CHAPTER ONE

INTRODUCTION 

1.1 BACKGROUND OF THE STUDY

In developed and developing countries there are wide range of taxes and levies that affect individuals and companies, citizens and foreigners, manufacturers and marketers, workers and pensioners. In Nigeria taxes range from petroleum profits taxation to tenement rate imposition,  and taxes are imposed at different levels to enable the government provide certain essential services and facilities to the population. Some of the issues involved are legal, economic, others are political, sociological, while others are historical.

The study will begin the appraisal by examining related taxes and levies applicable in Abia State and the legal instruments governing them. The government plays the piper and dictates the tune. Ogundele (1999:8) states that government intervention in an economy takes many forms. The degree of intervention differs from country to country, depending on the form of political model adopted in the governance of the country. The intervention referred to is tax, which in a well planned economy affects every aspect of human endeavour.  On the subject of intervention which differs from one form of government to another, and the form of intervention, they either intervene for the wrong reason or adopt the wrong strategies when intervention is justified. Mbanefo (1999:21) posits that the implications of government tax intervention are many and will be expatiated in this study.

Anyanwu (1997) opines that fiscal administration is tax policy making and collection as well as expenditure programming at all levels of government. It involves the controlling, organizing, directing, monitoring, planning and management of government revenues and expenditure. Furthermore, the long term role of fiscal administration is to collect all registered taxes at minimum cost, as well as execute government programmes as efficiently as possible by avoiding waste.

1.2  STATEMENT OF THE PROBLEM

Among the many problems confronting tax administration in Abia State, is how to ensure voluntary compliance on the part of the tax payers. Tax being a commodity nobody want to buy, the tax man is hardly liked by tax payers who perceive him as government toll collector. The problem of the tax man is worsened by poor performance of most state governments in terms of provision of amenties for the tax paying public. Lack of confidence and mutual distrust in government represented here by the tax man, gave rise to voluntary compliance difficulties. Tax laws in Nigeria are complex and difficult for the common taxpayer to understand, and some cases are problematic even for literate official. In addition to lack of  understanding, many taxpayers are unaware of the existence of certain tax. This couple with the lack of information, laziness of the tax official, uncooperative taxpayers and the habit of ‘quick –fix’ solutions-encourages the use of the best judgement approach. This may be a manifestation of the poor tax education and weak fulfillment by tax authorities of their responsibilities with regard to public awareness. Ocheoha (2000) asserts that tax is a commodity nobody will want to buy if buyers are given the opportunity of choice because tax is an imposition. He explains that government imposes taxes primarily to raise the revenue required to cover the cost of general administration and defense.  He contend that the cost of general administration includes paying of personnel emoluments, salaries, wages of leaders or those in authority, their aides, as well as the salaries of civil servants, police and military personnel.

Today the purposes of taxation have assumed a wider dimension hence the government uses it as a veritable tool of administration. Therefore, the status and standing of taxation as a subject worthy of study cannot be overemphasized. Abudulrazaq (2002) asserts that the way Nigerian taxation should be studied and practiced remains a broad and demanding one. He suggested there must be technical competence with a positive group of primary sources that the competence can be tested in many ways regarding form, elementary computation to planning transactions. Tax is imposed by those in authority for a variety of reasons and charges. Musgrave (2004) posits that taxes and charges are withdrawn from the private sector without leaving the government with liability to the payee. However, tax is a compulsory imposition, whereas charges and borrowing involve voluntary transactions. In other words, a major distinguishing factor of tax from other charges is that tax is not a quid proquo expenditure, thus implying that a tax payer should not demand or expect a commensurate exchange of goods or services for the tax paid.