CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THY STUDY
It has been popularly known and an established fact to the people in the state that the era of economic boom of gigantic proportion which was popularly nicknamed the OIL BOOM is order and therefore, a call for the need for increased drive for revenue generation has become inevitable. Now states have generally intensified their efforts for generation of taxes in their various state in orders supplement whatever they are able to grab from the federal government as their own allocation known as share national cake. This augmentation of federal government revenue generation by the imposition of taxes on the individuals, companies and commodities, if efficiently managed and carried out will help the state government eschews shackles of the economic recessive bondage which is the main problem disturbing the increased standard of living of individuals anywhere in the world therefore, it is the main objectives of the study to take a critical examination and evaluation of the taxation as a source of revenue for government (Enugu-State) and after the analysis the research is cleared to find the pervading problems and therefore a well planned recommendations for the reformation of taxation system, is formulated. This work focus to the need for increased drive for revenue in the state and problems militating against such optional revenue generation.
It may be recalled that ENUGU state is the state carved out of the former Anambra state which is one of the states created from the former eastern region although the capital still remain that of ENUGU. It was well understood from history that the some Eastern region was the last to accept and fall to the regulations as laws of the taxation system introduced by the Europeans who colonized Nigeria. Generally, there are known form of taxation in Nigeria, the first form of taxation in Nigeria which was tagged
‘’COMMUNITY TAX’’ was introduced in 1904 by lord Lugard, this replaced the community homage paid usually in kind and by service to village and clan heads. After 1904 there are some other taxation ordinance, most important being the one of 1917, that is
NATIVE REVENUE ORDINANCE
which applied only in Northern Nigeria was extended to southern Nigeria (ABEOKUTA) in 1918 but it did not get to the then Eastern Nigeria until in 1928, the modified farm of this ordinance which was introduced in eastern region in 1928 cropped up disaffection and was treated with total rejection which culminated into the famous ABA women’s riot of 1929. In 1937, there was the enactment of the native direct tax ordinance for Nigerians and a colony tax ordinance for the Europeans and companies. In 1940 and 1943, the foundation of our modern tax laws was laid down even though they lacked uniformity among them. However, with the instruction of federalism, the application of the 1940 ‘’direct tax ordinance’’ became a regional affair. The 1940 direct tax ordinance empowered all the region to tax their people according to local government system. With the introduction of Nigerian constitution order in council in (1954), power was given to each region to tax on a regional level and the eastern region acted immediately on this power and introduced the finance law (1956), which took effect from 1st April 1956. This law of generation into operation. Prior to the independence in 1958, the RAINSMAN fiscal commission introduced the personal income tax in Nigeria. This recommendation was embodied in the Nigeria constitution 1960 and formed the basis of the income tax manager act 1961 which is the modern act of income taxation for individuals and companies.
To complete the act, Eastern Nigeria passed the financial law 1962. This law fills in the gaps in the act particularly those aspects for which the federal legislative could not legislate. The law although passed in 1962 was made retroactive from April 19661, to agree with management act. The finance 1956 was amended in1956, 1957, 1960 and 1961. These amendments are no longer of importance since coming into eect of the finance law 1962. The passage of this has also rendered inoperative, section 11A& 15 (4A) of the old law which dealt with employees who had other sources of income in addition to their employment income. The finance law, 1962 was amended in 1960, 1966 &1967. These amendments in 1962 were mainly corrections of minor draing errors. It is the 1966 amendments (edict 37/1966) that made changes worthy of note. The regions were allowed to legislate for matters not dealt with by ITMA to suite local conditions. This was why the finance law caps 53, laws of eastern, 1962 which took retrospective effect from 1st April, 1961 formed the basic tax statute upon which the present day tax laws of Enugu state were made. It remains however subject to the ITMA (1961) which has nation-wide application with joint tax board was supervisory authority.
1.2 STATEMENT OF PROBLEMS
In discussing the problems of personal income tax, generation and administration in Enugu, it will be useful to distinguish these broad types of income tax. Well the problems hinder the provision of various services ranging from security to economic services for the citizens. The problems could be easily listed below:
i. Lack of staffs and inputs such as stationary, vehicles and efficiency legislation to cover the tax officials.
ii. Problems of locating the tax payers.
iii. Difficulty in identifying the tax payers.
iv. Some tax payers are hostile to tax officials.
v. Lack of appropriate incentives to officials
vi. Inadequate public enlightenment to tax payer.
vii. Lack of adequate information for tax payers sources of income.
viii. Some tax payers feel that the money they paid for tax is no longer used for social amenities as a result, reluctant to pay tax all.
1.3 OBJECTIVES OF THE STUDY
Government has different reasons for imposing taxes, more especially income tax. They have primary objectives as well as secondary objectives. The primary reason of income taxation is to provide government with revenue to enable them carry out the functions of taxation apart from being a useful instrument of fiscal and socio-economic policy. The main secondary objectives of income taxation are as follows:
i. The relation of this imposition of personal tax throughout the federal and state government may be avoided.
ii. To achieve uniformity in the incidence of personal tax in Nigeria.
iii. The determination of federal authorities over technical and other issues arising from personal taxation in which interest of these government might otherwise be in conflict.