1.1 BACKGROUND OF THE STUDY
Personal income tax (PIT) according to Decree No.4 of 1993 is a tax imposed on the income of individuals, communities, and families. It is also charged on the income due to a trustee or an estate Akhidime (2013).Since the enforcement of Personal income tax through decree no.4 of 1993,amendments have been made to this decree almost on 10years basis all in the effort to overcome challenges that are identified with the actualization of the objectives of tax regime.
It has been evident that personal income tax in Nigeria had remained the most unsatisfactory, disappointing and problematic of the tax system in Nigeria Akhidime (2013).The Problems associated with personal income tax have invariably influenced the spate of its amendment as deliberate efforts towards addressing the problems identified with it from time to time.
The self assessment tax regime is a system of tax administration whereby the tax payer is granted the right by law to compute his own tax liability,Pay the tax due (at a designated bank ) and produces evidence of tax paid at the time of filing his tax return at the tax office, on due date. On the other hand, the tax authority has the responsibilities of enablement to and checks on the tax payers to ensure a compliance with tax administration process. This means that the self assessment scheme is characterized by partnership and share roles and responsibilities between the tax payer and the authority (Appah, 2013).
Self assessment method of payment of taxes was actually introduced in Nigeria in 1992, following the enactment of the appropriate law in 1991.Initially, self assessment was not mandatory for every tax payer until 1998. Even now self assessment filing has continued to be incentivized, albeit, inadvertently, considering that it was mandatory. To encourage self assessment Kiabel and Nwikpasi (2001) listed some incentives attached to self assessment filers to include; non- payment of provisional tax; installment payment of tax due in not more than six installment payment to terminate latest by 30th November in the year of assessment; 1 per cent of tax payable is allowed as bonus; returns (Accounts and computations ) can be filed within 8 months (an additional two months) of the company’s year end. Malik (2010) summarized that, self assessment requires tax payers to understand the tax system and procedures to possess adequate tax knowledge, to be aware of their compliance obligation and to prepare to comply. This work aims to study personal income tax assessment and collection method in Anambra State, Nigeria.
1.2 STATEMENT OF PROBLEM
Low tax compliance is a matter of serious concern in many developing countries and Nigeria is not an exception. This is because it limit the capacity of government to raise revenue for developmental purposes (Torgler, 2003 ). This implies that the higher the revenue, the more likely government will put in place developmental plans for the enhancement of the living standard of the people. This is because, when people pay taxes, more revenue accrues to the government.
The rate of corruption on the part of tax officials is alarming as most of them connive and collude with suppose tax payers to evade and avoid tax. Sometimes the tax officials are not properly trained on the modern ways of tax administration.
More so, the cost of collecting tax in Anambra State ( both social and economic cost ) is too high to the extent that, if left unchecked, the cost may soon outweigh the benefit or value derived from such operation and that will not be appropriate for the system.
1.3 OBJECTIVES OF THE STUDY
The main objective of this study is to critically analyze personal income tax assessment and collection method in Anambra state, Nigeria. Specifically, it tends ;
1. To determine whether sole proprietors prepare their expected tax using self assessment procedures.
2. To know if organization compute personal income tax on workers in line with their existing act/law.
3. To evaluate the effectiveness of assessment procedures in the collection of personal income tax.
1.4 RESEARCH QUESTIONS
1. Do sole proprietors prepare their expected tax using self assessment procedures?
2. Do organization compute personal income tax on workers in line with their existing act/law?
3. Has assessment procedure been effective in the collection of personal income tax?
1.5 RESEARCH HYPOTHESIS
This study will test the following hypothesis:
(1) Ho: Sole proprietors do not prepare their expected tax using self assessment procedures.
Hi : Sole proprietors prepare their expected tax using self assessment
(2) .Ho : Organisations do not compute personal income tax on workers in line with their existing Act/law.
Hi : Organisations compute personal income tax on workers in line with their existing Act/law.
(3) Ho : Assessment procedures has not been effective in the collection of personal income tax.
Hi : Assessment procedures has been effective in the collection of personal income tax.
1.6 SIGNIFICANCE OF THE STUDY
This research will be of immense benefit to the government, tax administrator as well as the tax payer;
To the government, it will help them in developing a more viable method of tax collection using minimum force. It will also exposed them to the effect of people perception of government responsiveness on tax compliance.
In the same vein, it will make the tax administrator to be more oriented towards seeking results through coorperation rather than cohesion alone and prefer to see themselves as service providers rather than strict law enforcer.
On the other hand, this study will educate the citizens on the need for them to pay tax, as it will help the government in providing necessary amenities.
Finally, this research will be of benefit to future researcher in the field as it will contribute empirical study conducted in this field.
1.7 SCOPE AND LIMITATION OF THE STUDY
This study on the critical analysis of personal income tax assessment and collection method in Anambra state, Nigeria is a topic which requires much coverage, this study will be carried out at Anambra state internal revenue services due to financial constraint, difficulty on assessing relevant materials as well as short time allotted in this study.
1.8 OPERATIONAL DEFINITION OF TERMS
Personal income tax (PIT): It is a tax levied on individual’s income, be it an employee or self employed person, in order to generate revenue, allocate scarce resources, redistribute income and stabilize the economy.
Tax authority: This is a body of persons responsible under the law to impose tax on income of individuals.
Year of assessment: This is the income tax year. Financial/Decree No. 2 of 1981 as amended defines it as a period of 12 months beginning from the 1st January of a particular year to the 31st December of the same year.
Tax compliance: Willingness to pay tax without coercion or threat.
P-A-Y-E : Pay as you earn, is a system of collecting personal income tax due on employment income ie salaries, wages, pension, bonuses, commission, director remuneration etc.
Direct tax : Otherwise known as self assessment tax. They are those tax levied directly on individuals who are not under employ.
Tax evasion : It is a deliberate act on the part of the tax payer not to pay tax due.
Tax avoidance : Tax avoidance is a way of identifying the loopholes in the tax laws and then taking advantage of such loopholes to reduce tax payable.