The Impact of Blockchain Technology on Tax Administration in Nigeria: A Case Study of the FIRS
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Background of the Study
Blockchain technology, a decentralized and immutable ledger system, has gained widespread attention across various industries due to its potential to revolutionize the way transactions are recorded and verified. Its application in tax administration holds promise for increasing transparency, reducing tax evasion, and improving efficiency in revenue collection. In Nigeria, where tax compliance remains a challenge and where tax evasion and fraud are prevalent, the adoption of blockchain technology could significantly enhance the capabilities of the Federal Inland Revenue Service (FIRS).
The FIRS, which is responsible for tax collection in Nigeria, has faced challenges such as tax fraud, inefficient data management, and issues with verifying taxpayer information. Blockchain’s ability to provide secure and transparent transaction records could offer a solution to these problems by ensuring that tax payments are accurately recorded and easily traceable. In addition, blockchain could help automate tax processes, reducing human error and the potential for corruption within tax administration.
Several countries have begun exploring or implementing blockchain for tax purposes, and there is a growing interest in its potential to improve tax collection systems in developing countries like Nigeria. However, there is limited research on how blockchain could specifically impact tax administration in Nigeria, particularly in terms of enhancing the effectiveness of the FIRS. This study will explore the potential benefits and challenges of adopting blockchain technology in the Nigerian tax system.
Statement of the Problem
While blockchain technology has shown significant potential in other sectors, its application in tax administration in Nigeria remains largely unexplored. The FIRS continues to face challenges with tax fraud, inefficient data management, and poor taxpayer compliance. The problem lies in determining whether blockchain can effectively address these challenges, streamline tax processes, and improve transparency within the tax administration system.
This study aims to assess the potential impact of blockchain technology on tax administration in Nigeria, particularly with respect to its ability to improve the FIRS’s efficiency and effectiveness in revenue collection.
Objectives of the Study
- To assess the potential benefits of using blockchain technology in Nigeria's tax administration system.
- To examine the challenges the FIRS may face in adopting blockchain technology.
- To evaluate the impact of blockchain on improving tax transparency and reducing fraud within the FIRS.
Research Questions
- How can blockchain technology improve the efficiency of tax administration in Nigeria?
- What challenges does the FIRS face in implementing blockchain technology in its operations?
- What impact can blockchain have on reducing tax fraud and improving transparency in tax collection?
Research Hypotheses
- H0: Blockchain technology will not significantly improve the efficiency of tax administration in Nigeria.
- H0: The FIRS will not face significant challenges in adopting blockchain technology for tax administration.
- H0: Blockchain technology will not have a significant impact on reducing tax fraud and improving transparency in the Nigerian tax system.
Scope and Limitations of the Study
The study will focus on the potential application of blockchain technology within the FIRS’s tax administration processes. The period of analysis will span from 2018 to 2025, with a focus on existing case studies of blockchain implementation in other countries. Limitations include the availability of data on ongoing or planned blockchain initiatives by the FIRS and the relatively nascent stage of blockchain adoption within Nigeria’s tax system.
Definitions of Terms
- Blockchain Technology: A decentralized and secure digital ledger system that records transactions across multiple computers, ensuring transparency and reducing the risk of fraud.
- Tax Administration: The processes and systems used by a government agency to collect taxes, enforce tax laws, and manage taxpayer information.
- FIRS: The Federal Inland Revenue Service, the Nigerian government agency responsible for tax collection and administration.
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