1.1 THE BACKGROUND TO THE STUDY
In Nigeria, the major revenue earning sources is from crude oil. The revenue is shared between the Federal and state governments, based on the revenue allocation formula.
Non oil producing states are not favoured by this formula because they are excluded from 13% of whatever figure that is to be shared by the states which is kept aside for the oil states. The recent global economic melt down has affected the crude oil revenue of the Federal Government negatively. This has also affected the share of each state in the same manner.
In Enugu State, the failure of the past governments to meet up with their social contract with the people was mainly attributed to this insufficiency of federal revenue allocated to them. For this reason, the state government will only succeed if it generates enough revenue internally. Many authors including Okpe  and Ola [1981:6] all agreed that income tax is one of the major sources of revenue of all governments in Nigeria. Adenola [2007:57] stated that taxation is a major source of revenue for all tiers of government and the extent of social service need is such that government must tap into all revenue sources to be able to provide these services: Nzotta [2007:40] also agreed that “different tiers of government [Federal, State and Local] rely on taxes as a major source of revenue for the implementation of their programmes”
The body responsible for the administration of income tax in any state is the state Board of Internal Revenue. It is the emphasis on Enugu State to boost its internal revenue generation that motivated the author into searching for areas of internal revenue sources that have not been properly harnessed. The income tax of the self-employed persons in the state ranked first in the list that readily came to the mind of the researcher. The researcher’s interest is to study the existing structure in the State Board of Internal Revenue with a view to:
- Find out to what extent the self employed are contributing to the internal revenue generation of the state government.
- The problems associated with the proper assessment and collection of income tax of the self-employed in the state.
- To proffer solutions to the identified problems so as to enable the state government tap the abundant revenue in this sector and use it for the provision of social amenities to the people.
1.2 STATEMENT OF THE PROBLEM
Kevin Gager [2005:10] reported that the former President of Nigeria, Chief Olusegun Obasanjo on his official visit to Enugu State on February 7, 2005, acknowledged that “Enugu State was very low on the scale of federal revenue allocation amongst states in Nigeria”. The past President’s Statement will be understood better when we consider the federal revenue worth N158.03 billion shared by the states in Nigeria in June 2008 as was posted to the federal ministry of Finance Websites by the Hon. Minister of State for Finance, Remi Baballa. Out of this figure, Rivers State got N20.47 billion [13%], Akwa Ibom got N13.66 billion [8.6%], Enugu State got N2.8 billion [1.8%] while Ebonyi State got the least by getting N2.25 billion [1.4%].
Despite this meager Federal revenue, Enugu State government is still trying its best in the provision of social amenities to her people. This is possible because the state is working very hard in generating revenue internally. This internal revenue sources include taxes, fees, levies etc. The personal income tax is a major contributor to this internally generated revenue.
The body responsible for the administration of personal income tax in Enugu State is the Enugu State Board of Internal Revenue. The board has among others the following functions:
- To ensure effectiveness and optimum collection of all taxes due to the government, and
- Doing all such things deemed necessary and expedient for the assessment and collection of the tax and accounting for money so collected.
This growing need for the state to generate more revenue internally in order to sustain its developmental projects has necessitated the researcher’s interest in studding the existing structure in the state Board of Internal Revenue in relation to the administration of income tax of self employed persons in the state with a view to finding out:
- To what extents are the self employed persons contributing the needed revenue to the coffers of the state government?
- To what extent has the board performed its assigned functions stated above?
1.3 THE OBJECTIVES OF THE STUDY
The study seeks to achieve the following specific and general objectives. The general objective of the study is to boost the internal revenue generation of the state government by harnessing income tax revenue from the self employed.
The specific objectives include the following:
- To determine the level of contributions made by the self-employed persons to the internal revenue generation of the state.
- To evaluate the present assessment and collection machinery of the self-employed in the state Board of Internal Revenue.
- To ascertain problems militating against the proper assessment and collection of income tax of the self employed.
- To identify loopholes [if any] in the present system that give room to tax evasion, and
1.4 RESEARCH QUESTIONS
The following research questions were formulated to give guide to the study:
- Are there proper machinery for the assessment and collection of income tax of self-employed persons in the state?
- Has the board of internal revenue got adequate trained staff to do this job?
- Are there effective measures put in place to identify tax defaulters in the state?
- Are the self-employed aware of the penalties for non-payment of income tax?
- To what extent have the self-employed workers contributed to the Internal Revenue generation of Enugu state for the past ten years?
1.5 HYPOTHESES OF THE STUDY
Considering the problem and objective of the study, the following hypotheses were formulated to provide a guide and direction to the study.
- Lack of income tax assessment of self-employed workers in Enugu state has significant impact on their rate of income tax payment.
- Lack of adequate measures to identify income tax defaulters in Enugu state have significant impact on the rate of income tax payment of self-employed workers in the state.
- Lack of full implementation of penalties for income tax evasion has significant impact on the rate of income tax payment of the self employed workers in Enugu state.
1.6 SIGNIFICANCE OF THE STUDY
The significance of the study lies in its contributions to both practical and academic spheres of knowledge. The study is intended to critically analyze the problems militating against the proper assessment and collection of income tax of self-employed persons in Enugu state and proffer solutions to the identified problems.
- To the board of internal revenue, the result of the study will help to identify the loopholes in its machinery of assessment and collection of income tax from self-employed persons in the state and hence block them for effective and efficient performance of its duties.
- To the state government, the improved performance of the state board of internal revenue will lead to more revenue generation to the government.
- To the citizens and people living in Enugu state, the improved revenue generation, will lead to higher standard of living through provision of Infrastructural facilities to them by the state government.
- To other researchers who are working on the similar or related topics, this work will serve as a reference point to them.
1.7 SCOPE OF THE STUDY
The study is limited to income tax of self-employed persons in Enugu state. Other forms of taxes are not within the scope of this study.