AN ASSESSMENT OF INFORMATION TECHNOLOGY AND ITS EFFECTS ON THE EFFICIENCY OF TAX ADMINISTRATION IN NIGERIA

AN ASSESSMENT OF INFORMATION TECHNOLOGY AND ITS EFFECTS ON THE EFFICIENCY OF TAX ADMINISTRATION IN NIGERIA

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Background Of The Study

One of the oldest and most important sources of government revenue is taxation. Nigeria's taxation history extends back to the pre-colonial era. Various systems of taxation existed during this period, such as compulsory services, contributions of goods, money, labor, and the like, among the various kingdoms and ethnic groups and tribes controlled by the Obas, Emirs, and others, in order to support the Monarch and also for community development (ICAN, 2010).

When the late Lord Lugard implemented a community tax in Northern Nigeria in 1904, it was the first time that taxation as we know it was implemented in Nigeria. Later, he made revisions that culminated in the 1917 Native Revenue Ordinance. In 1918, an amendment ordinance was approved that expanded the 1917 law's powers to Southern Nigeria. The original ordinance included Abeokuta in Western Nigeria and Benin City in Midwestern Nigeria, and it was expanded to include Eastern Nigeria in 1928.

In a contemporary sense, however, taxation in Nigeria first began in 1940. On April 1, 1943, a more progressive income tax Ordinance No.29 of 1943 Cap92 went into effect, assessing Europeans across the country as well as Africans living in Lagos.

The ordinance was administered by the Commissioner, who was appointed by the Governor-General by notice in the Gazette (now known as the Federal Republic of Nigeria Gazette). The Federal Board of Inland Revenue assumed the position of the Commissioner under the 1st Schedule, Ordinance 39/58. (Ola, 1974).

In recent years, tax administration in Nigeria has been devolved to various tax authorities, depending on the type of tax involved. In general, there are three (3) tax authorities: i. Federal Inland Revenue Service Board, ii. State Internal Revenue Service Board, and iii. Local Government Authorities.

The Nigerian Tax Administration's organs, on the other hand, are mentioned below:

i.The Federal Inland Revenue Service Board ii.The State Internal Revenue Service Board iii.The Joint Tax Board iv. The Local Government Revenue Committee v. The Joint State Revenue Committee ICAN (2010, ICAN, ICAN, ICAN, ICAN, ICAN

The enabling legislation for each sort of tax will usually include a section defining the organization responsible for administering the tax. The following are the different enabling tax laws:

1. Company Income Tax Act, Cap C21, LFN 2004, as modified, which levies tax on the revenues of firms other than corporations and enterprises involved in petroleum activities Upstream operations).
2. Petroleum Earnings Tax Act, Cap P13 LFN 2004, which levies a tax on profits from petroleum operations.
3. Education Tax Act, Cap E4 LFN 2004, which levies an education tax on the assessable earnings of Nigerian firms.
4. Personal Income Tax Act, Cap P8 LFN 2004, as modified, which levies a tax on individual and corporate earnings.
5. Value Added Tax Act, Cap V1 LFN 2004, as amended, levies tax on incorporated firms and other business organizations' supply of goods and services (unless those explicitly exempted or zero-rated).
6. v.Stamp Duties Act, Cap S8 LFN 2004, which imposes duties on a list of specified instruments.
7. vii.Capital Gains Tax Act, Cap C1 LFN 2004, which levies a tax on capital gains from the sale of chargeable assets (ICAN, 2006).

A fundamental success component for every system, according to Alhaji Kabir M. Mashi (2019), is its perspective on administrative concerns. Currently, the tax administration in Nigeria, namely Enugu state, is beset by a slew of restricting problems, including:

1. Weak administrative facilities/administrative failures, which might lead to scenarios like tax evasion and avoidance.
2. Mismanagement and corruption on the part of tax authorities.
3. The financing issue that has a detrimental influence on efficiency and performance of tax collection agencies.
4. Appropriate records from the informal economy are lacking.
5. V.Inability to locate all taxable individuals. 1988 (Bird).
6. There is no adequate system in place to pursue tax evasion cases.

Enugu State's quick expansion and development resulted in an increase in population as well as an increase in the number of businesses. Due to the rise of business and the resulting breadth of operations and fiscal scale, tax planning and management have become increasingly complicated processes. Given the volume of data that must be processed in order to evaluate and compute tax liabilities, it is critical that both taxing authorities and businesses use proper computer programs to improve tax planning and administration.

The introduction of information technology in this period has had a significant impact on both private and public sector economic and corporate activity. While it has created opportunities that were previously unknown or ignored, it has also saved many organizations millions of dollars in ongoing fraud through its applications. The use of information technology in Nigeria's tax administration has become more vital, since it allows for quick, easy, and accurate computation, storage, and presentation/ retrieval of data/ records.

Certain computer programs have been developed to make the calculation of large amounts of data easier. One of the most common examples are Microsoft Excel (Electronic Spread Sheet) and Microsoft Access (Database). Peachtree Accounting, PeopleSoft System, SQL Database, QuickBooks, Management Information Processing System, Quikens, and other database and accounting products provide for quick calculation and computation of an individual's or a company's tax liability.

The world has increasingly become a global village, and the use of information technology in nearly every area of the economy has formed a nexus between Nigeria and the rest of the globe. As a result, in order to increase the efficiency of tax administration in Nigeria, it will be prudent to employ information technology from the beginning of tax collecting to the end of the process.

​​​​​​​Statement Of The Problem

For many years, Nigerian tax administration has been beset with issues, the most of which can be traced back to a lack of or ineffective use of information technology in tax administration.

The tax administration in Enugu State has yet to completely embrace the usage of information technology for record keeping. There is evidence of a manually created database of tax payers, according to BECANS Business Environment Report 1(15) (2007). Manual compilation entails the usage of files and folders to store data. When documents are held in this manner for an extended period of time, retrieving them might be challenging. Records kept in this manner can be extremely untrustworthy since they are readily manipulated.

Another significant issue is the mechanism of tax collecting. Revenue collectors are frequently hostile because they employ unconventional techniques of tax collection, particularly at the local government level.

Furthermore, utilizing manual procedures, identifying taxable people has proven to be a mammoth undertaking.

The widespread use of information technology in tax administration in Nigeria would be a welcome development in the system, as it would considerably improve tax administration efficiency in Enugu state in particular and Nigeria in general.

Objective Of The Study

This research work is aimed at achieving certain objectives which are stated below:

1. To determine if effective tax administration leads to an increase in tax base;
2. To ascertain whether inefficiency in tax administration creates room for tax evasion;
3. To find out whether the application of information technology increases efficiency in tax administration;
4. To know whether poor remuneration of tax personnel affects the dispensation of taxation.

Research Questions

1. Does effective tax administration lead to an increase in tax base?
2. Does inefficiency in tax administration create an avenue for tax evasion?
3. Does the application of Information technology increase efficiency in tax administration
4. Does poor remuneration of tax personnel affect the effective tax administration?

Research Hypotheses

Based on the objectives, the following researches were formulated:

Hypothesis One

H0- Effective tax administration does not lead to an increase in tax base.

H1- Effective tax administration lead to an increase in tax base.

Hypothesis Two

H0- Inefficiency in tax administration does not create and avenue for tax evasion.

H1- Inefficiency in tax administration create and avenue for tax evasion.

Hypothesis Three

H0- The application of information technology does not increase efficiency in tax administration.

H1- The application of information technology increase efficiency in tax administration.

​​​​​​​Significance Of The Study

it is hoped that this work will form a major catalyst to stimulate the initiation of a proper legislative process that will regulate tax administration in Nigeria, particularly in  Enugu State.

Furthermore, effective implementation of information technology in tax administration will be of immense benefit to tax authorities. The use of information technology will invariably reduce work hours, enhance efficiency  and  reduce  opportunities for corrupt practices in the system.

Finally, it is believed that the information generated from this research will enhance the tax payers  awareness  on  tax issues like tax incentives and penalties for tax related offences such as tax evasion.

Scope And Limitation Of The Study

As this research work is focused on the effect of information technology on the efficiency of tax administration in Nigeria, with particular reference to Enugu State, the scope of the study will be limited to the activities of Enugu State Board of Internal Revenue

In  the   course   of   carrying   out   this   research   work,   certain limitations were encountered, they include the following:

1. Lack of access to certain materials needed for the research.
2. Lacks of co-operation from institutions as certain tax institutions were not forthcoming with their record
3. Certain libraries did not have contemporary materials for the researcher to work with.

Operational Definition of Terms

In order to avoid confusion surrounding the words, the following technical terms have precisely been defined, as they relate to the context of the research work.

Tax- An amount of money levied by a government on its citizens and used to run the government, country, a state, a county or a municipality/ local government.

Tax  Evasion- This is an act whereby the taxpayer can achieve the minimization of tax through illegal means. It involves outright fraud and deceit.

Tax Avoidance- This arises in a situation where a taxpayer arranges his financial affairs in a form that will make him pay the least possible amount of tax without breaking the law.

Ordinance- A law or rule made by an authority such as a city government.

Stakeholders- Those persons/ entities that contribute to,  and derive benefits from, the country‟s tax system. This includes every Nigerian citizen and resident, corporate entities, government at all levels and government agencies.

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