An Evaluation of PIT Collection Mechanisms in Nigerian Local Governments: A Study of Ikeja LGA
- Project Research
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Background of the Study
The collection of Personal Income Tax (PIT) is critical for local governments in Nigeria, as it serves as a primary source of revenue to fund grassroots development initiatives. Efficient PIT collection mechanisms are essential for ensuring that local governments have the financial capacity to provide public goods and services. However, many local governments, including Ikeja Local Government Area (LGA) in Lagos State, face significant challenges in implementing effective collection systems. These challenges include inadequate infrastructure, weak enforcement mechanisms, and a lack of transparency in the process (Afolabi & Dada, 2023).
Ikeja LGA, being an economic hub, has substantial revenue potential from PIT. Despite this, the local government struggles with issues such as tax evasion, limited taxpayer education, and inefficiencies in tax administration. The decentralization of Nigeria's tax system further complicates PIT collection at the local level, leading to overlaps and conflicts between federal, state, and local authorities (Ogunleye, 2024).
This study evaluates the effectiveness of PIT collection mechanisms in Ikeja LGA, focusing on the challenges and opportunities for improving the system. By identifying best practices and systemic inefficiencies, the research aims to provide recommendations for enhancing local government revenue generation.
Statement of the Problem
Local governments in Nigeria, including Ikeja LGA, face persistent issues in collecting PIT effectively. The lack of modern technology, insufficient manpower, and weak enforcement frameworks contribute to poor collection rates. Additionally, the informal nature of many economic activities within Ikeja LGA creates challenges in capturing all taxable individuals within the system (Okafor et al., 2023). These inefficiencies result in revenue shortfalls, limiting the LGA’s ability to provide essential services such as waste management, primary healthcare, and road maintenance.
This study investigates the existing PIT collection mechanisms in Ikeja LGA, identifying the systemic challenges that hinder effective collection and exploring opportunities for improvement.
Objectives of the Study
- To analyze the effectiveness of PIT collection mechanisms in Ikeja LGA.
- To identify the challenges faced by Ikeja LGA in implementing PIT collection.
- To propose strategies for improving PIT collection mechanisms in Ikeja LGA.
Research Questions
- How effective are the current PIT collection mechanisms in Ikeja LGA?
- What challenges does Ikeja LGA face in implementing PIT collection?
- What strategies can improve PIT collection mechanisms in Ikeja LGA?
Research Hypotheses
- The current PIT collection mechanisms in Ikeja LGA are significantly ineffective.
- Challenges such as inadequate infrastructure and enforcement significantly hinder PIT collection in Ikeja LGA.
- Improved strategies and technology can significantly enhance PIT collection in Ikeja LGA.
Scope and Limitations of the Study
The study focuses on PIT collection mechanisms in Ikeja LGA during the period of 2023 to 2025. Limitations include potential difficulty in accessing comprehensive data from tax authorities and the informal nature of some taxable activities within the LGA.
Definitions of Terms
- PIT Collection Mechanisms: The methods and processes used by government agencies to gather personal income tax revenues.
- Local Government Area (LGA): The smallest administrative division in Nigeria responsible for grassroots governance.
