both the cost of the goods and the tax levied on it. The incidence of a direct tax (example, income tax falls directly on the payer, whereas the incidence of an indirect tax may fall on the seller, the buyer or both of them. Besides, the extent to which the incidence of a tax can be shifted, wholly or in part depends on the nature of the goods taxed and its elasticity of demand.

(b).      INCIDENCE OF TAXATION UNDER DIFFERENT ELASTICITY
Y
S2
i.          Perfect Inelasticity of Demand: In a situation where the demand for a commodity is perfectly inelastic, the incidence of taxation will be borne by the buyer/consumer who will pay the entire tax. Let us explain with a diagram
S2
D
P2
P1
S1
S1
X
 Fig.2.5 
Qty
 

The incidence of tax when demand is perfectly inelastic
ii.                 Perfect Elastic of Demand: If the demand is perfectly, the incidence of the taxation will be upon the seller who cannot shift the tax to the buyer otherwise demand could drop to zero (he would make no sales). To show it diagrammatically.


                                                                                                                            


The incidence of tat when demand is fairly elastic.

2.10    BASIC STRUCTURES AND THE ORGANS OF TAX ADMINISTRATION  
The administration of tax in Nigeria is carried out by different tax authorities with respect to the relevant tax laws which is referred as relevance tax authority (RTA). In view of Agudu (2000:241), RTA is “the authority which as jurisdiction to collect a particular tax in Nigeria”. This RTA could be the Federal Board of Inland Revenue (FBIR), the State Board of Internal Revenue (SBIR) or the Local Government Revenue Committee (LGRC). This duties and functions was properly stipulated in section 100 Personal Income Tax Decree of 1993 as amended by Decree No. 18 of 1998.
Moreover, tax administration in Nigeria is not complete if discussed in isolation of the Joint Tax Board (JTB), the Joint State Revenue Committee (JSRC) and the Body of Appeal Commissioners, which the researcher seen as the supreme bodies are regards to tax administration in Nigeria.
We will not take a look at or into the areas, functions, and duties of SBIR. The administration of the state tax matter is the responsibility of the State Board of Internal Revenue. It was section 85A of Personal Income Tax Act (PITA) of 1993 that provides for the establishment of SBIR, which is known as “the state services”.

2.11                FEDERAL BOARD OF INLAND REVENUE
The federal board of Inland Revenue is the federal tax authority and it was created in law by the companies income tax act.
  
2.12                BRIEF HISTORY
Section 1 of the Companies Income Tax Act 1979 established (or better stated reaffirms the establishment of a board of which the official name is the federal board of inland revenue. It should be recalled that the board was originally established under the 1958 income tax administration ordinance and formalized under section 3 of the companies’ income tax act of 1916.
2.13.   COMPOSITION OF THE BOARD
The act stipulated the members of the board which is as follows:
a.      Chairman who shall be the chief executive chairman of the federal Inland Revenue services. He shall be a person within the service experienced in taxation to be appointed by the president.
b.      The directors and heads of departments of the services.
c.      The office from time to time holding or acting the in the office of deputy or assistant director (that is principal assistant secretary with responsibility for revenue matters in the federal ministry of finance.
d.      A member of the board of the national revenue mobilization allocation and fiscal commission.
e.      Representatives of the Nigeria national petroleum corporation (NNPC) not lower in rank then an executive director.
f.       A director from the national planning commission
g.      A representative of the department of custom and excise
h.      The registrar-general of the corporate affairs commission
i.        The most senior of the officers holing or acting in the posts of legal adviser and legal assistant adviser in the federal inland revenue service and who is available from time to time on duty.
Any five (5) members, one of who must be either the director or a deputy director constitute quorum whenever necessary. The board nominates an officer of the Federal Inland Revenue Service to be the Secretary to the Board. The board can sue and be sued in his official name and may authorize any person to accept service of any document sent, served or delivered to it, not withstanding, that the legal adviser to the board in his professional capacity in an proceedings on which the board is a party and the legal adviser shall not in such circumstances give evidence on behalf of the board.

2.14                DUTIES: The duties of the federal board of Inland Revenue.
a.      To access all limited liability company out Nigeria
b.      To deg with claims objection an appeal of tax payers
c.      To impose penalty for on paid tax
d.      With the consent of the minister responsible for finance to delegate as and if necessary, certain powers to the joint tax board.
e.      To take instructions from the minister of finance.
For avoidance of doubt, the board can only delegate certain specific duties as staged in the schedule of the act to the joint tax board with the consent of the minister. It is provided also that the board can authorizes any person within or outside Nigeria to perform exercise on behalf of the board any power or duty conferred on the board. The minister of finance prescribes the manner in which the board shall render an account of all money collected.
2.15                AIMS AND OBJECTIVES
i.          To make recommendation in respect of assessment of profits in both individuals and limited companies.
ii.         To make recommendations in respect of claims by companies for losses.
iii.       To examine returns, account, documents any other statements of any company received by the firs and the computation of the adjusted profit for tax purposes.
iv.        The board shall advise the government of federation on request in respect of double taxation arrangements concluded.
v.         Shall use its best endeavors to promote uniformity both in the application of the ITMA and in the incidence of tax on individuals throughout Nigeria. 

COMPOSITION OF THE STATE BOARD OF INTERNAL REVENUE   
The state board comprises:
1.      The executive chairman and a deputy chairman who are public offices of the state with rank not below director.
2.      A representative of the ministry of justice not below the rank of senior state council.
3.      A representative of the local government service commission not below the grade of senior personnel officer.
4.      Two other members being chief inspector of taxes or equivalent grade.

FUNCTIONS OF THE BOARD
The functions of the board include:
i.                    Ensuring the effectiveness and optimum collection of all taxes and penalties due to the state government under the relevant law.
ii.                 Making recommendations where appropriate to the joint tax board on tax policy, tax reforms, etc.
iii.               Appoint, promote, transfer, and discipline of employees of the state service.
iv.               General control of management of the service on mattes or policy, subject to the provision of the law setting up the service.
2.16               TAX AS SOURCE OF REVENUE TO THE STATE
There are various sources of income accruable to the statement. These would include:
1.               Personal Income Tax: both under PAYE and assessment.
2.               Income arising from withholding tax-individuals and registered businesses.
3.               Capital gain tax.
4.               Toad tax for vehicles.
5.               Marker fees-where state finance is involved.
6.               Tax from lotteries
7.               Tax from pools betting
8.               Tax from gaming and casino
9.               Business registration fees.
10.          Development levies
11.          Stamp duties on instruments by individuals.  
2.17                ECONOMIC EFFECTS OF HEAVY TAXATION
Among economics of the world, heavy taxation has great effects on individuals, business firms and the economy in general. Due (1963:64), has summarized the economic effects of taxation in terms of its impacts on;
a.      Purchase power.
b.      National income.
c.      Income distribution.
d.      Tax payer behavior.
e.      Resource allocation.
But among other views by Aboyade (1985:59) and Heinson (1974:147) the economic effects of heavy taxation have been put together by Ralph (1998:47) to include:
i.                    Discouragement to Work: Heavy tax on income, mostly if progressive, can be a serious discouragement on the wish of people to work. The incentive to work especially for an over-time is completely killed since heavy taxation makes it appear to be very much more heavily taxed than the rest of one’s income. While indirect taxation may actually increase the desire to work in order to earn the extra amount necessary to pay for the goods.
ii.                 Disincentive to save: Taxation at times kills the incentive to save as one’s income is greatly reduced by the amount of tax paid. Although the ability to save depends on the purpose for which one is saving and also the existing interest rate. But indirect taxation imposed to curb inflation may have the opposite effect (that is, demand for increase wages).
iii.               Diversion of Economic Resources: Differences in taxation of certain commodities cause resources to move from the heavy taxed to more lightly taxed line of business. For instance, purchase taxes on commodities can have directional effects by reducing production thereby brining a diversion of resources from the production of the taxed commodities to the production of some other things.
iv.               Prevention of Investment: Profit tax which is always the way corporations are taxed investment. Investment could be possible only when there is possibility of earning larger profit amidst a reduced tax rate. This in turn could lead to reduction in economic progress.
2.18                PROBLEMS OF TAX ADMINISTRATION IN NIGERIA
i.          Poor Information System: Gross information system in tax administrative environment undoubtedly helps to man tax administration in Nigeria. Efficient information system enables the authorities to network with a view to catching the taxpayer that avoid or evades taxes. 
ii.         Lack of Enumeration: Inadequate tax enumeration by the tax administrators as to build up a strong database of taxpayer is also a militating factor to tax administration and management in Nigeria. Proper tax enumeration aimed at identifying all possible sources of income of taxpayers for tax purposes will help improve mechanism of tax administration in Nigeria.
iii.       Lack of Computerized Operations: Owing to advancement in digital activities are being out these days efficiently and effectively the volumes notwithstanding. Consequently, lack of computerized operations in the management and administration of tax authorities undoubtedly makes the exercise a mirage in the system.
iv.        Poor Funding: Apart from gross under of the officers of the board of internal revenue also militates against good tax administration in that revenue generating agencies fend to suffer more that the expenditure establishment were founds available exceed the resulting in uncontrolled LPO issues near year end.
v.                  Lack of Information facilities: Facilities for tax officers also account for inefficient tax administration and management in Nigeria. A visit to some of the tax officers will reveal that when NEPA goes off, the offices remain in the dark as there is either no generator or where there is a generator, they cannot afford to purchase diesel at the current black market rate. You can hardly see them on the phone due to lack of telephone system resulting in poor information system that would enable tax authorities to network with a view to catching the taxpayer that avoids tax.
vi.               Instability in Tax System: One of the core-problems of tax administration in Nigeria is gross instability in tax system. Going from the tax history gotten from some of the states in the need for some measure of instability in the system. It is only were there is sustained stability without allowing the introduction of politics and sentiments that an enduring good tax system may be entrenched in the country.           

CHAPTER THREE
RESEARCH METHODOLOGY
The aim of this chapter is to enable the reader know the type of research method used in the collection of data which the researcher considered relevant to the study. It further discusses preliminary search for relevant information in order to determine the feasibility of the study, the method and tools of data collections and describes the population and sample.

3:1      RESEARCH DESIGN
The research design that was used in this research work is Survey Method, which is considered as the most appropriate and suitable.
The questionnaire was designed in Check List Form and also given to the respondent with instructions on how to tick the answers to the questions. The researcher employed tabular format in data presentation and analysis, Chi-square statistical tool was used in testing the hypothesis, in which the decision was based on. Furthermore, the chapter focuses on the decision criterion for the validation of the research hypothesis.

3:3      AREA OF STUDY
This study is based on the evaluation of Ebonyi State Tax System as a major source of revenue generation with emphasis on Impact of Taxation on the Internally Generated Revenue of Ebonyi State, the researcher made use of Ebonyi State Board of Internal Revenue, Abakaliki, Professional Accountants, Civil Servants and the Public from various walks of life in carrying-out research work.

3:4      SOURCES OF DATA
The research carried out a preliminary appraisal of the study area and a check on the availability of research materials. Due to the nature of the study, the research used both primary and secondary data.
PRIMARY DATA
Primary data were collected through personal interview with the Tax Director at Ebonyi State Local Tax Office. Also, questionnaire was administered to the Staff of  the State Board of Internal Revenue Services, Abakaliki. Even, data was collected through interview with the senior staff of the State Board of Internal Revenue, Abakaliki.


SECONDARY DATA
In this study, the researcher made it clear in the above that secondary data was also used in data collection. Therefore, these are the data collected from various sources of materials that make up the research project work. The sources of secondary data involves Professional Journals, Textbooks, Research Materials, Published Guidelines, etc

3:5      POPULATION OF THE STUDY
The population of the study was drawn from the State Board of Internal Revenue (SBIR). The population embraces the senior staff of State Board of Internal Revenue Abakaliki.
The senior staff were chosen because the researcher believes that the category of staff must have enough experiences in tax operations in the state. The study site was chosen with a population of one hundred staff of State Board of Internal Revenue (SBIR). The sample size was drawn from the population.

3:6      SAMPLE SIZE
It is paramount to select an appropriate sample size in order to achieve accurate results. It is misleading to assume that the bigger the sample, the better the study. The level of precision required in the estimates, the intrinsic level of viability of the factor to be estimated, the homogeneity of the population, the prior information about the population, the number of categories of data to be analyzed and the level of aggregation of the results are some of the factors that should be considered to have a desirable sample size. The more precise the estimates are desired to be smaller the standard error (Eboh, 1998:53-54).
In this study, the researcher used Taro Yamini Formular
n   =      N     
            1+N(e)2
Where:
n = Desired Sample Size
N = Total Population
e = Accepted Error Limit (0.05)
The State Board of Internal Revenue (SBIR) Abakaliki has population of 100 Senior Staff. In determining the sample size using Taro Yamini Formular, the total number of staff = 0
SOLUTION
n   =      N     
            1+N(e)2
Where: N = 100
e = (0.05)2 = 0.0025
n   =    100     
            1+100(0.0025)
n   =    100     
               1.2
n   =      80
From the above calculation, the researcher will use Eighty (80) sample size for the study.

3:7      DESIGNING AND ADMINISTRATION OF QUESTIONNAIRES
Twenty (20) questions were administered through the questionnaires in the study. The questions were designed to be in check list form. They were administered to the staffs of State Board of Internal Revenue and Ministry of Finance, Abakaliki. As earlier stated in this work, the questionnaires were administered here because the respondents had full knowledge of the study and are literates too.

3:8      ANALYTICAL METHOD/TECHNIQUE
The analysis of the primary and secondary data was done using
Chi-square (x2), it’s a test of goodness of fit. It is a statistical distribution that can be used to test if an observed series of values differ significantly from what was expected.
On the other hand, the bigger the difference between observed and expected values, the bigger the square of these differences and therefore the bigger chi­-square becomes.
Data will be tested at 5% level of significance and chi-square table will equally be used in calculation of (x2). Secondly percentages will equally be used in the analysis of data. To make the work more comprehensive, a tabular format will be used.
The formula for chi-square (x2) distributions is
(x2) =∑(oi – ei)2 
                   ei
when,
x2 = Calculated Chi-square value
  = Summation
Oi = Observed
ei = Expected Frequency


CHAPTER FOUR
                                                            FINDINGS
For a systematic presentation and appropriate analysis, the questions have been considered sequentially, that is, questions are grouped in the order of significance or relevance. The answers to the questionnaire and hypotheses as formulated in chapter one have been tested by employing the statistical tools of chi-square distribution. A tabular format has equally been used in which responses are displayed and summarized.

4.1       DISTRIBUTION AND RETURN OF QUESTIONNAIRES
Eighty (80) copies of questions were administered to the respondents and same number was returned.
Therefore the sample size for this study is eighty (80)
TABLE 4.1 CLASSIFICATION OF RESPONDENTS BY SEX
SEX
NO.OF RESPONDENTS
PERCENTAGE (%)
MALE
49
61
FEMALE
31
39
TOTAL
80
100

Source: published report from Ebonyi State Board of Internal Revenue, Abakaliki.
The table above shows that a large portion of the sample population was drawn from the male population which represents about 61% of the total respondents, while the female population represents 39% of the respondents.

TABLE 4.2    AGE CLASSIFICATION OF REPRESENTS
AGE
NO.OF RESPONDENTS
PERCENTAGE (%)
20-30
9
11
31-40
31
39
41-50
24
30
51 and above
16
20
TOTAL
80
100

In the table above, employees within the ages of 20-30 are 9 representing 11%, employees within the range of 31-40 are 31 representing 39%, employees within the range of 41-50 are 24 representing 30% and employee from the ages of 51 and above are 16 representing 20% of the total respondents.

TABLE 4.3                ACADEMIC QUALIFICATIONS AND                               DISTRIBUTION OF RESPONDENTS
QUALIFICATION
NO.OF RESPONDENTS
PERCENTAGE (%)
O’LEVEL
11
14
NCE/OND
13
16
HND/BSC
40
50
M.SC/MA/PhD
16
20
TOTAL
80
100

In the table above, it shows that of the 80 respondents, 11 0f the employees are O’level holders while 13 of them are NCE/OND holders, HND/B.SC are 40 and M.SC/MA/PhD holders are 16 representing 14%, 16%, 50%, and 20% respectively.



TABLE 4.4 WORKING EXPERIENCE DISTRIBUTIONS OF RESPONDENTS
YEARS
NO.OF RESPONDENTS
PERCENTAGE (%)
1   – 5 
11
11
6 – 10
20
25
ABOVE 10
51
64
TOTAL
80
100


QUESTION 5, TABLE 4.5
DISTRIBUTION OF THE QUESTION, CAN TAXATION BE USED TO GENERATE REVENUE TO THE GOVERNMENT OF EBONYI STATE?
RESPONSE
NO. OF REPONDENT
% OF RESPONDENT
YES
60
75
NO
20
25
TOTAL
80
100

The above table shows that the greater number of respondents, sixty(60), representing 75% agreed that Ebonyi State Government can generate revenue through taxation, while twenty (20) respondents, representing 25% disagreed that Ebonyi State Government can generate revenue through taxation.

QUESTION 6, TABLE 4.6.
RESPONSE TO THE QUESTION OF THE POOR IMPLEMENTATION OF TAX POLICY IS RESPONSIBLE FOR THE LOW RATE OF REVENUE GENERATION IN EBONYI STATE.
RESPONSE
NO.OF RESPONDENT
% OF RESPONDENT
YES
49
61
NO
25
31
INVALID
6
8
TOTAL
80
100

The table shows that of the 80 respondents, 49 of them representing 61% agreed that the absence of a good tax policy is responsible for the low rate of revenue generated in the Ebonyi State while 25 representing 31% did not agree and 6 representing 8% could not arrive at a conclusion.

QUESTION 7, TABLE 4.7
RESPONSES ON IF LACK OF ADEQUATE INTERNAL CONTROL HAS CONTRIBUTED IMMENSELY TO THE POOR PERFORMANCES OF THE EBONYI STATE BOARD OF INTERNAL REVENUE IN THE GENERATION OF REVENUE.
RESPONSE
NO.OF RESPONDENT
% OF RESPONDENT

YES
55
69
NO
20
25
INVALID
5
6
TOTAL
80
100


TABLE 4.7    Shows that 55 representing 69% of the respondent agreed that there is inadequate internal control or the hindering the performance of the Ebonyi State Board of Internal Revenue in the generation of revenue while 20 of them representing 25% did not agreed and 5 representing 6% could not arrive at any conclusion.

QUESTION 8, TABLE 4.8
IS THE AVOIDANCE AND EVASION TAX RESPONSIBLE FOR THE LOW RATE OF REVENUE GENERATED IN EBONYI STATE THROUGH TAX?
RESPONSE
NO.OF RESPONDENT
% OF RESPONDENT

YES
50
63
NO
21
26
INVALID
9
11
TOTAL
80
100

The above shows that out of the 80 respondents, 50 representing 63% accepts that they experienced cases of Tax Evasion and that the problem is genuine, while 20 representing 26% does not accept that the problem of Tax Evasion exists and 9 representing 11% could not arrive at any conclusion.

QUESTION 9, TABLE 4.9
CAN PRODUCTION AND CONSUPTION OF COMMODITY BE CHECKED THROUGH TAXATION IN EBONYI STATE?
OPTIONS
NO.OF RESPONDENTS
PERCENTAGE (%)

YES
57
71
NO
23
29
TOTAL
80
100

From the above analysis, total number of fifty seven (57) respondents, representing 71% agreed that production and consumption commodities can be achieved through taxation, while twenty three (23) respondents, representing 29% disagreed that production and consumption commodities can be achieved through taxation in Ebonyi State.

QUESTION 10, TABLE 4.10
CAN TAX BE USED TO CORRECT DEFICIT BALANCE OF PAYMENT?
OPTIONS
NO. OF RESPONDENT
PERCENTAGE (% )
YES
65
81
NO
15
19
TOTAL
80
100

The responses above shows that absolute majority of the respondents, that is sixty five (65), representing 81% agreed that deficit balance of payment can be corrected through good tax practices and total of fifteen (15) respondents representing 19% disagreed that deficit balance of payment can be achieved through good tax practices.

QUESTION 11, TABLE 4.11
DOES TAXABLE PERSONS IN EBONYI STATE RESPOND TO TAX?
OPTIONS
NO OF RESPONDENT
PERCENTAGES (%)
YES
35
44
NO
45
56
TOTAL
80
100

Going by the analysis above, it is obvious that thirty five (35) respondents, representing 44% agreed that taxable persons in Ebonyi State do responded to tax while forty five (45) respondents, representing 56% disagreed that taxable persons in Ebonyi State does not respond to tax.

QUESTION 12, TABLE 4.12
DOES THE GOVERNMENT AGENT RESPONSIBLE FOR TAX COLLECTION REMIT ALL MONEY COLLECTED TO THE GOVERNMENT?
OPTIONS
NO. OF RESPONDENT
PERCENTAGES (%)
YES
37
46
NO
43
54
TOTAL
80
100

From the above result, thirty seven (37) respondents, representing 46% agreed that government agents responsible for tax collection do remits all money collected to the government, while total of forty three (43) respondents representing 54% disagreed that government agents responsible for collection of tax do remit money collected to the government.

QUESTION 13, TABLE 4.13
DOES TAXABLE PERSONS IN THE EBONYI STATE PAY THEIR TAX AS AT WHEN DUE?
RESPONSE
NO. OF RESPONDENT
% OF RESPONDENT
YES
40
50%
NO
40
50%
TOTAL
80
100%
The table shows that 40 representing 50% and 40 representing 50% (i.e.) half agreed and disagreed respectively to the basis of assessment.

QUESTION 14, TABLE 4.14
IS THE TAX PROCEEDS JUDICIOUSLY UTILIZED IN EBONYI STATE?
OPTIONS
NO. OF RESPONDENTS
PERCENTAGE (%)
YES
57
71
NO
23
29
TOTAL
80
100

From the above analysis, the researcher discovered that the total number of fifty seven (57) respondents, representing 71% agreed that tax proceeds are judiciously utilized in Ebonyi State, while twenty three (23) respondents, representing 29% disagreed that tax proceeds are judiciously utilized in Ebonyi State.

QUESTION 15, TABLE 4.15
DOES INADEQUATE DATA AND FINANCIAL INFORMATION AFFECT THE EFFECTIVE AND EFFICIENT COLLECTION OF TAX BY YOUR ORGANIZATION?
RESPONSE
NO. OF RESPONDENTS
% OF RESPONDENT
YES
77
96
NO
3
4
TOTAL
80
100

TABLE 4.15 Shows that 77 of the respondent representing 96% are of the opinion that inadequate data and financial information affect the effective and efficient collection of tax by the organization while 3 representing 4% maintained that inadequate data and financial information is not after the effective and efficient collection of tax by the organization.

QUESTION 16, TABLE 4.16
RESPONSE TO IF TAX HELP IN THE CREATION OF EMPLOYMENT IN EBONYI STATE
RESPONSES
NO. OF RESPONDENTS
% OF RESPONSES
YES
55
69
NO
25
31
TOTAL
80
100

Table 4.16 shows that of the 80 respondents, 55 of them representing 69% are of the opinion that tax helps in creating employment in the Ebonyi State while 25 representing 31% do not share that view.

QUESTION 17, TABLE 4.17
IS TAX AN INSTRUMENT FOR THE REDISTRIBUTION OF INCOME IN THE EBONYI STATE?
RESPONSE
NO. OF RESPONDENTS
% OF RESPONSE
YES
25
31
NO
55
69
TOTAL
80
100

Table 4.17 shows that 25 respondents, representing 31% agreed that tax is an instrument for the redistribution of income in the Ebonyi State while 55 representing 69% do not agreed.

QUESTION 18, TABLE 4.18
IS THE ADMINISTRATIVE EXPENSES INCURRED IN COLLECTING TAX VERY HIGH COMPARED TO AMOUNT OF TAX COLLECTED?
RESPONSE
NO. OF RESPONDENTS
% OF RESPONDENT
YES
41
51
NO
39
49
TOTAL
80
100

In the table above, 41 of the respondent, representing 51% are of the opinion that the administrative expenses incurred in collecting tax very high compared to amount of tax collected while 49 representing 49% do not share the same view.

QUESTION 19, TABLE 4.19
RESPONSE TO QUESTION OF THE EBONYI STATE BOARD OF INTERNAL REVENUE, ABAKALIKI (SBIR) ARE FAIR IN THEIR ASSESSMENT
RESPONSE
NO OF RESPONDENTS
% OF RESPONDENT
YES
75
94
NO
5
6
TOTAL
80
100

This table indicate that of the 80 respondents, 75 representing 94% agreed that SBIR, Abakaliki are fair in their assessment while 5 representing 6% of the total respondent did not agreed.

 QUESTION 20, TABLE 4.20
RESPONSE TO QUESTION OF THE PAYE SYSTEM HAS A SIGNIFICANT CONTRIBUTION ON EBONYI STATE ECONOMY
RESPONSE
NO OF RESPONDENTS
% OF RESPONDENT
YES
25
31
NO
55
69
TOTAL
80
100

This table indicate that of the 80 respondents, 25 representing 31% agreed that PAYE system has a significant contribution on Ebonyi State economy, while 55 representing 69% did not agreed that PAYE system has a significant contribution on Ebonyi State economy.

4.3          HYPOTHESIS TESTING TECHNIQUES
Testing a statistical hypothesis involves the results computed from random sample to test or verify certain claims and assumptions made about the true value of an unknown parameter or about the nature of the population distribution.
These claims, which may or not be true, are called Statistical Hypothesis.
A Null Hypothesis (Ho) is any prepositional statement or claim made about the value of an unknown parameter, which is subjected to nullification or rejection if there is no sufficient evidence to back it up. The Null Hypothesis (Ho) is rejected whenever the probability of the observed sample or more extreme samples, under Ho is less that the computed Chi-Square (X2). An alternative hypothesis (Ho) is any other hypothesis, which negates or contradicts the Null Hypothesis (Ho), such that if (Ho) is rejected, (Hi) will be accepted and vise-versa.
The formula that should used in this study is Chi-Square (X2) formula.
The formula is hereby stated as follows:
X2 = ∑ (O – E)
               E
Where:           X2 = Chi-Square calculated
                        O = Observed Frequency
                        E = Expected Frequency
                        O – E = Deviation
                        (O – E)2 = Deviation Squared

Therefore: E = Row Total x Column Total
                                             Grand Total
                          E = RT x CT
                                      GT

4:4 TESTING OF HYPOTHESIS
      TESTING OF HYPOTHESIS ONE (1)
H01: poor implementation of tax policy is not responsible for        the low rate of revenue generated in Ebonyi State.
H1: poor implementation of tax policy is responsible for        the low rate of revenue generated in Ebonyi State.
STATISTICAL DISTRIBUTION IN RELATION TO QUESTION SIX (6)
MANAGEMENT LEVEL
TOP
MIDDLE
TOTAL
Yes
20
29
49
No
18
7
25
Invalid
5
1
6
Total
43
37
80

DEGREE OF FREEDOM: using Chi-Square test, degree of freedom (df) = (C – 1)(R – 1) where C is the number of column and R is the number of rows in the contingency table.
(df) = (C – 1)(R – 1)
      = (2 – 1)(3 – 1)
      1 x 2 = 2
Significant level = 0.05
Critical value = 5.991 (from table)
X2 = ∑ (O – E)2
              E
O = Observed Frequency
E = Expected Frequency

Expected Frequency
E = Row Total x Column Total = RT x CT
              Grand Total                    GT
(1)              49 x 43 = 26.34                          (4) 25 x 37 = 11.56
    80                                                                      80

(2)              49 x 37 = 22.66                          (5) 6 x 43 = 3.22
    80                                                                      80

(3)              25 x 43 = 13.44                          (6) 6 x 37 = 2.78
    80                                                                      80

O
E
0 – E
(O – E)2
(O – E)2
E
20
26.54
-6.34
40.1956
1.5260
29
22.66
6.34
40.1956
1.7739
18
13.44
4.56
20.7936
1.5471
7
11.56
-4.56
20.7936
1.7988
5
3.22
1.78
3.1684
0.9809
1
2.78
-1.78
3.1684
1.1397
TOTAL



8.7664

DECISION RULE:
Since the computed value, which is 8.7664 is greater than Critical Value, which 5.991, hence, we reject the Null  Hypothesis (H01) and accept Alternative Hypothesis (H1) and conclude that “ poor implementation of tax policy is responsible for the low rate revenue generated in Ebonyi State”.



TESTING OF HYPOTHESIS TWO (2)
H02: Lack of adequate internal control is not responsible for the poor performance of the Ebonyi State Board of Internal Revenue in the generation of revenue.
H2: Lack of adequate internal control is responsible for the poor performance of the Ebonyi State Board of Internal Revenue in the generation of revenue.
STATISTICAL DISTRIBUTION OF RESPONSE IN RELATIION TO QUESTION SEVEN (7)
MANAGEMENT LEVEL
TOP
MIDDLE
TOTAL
Yes
25
30
55
No
15
5
20
Invalid
4
1
5
Total
44
36
80

DEGREE OF FREEDOM:
(df) = (C – 1)(R – 1)
      = (2 – 1)(3 – 1)
      1 x 2 = 2
Significant level = 0.05
Critical value = 5.991 (from table)
Expected Frequency
E = Row Total x Column Total = RT x CT
              Grand Total                    GT

(1)              55 x 44 = 30.25                          (4) 20 x 36 = 9.0
    80                                                                      80

(2)              55 x 36 = 24.75                          (5) 5 x 44 = 2.75
    80                                                                      80

(3)              20 x 44 = 11.0                             (6) 5 x 56 = 2.25
    80                                                                      80

O
E
0 – E
(O – E)2
(O – E)2
E
25
30.5
-5.25
27.5625
0.9112
30
24.75
5.25
27.5625
1.1136
15
11.0
4.0
16.0
1.4545
5
9.0
-4.0
16.0
1.7778
4
2.75
1.25
1.5625
0.5682
1
2.25
-1.25
1.5625
0.6944
TOTAL



6.5197

DECISION RULE:
Since the computed value, which is 6.5197 is greater than Critical Value, which 5.991, hence, we reject the Null  Hypothesis (H02) and accept Alternative Hypothesis (H2) and conclude that “ lack of adequate internal control is responsible for poor performance of the Ebonyi State Board of Internal Revenue in the generation of revenue”.





TESTING OF HYPOTHESIS TWO (3)
H03: The evasion and avoidance of tax has no significant contribution on the low rate of revenue generation in Ebonyi State through tax.
H3: The evasion and avoidance of tax has no significant contribution on the low rate of revenue generation in Ebonyi State through tax.
STATISTICAL DISTRIBUTION IN RELATIION TO QUESTION  EIGHT(8)
MANAGEMENT LEVEL
TOP
MIDDLE
TOTAL
Yes
23
27
50
No
16
5
21
Invalid
7
2
9
Total
46
34
80

DEGREE OF FREEDOM:
(df) = (C – 1)(R – 1)
      = (2 – 1)(3 – 1)
      1 x 2 = 2
Significant level = 0.05
Critical value = 5.991 (from table)
Expected Frequency
E = Row Total x Column Total = RT x CT
              Grand Total                    GT

(1)              50 x 46 = 28.75                          (4) 21 x 34 = 8.92
    80                                                                      80

(2)              50 x 34 = 21.25                          (5) 9 x 46 = 5.18
    80                                                                      80

(3)              21 x 46 = 12.08                          (6) 94 x 34 = 3.82
    80                                                                      80

O
E
0 – E
(O – E)2
(O – E)2
E
23
28.75
-5.75
33.0625
1.15
27
21.25
5.75
33.0625
1.5559
16
12.08
3.92
15.3664
1.2721
5
8.92
-3.92
15.3664
1.7227
7
5.18
1.82
3.3124
0.6395
2
3.82
-1.82
3.3124
0.6971
TOTAL



7.2073

DECISION RULE:
Since the computed value, which is 7.2073 is greater than Critical Value, which 5.991, hence, we reject the Null  Hypothesis (H03) and accept Alternative Hypothesis (H3) and conclude that “The evasion and avoidance of tax has no significant contribution on the low rate of revenue generation in Ebonyi State through tax”.

CHAPTER FIVE
DISCUSSION AND SUMMARY OF FINDINGS
5.1       DISCUSSION
Based on the result analysis, findings were made which revealed that hypothesis earlier developed were true.
As earlier stated, the main objective of the study is to expose problem areas which affects the generation of revenue in the Ebonyi State through tax with the view to offering suggestion on how revenue can be generated through tax in Ebonyi State.
The researcher observed that the staff of the Ebonyi State Board of Internal Revenue, Abakaliki were involved in share malpractices capable of causing economic harm to Ebonyi State.
Questions asked to the general public revealed that not many are aware of the functions of the Ebonyi State Board of Internal Revenue, Abakaliki.
Personal interview also revealed that taxable persons do not present the Ebonyi State Board of Internal Revenue, Abakaliki, with adequate data and functional information and this greatly affect the effective and efficient running of the organization.
It also revealed that not many aware of the existing tax policies and regulation.
They are of the opinion that there are malpractices of tax income source. They believe that taxable people e.g Civil Servant are actually taxed but revenue generated are not actually submitted in full to the Ebonyi State Board of Internal Revenue.
There is also the problem of tax evasion. The state of Ebonyi State Board of Internal Revenue, Abakaliki, I agreed that they experience the problem of tax evasion to a great extent and also that of taxable source exploiting the loopholes in tax laws. The legislation which guides against or checks tax evasion are not adequate or not available at all and even those available are not effective. Members of the public interviewed, revealed that their unwillingness to pay tax was because they derive little or nothing from government in terms of benefit but tax experts faulted this assertion by saying that tax is a compulsory levy and do not have a ”quid pro quo” (no exchange). It should be discharged whether or not one enjoys any benefit.

5.2       SUMMARY OF FINDINGS
This chapter represents the summary of findings from study. The researcher focused on the Impact of Taxation on the Internally Generated Revenue of Ebonyi State in which Ebonyi State Board of Internal Revenue, Abakaliki, was picked as a case study. The study has successfully completed and summary of findings was realized through the use of primary and secondary data.
Primary data was collected through personal interview with the tax director in Abakaliki tax office.
Also, questionnaires were administered to staff of Ebonyi State Board of Internal Revenue, Abakaliki.
Secondary data was gathered from the published guidelines by the Ebonyi State Board of Internal Revenue and libraries.
Summary of findings was drawn from analysis of the collected data. The researcher convincingly believes that the data presentation analysis reflect the sincere views and knowledge of the respondents on the impact of taxation on the internally generated revenue of Ebonyi State. The researcher chose eight samples in which eight copies of questionnaires were distributed to Ebonyi State Board of Internal Revenue, Abakaliki and 100% was returned.
In order to make the work more comprehensible and to facilitate analysis, a tabular format was used in which responses were displayed and summarized as follows: from the analysis of respondents in chapter four, the researcher discovered that the majority of respondents were in support that taxation can be used to achieve good number of things economic development in Ebonyi State such as: creation of employment, generation of revenue to the government, correct deficit balance of payment, consumption of commodities and inflation control, restriction of certain trades, but few respondents were not supporting that tax can be used to achieve these things in Ebonyi State.
Secondly, majority of the respondents were in the opinion that taxable persons in Ebonyi State does not respond to tax.
In the same view, few respondents did not support that government agents do remit all money collected from tax payers.
Finally, good reasonable number of respondents was in the opinion that tax proceeds are judiciously utilized in Ebonyi Stat e.
From the foregoing discussion, following findings became apparent:
1.      That poor implementation of tax policy is responsible for the low rate of revenue generation in Ebonyi State.
2.      That lack of adequate internal control is responsible for the poor performance of Ebonyi State Board of Internal Revenue in the generation of revenue.
3.      That the evasion and avoidance of tax has significant contribution on the low rate of revenue generation in Ebonyi State.
These data and interview that was analyzed in chapter four was carefully collected from the respondents and also, it was accurately analyzed in order to obtain correct information that would enable the researcher to solve the research problems.

CHAPTER SIX
CONCLUSION AND RECOMMENDATIONS
6.1 CONCLUSION
Taxation is all about the system through which revenue is being generated by the government. In the absence of subscribers, shareholders or underwriters, government must compulsorily levy the citizens to generate enough funds for meeting the cost of providing services.
A national tax system should guarantee revenue adequate to cover the expenditures of government at all levels. This is the main reason for which government ingeniously seek out new sources of revenue generation, if the revenue generated is not enough to run pressure on the government. The requirement does not imply that occasioned deficit or surplus is evil, it implies that revenue should not always lag behind expenditure.
A tax system is required to be flexible and elastic enough to produce additional revenues without unduly disrupting the economic process.
Based on the results obtained in chapter four, it will be wise to conclude that tax practices are very necessary in Ebonyi State economy. The study revealed that taxation can play a good number of roles in the economy particularly in Ebonyi State. From the responses, about 59% - 84% respondents confirmed that they have witnessed tremendous improvement in Ebonyi State since the inception of tax system. From results gotten from tested hypothesis, it is obvious and certain that economic activities can be enhanced through good and appropriate tax practices in Ebonyi State.
On utilization, the study revealed that Ebonyi State utilizes tax revenue judiciously. From all indications, tax cannot be undermined because majority of the respondents has confirmed to have witnessed improvement in the areas of provision of social amenities by the government such as rural electrification, road maintenance, pipe-bourn water and health care centers. Government provided funds for the provision of these amenities from collected tax revenue in order to enhance the standard of living of the citizens.
On remittance, the study revealed that government agents do remit all tax proceeds, while few respondents from the questionnaires indicated that the agents do not remits all tax proceeds to the government.






6.2             RECOMMENDATIONS
Based on the results of the research findings, the following recommendations are made:
1.      Going by the increase demand for infrastructures and improved standard of living of the citizens of Ebonyi State in particular and the nation in general, the researcher suggested that certain steps need to be taken to make tax operations more effective in order to generate more revenue for the government to meet its obligations.
2.      It is obvious that tax strives in a productive economy, in line with the statement, the researcher recommended that Ebonyi State should create a more enabling business environment to encourage investors in the productive or real sector mostly in Abakaliki, Afikpo and most other local government areas of the state to boost tax yield and as such more improve desired infrastructures.
3.      The researcher also recommended that more local tax offices should be opened in all local government headquarters for easy accessible collection of tax and it will also boost returns.
4.      The researcher also recommended that tax proceeds should be used in physical development project that would motivate taxable persons respond more favorably to tax.
5.      For effective and efficient records, the researcher recommended that government should install strongly check and internal control system in different local tax offices to ensure total and accurate remittance of tax proceeds.
6.      The government should set-up strict enforcement of tax laws so as to discourage and punish tax evasion.
7.      The government should check the exercise of the fraudulent tax officials as to increase the yield of PAYE as variant income tax.
8.      Finally, the researcher recommended that the government should employ literate personnel to handle tax matters in the state; this will lead to swift tax operations.

6.3             RECOMMENDATIONS FOR FURTHER STUDY
The researcher recommended that in further study, it will be pertinent to look into the formations of tax organs like Ebonyi State Board of Internal Revenue (ESBIR), Joint Tax Board (JTB) and its functions.
The researcher also recommended that in further study, it will be necessary to examine the tool of fiscal policy and their applications to the economy once taxation is a major source of revenue to the government.
The researcher also recommended that in further study, certain sections of the Value Added Tax Decree 102 of 1993 be amended to stand the test of time particularly Section 1, sub-section (1) and (2) which provides for such goods and services that are “vetable”.
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