The major objective of this research is to assess the trends of revenue generated via the companies’ income tax and by implication to evaluate the performance of the Federal Inland Revenue Service with respect to the administration and collections of companies’ income tax in Nigeria.

The researcher proposed two hypotheses towards addressing the study’s objectives and both primary and secondary sources of data are used in generating the necessary data for that purpose. These data are presented and analyzed by the use of tables, chi-square and regression model of analysis.

It is discovered that companies’ income tax revenue generated has been improving significantly from year to year. The estimates produced by the regression analysis show that the variance between actual companies’ income tax and expected are wide and that companies’ income tax generation and administration had a significant impact on the development of the Nigerian economy between 2010 and 2019. This study has also identified factors militating against effective assessment and collection of companies’ income tax in Nigeria.

In furtherance to the above findings, the researcher recommends that government should provide condusive business environment for the revamping of businesses in the various industries of the economy to further increase companies’ income tax revenue generation.

Government should also articulate macro-economic measures designed to stimulate growth and stability in order to forestall any negative variation that might affect the companies’ income tax revenue generation in any year.

History shows that man has to pay tax in one form or the other, that is, either in cash or kind, initially in the olden days to the chieftains and later on to a form of organized government. Before the oil boom in Nigeria, income from taxation was the major source of revenue to all level of governments. Therefore, no system can be effective whether that of the federal, state or local government unless it enjoys some degree of financial independence. This financial independence can be achieved by direct taxations, collection of levies, fines and fees, among others.

Aji (1997) in his contribution defines taxation as “compulsory contribution to support government, levied on persons, property, income, commodity and transaction mostly proportional to the amount on which the contribution is levied”. Ishola (1999) also defines taxation as “compulsory payment made by the individuals and companies to the government coffer as a percentage of their annual income primarily with the aim of raising revenue and secondly with the aim of directing the factors of production towards government objective for that period”.

Taxation, therefore, is an imposition of levies by government on persons, companies and property for the purpose of raising funds for economic growth and development of any country. Government on its own cannot function or perform without funds. Government needs a lot of money, which can only be obtained through taxation and other sources. The general public on its part expects services especially social services to be provided by the government through its agencies. As a result, the citizens and companies are made to be suppliers of these funds through various tax laws, acts, legislations, edicts and decrees. The existence of an efficient tax system is a necessity for every economy because it provides the necessary revenue for economic growth and development.

Public financing is the responsibility of the government and it has to encourage or develop sources of internal revenue to enable it provide the necessary social amenities to the growing population of the nation or state.

Taxes have been used as economic policy instruments of government to either reduce or increase investment in the economy in general. Hence, tax can be used as a source of stimulating investment in a desired sector of the economy.

It can also be used as a means of encouraging foreign investors to come and invest in the country. It is through taxation that the government of third world countries could finance the various government agencies and parastatals with direct government involvement. It, therefore, follows that government development projects will depend almost entirely on the level of revenue that it can generate from her citizens.

Aji (1997) emphasizes that irrespective of the ideological background on which a nation’s economy is based, taxation in its various forms have always been the major sources of revenue to the government. Enough revenue is needed for a nation to develop economically, socially and politically. Therefore, taxation becomes more important when the issue of developing countries with crude oil is considered.

Company income tax is a compulsory levy by government on the profits made by the registered companies in Nigeria. This type of tax is a sub-set of direct taxes because the incidence of payment and burden of companies income tax are borne by the companies and not transferable to third parties. The relevant tax authority charged with responsibility of assessing and collection of companies income tax among others is the Federal Inland Revenue Services (FIRS) under the supervision of a board called the Federal Board of Inland Revenue (FBIR).

The Companies Income Tax Act is a federal law operated by the Federal Inland Revenue Service. In view of the tremendous contribution of the companies income tax to the federal common pool account called the Federation Account over the years, there is need to assess its contributions further. This study is an assessment of the revenue performance of companies’ income tax in Nigeria for a period of ten (10) years from 2010 to 2019. Presently, the three tiers of government rely heavily on the allocation from the federation account to finance the personnel costs, overhead expenditures and to embark on developmental projects. It is against this background that the study is focused on finding out whether there is positive or negative trend in the revenue being generated from the companies’ income tax as well as its contributions to the economic development of Nigeria during the period under review.

The major source of government revenue in Nigeria today is the proceeds from the sale of crude oil and gas in both local and international markets. As a matter of fact, this has been the situations in Nigeria for a long time.

Unfortunately, the incomes generated by the federal government from other sources have not been in any way comparable to the oil revenue. This development has impacted negatively on the ability of the government to perform it constitutional, social and economic responsibilities.

The dependence on the oil revenue is so much that other sources of revenue, like agriculture, manufacturing, exports and others have been neglected. At various times in the life of the country, there have been calls on the government to diversify the revenue base of the economy by exploiting other sources of revenue in order to promote economic development and reduce dependence on oil.

In the last one decade, the Nigerian economy has witnessed a number of reforms as a result of inadequacy of funds. For example, since the inception of the Obasanjo’s administration (1999 – date), there have been more moves to downsize the public service than any other administration in Nigeria. The Babangida’s administration (1985-1993) began the efforts towards the privatization of public utilities. This trend has continued under successive administrations with objective of reducing the financial burden on the federal government and repositioning the economy.

In addition, basic infrastructure like roads, basic health care, portable water, electricity and basic education are seriously lacking in many places. And where they exist, most of the times, they are nothing to write home about. Inadequacy of funds has been blamed by the Federal, state and local governments for their inability to discharge the duties in a very satisfactory manner.

The problems are explained, in part by:
(a) The incessant embezzlement of revenue generated from companies income tax by some staff of the Federal Inland Revenue Service through diversion of tax cheques into private individual bank account.

(b) Collusion by government tax officials with some companies to issue under assessment of tax in order to pay less tax.

(c) Outright abandonment to pursue vigorously the collection of taxes after initial issuance of notice of assessment.

(d) The collapse of many companies as a result of unfavourable economic situations and social infrastructure especially the issue of energy.

It is against these backgrounds that the study is being carried out so as to determine whether there is positive or negative trends in revenue generation from companies income tax in the country during the period under review as a result of these problems.

The objectives of this study are:
a. To evaluate the performance of the Federal Inland Revenue Service with respect to the administration and collection of companies income tax in Nigeria;

b. To determine the trend of revenue generated via the companies income tax in Nigeria;

c. To determine the contributions of the companies income tax to the economic development of Nigeria based on (a) and (b) above;

d. To determine the prospects and challenges of the administration and the collection of companies income tax in Nigeria;

e. To make appropriate recommendations based on the findings of the study.

Based on the foregoing, the research questions of this study can be posed as follows:

a. How efficient and effective has the Federal Inland Revenue Services been in the administration and collection of the companies’ income tax in Nigeria?

b. What was the trend of the revenue generated via companies’ income tax in Nigeria between 2010 and 2019; was it on the increase or on the decrease?

c. What were the real contributions of the companies’ income tax to the economic development of Nigeria in the period under review?

d. What are the prospects and challenges of the efficient administration and collection of companies’ income tax in Nigeria during the period under review?

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Item Type: Project Material  |  Size: 63 pages  |  Chapters: 1-5
Format: MS Word  |  Delivery: Within 30Mins.


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