Enforcement Procdures in Nigeria Tax System

CHAPTER ONE

1. BACKGROUND OF STUDY
Taxation plays a very important role in the economic life of a developing country like Nigeria. Today Nigeria is indeed in need of effective and efficient tax system in order to generate enough revenue that will finance economic growth and development. There is the urgent need in the country to evolve new approach for handling various tax issue dealing with both compliance and planning work. The use of Tax in National development is increasing and further introduction of new technology will ensure its continued growth and influence in stimulating economic growth.

All over the world, nations strive for progress development and continuous improvement in the welfare of their citizens. Developed nations are known for their ability in providing for present generations of their citizens, without jeopardizing the future of coming generations take certain decisions to safeguard their future.

Ordinarily, citizens and taxable corporate organization are not only expected to voluntarily comply with the payment of taxes, they are also expected to pay the correct amount of taxes from where these legitimate expectations by the Governments from the tax paying public are not fully achieved, the relevant question will be how to enforce compliance in the payment of taxes. Payment of taxes has religious and secular foundations. A devout believer in the Christian religion who does not pay tax commits a sin and a crime. Jesus Christ encouraged the payment of taxes even by his disciples to whom he handed over the church as it is today, the divisions of Christianity according to denominations notwithstanding.
Among the several instances of Tax in the bible are: Mathew 17: 12 – 27 and 2 Kings 23: 35. In fact in Mathew 17: 27, Peter paid tax for himself, other disciples and Jesus Christ.
In the last 6 – 9 years, some of the State Governments and the Federal Government have employed the services of some Tax Consultants as one of the way to enforce tax compliance. In some quarters, some of these Tax Consultants have been dubbed
“Tax Contractors” because of their failure to wear “human face” in some instances during the course of their duties. The study intends to examine this and other various enforcement procedures stated in some of the major Tax Laws in Nigeria. Some of the enforcement procedures to be covered include; Self Assessment introduced by the Federal Inland Revenue Service in 1991 to enforce voluntary compliance, sanctions in form of penalties against tax defaulters, power of search and seizure of books, documents and records of taxpayers to recover the tax due and most recently Tax Appeal Tribunal that was inaugurated on the 5th of February 2010 to replace the defunct Body of Appeal commissioners (BAC) and the Value Added Tax Tribunal (VAT – T) that have been abrogated.

Other procedures to be examined include special functions of desk examination, Tax Audit and Special/Criminal Investigation in the Nigeria Tax Administration.
Thereafter an inference will be made as to the effectiveness or otherwise of these procedures in the effort to increase government revenue and also to achieve voluntary compliance. 2. STATEMENT OF THE PROBLEM
Can the revenue generation objective of taxation not be pursued without hurting the economic fabric of the country and to what extent has voluntary tax compliance and invariably Government revenue been enhanced through the various tax enforcement procedures of tax Laws? 3. OBJECTIVES OF THE STUDY
This study provides basic answers to the questions raised in item 1.4 below. In summary, have the tax enforcement procedures in Nigeria tax system strong enough to encourage taxpayers to voluntarily comply with payment of tax? 4. RESEARCH QUESTIONS i) Are the taxpayers versed with the enforcement procedures of our tax laws? ii) Are the various enforcement procedures brought to the notice of the taxpayers? iii) In what ways are the taxpayers induced to voluntarily comply with payment of taxes? iv) Does the tax enforcement procedure deter taxpayers from evasion? 5. HYPOTHESES i) That considering the rate of illiteracy in Nigeria, most taxpayers are not familiar with most of the enforcement procedures. ii) That taxpayer’s education has been pursued vigorously by the various tax authorities. iii) That enforcement procedure, are compulsory to combat evasion of taxes.

6. SIGNIFICANCE OF STUDY i) It will help the various tax authorities assess the effectiveness or otherwise of the existing tax enforcement procedures. ii) Identify and plug loopholes in the present tax system that permits evasion of tax. iii) It will assist future researchers. 7. LITERATURE TO BE REVIEWED
The literature to be reviewed will include but not limited to the following:- i) Companies Income Tax Act (CITA) CAP C21 LFN 2004 as amended to date. ii) Capital gains Tax Act Cap 1, LFN 2004. iii) Personal Income Tax Act (PITA) CAP P8 LFN 2004. This is the consolidation of PITA 1993 with subsequent amendments. iv) Petroleum Profit Tax Cap 13, LFN 2004 v) Value Added Tax Act CAP VI, LFN 2004. vi) Education Tax Act Cap E 4, LFN 2004. vii) Stamp Duties Act (SDA) Cap S8, LFN 2004. viii) Gauge: A quarterly publication of the Federal Inland Revenue Service. ix) Various papers delivered at seminars organized by Federal Inland Revenue Service. x) Technical circulars for field officers: - Federal Inland Revenue Service. xi) Various cuttings from Newspaper. 8. SCOPE AND LIMITATION OF THE STUDY
The scope to be covered includes the tax enforcement procedures under various tax legislation in Nigeria. 50 questionnaires were administered.
1.9 DEFINITIONS OF TERMS

10. SOURCES OF INFORMATION ;
The Researcher made use of 2 types of Sources namely primary and secondary data. The secondary data were obtained from Internet, Newspaper, Journals, Published and Unpublished works. The primary data were obtained from field visit , Interview of selected persons and administration of questionnaires.
11. ORGANISATION OF STUDY
The researcher organized the work into five chapters; Chapter 1 : deals with the background of study Chapter 2: relates on Literature review Chapter 3: handles the methodology or techniques of investigation Chapter 4: treats data analysis and presentation of result Chapter 5: handles the summary, research findings and observations, recommendations and concluding remarks.

CHAPTER TWO
LITERATURE REVIEW 1. TAX DEFINED
Tax has been defined variously by many authors. One of such definitions takes tax to be “a compulsory payment levied on the citizens by the government for the purpose of achieving its goals”. Its compulsory nature, suggests that citizens should comply with payment of tax. The citizenry however may do this voluntarily or it may be through coercion, depending on how the taxpayers perceive the tax system and administration in general. These levies are made on personal Income such as salaries, business profits, interests, dividends, discount and royalties. It is also levied against company profits, petroleum profits, Capital gains, and capital transfer Tax through the capital Transfer decree was abrogated effective from January 1, 1996. 2. TYPES OF TAXES
Basically, there are two types of taxes. These are direct and indirect taxes. I) Direct Taxes: - “These taxes are based on the income of individuals or profits of an economy entity”. It is so called because they are taxes on income or profits; the incidence of payment falls directly on the income earners. In Nigeria, direct taxes include the following: a) Personal Income Tax: This is a tax on the income of the employees, sole traders, partnerships and pensioners. The relevant tax Law in the personal Income Tax Act 2004 (as amended to date). b) Company Income Tax: This is the tax on income and profit of limited liability (public and private) companies which have been established for the purpose of making profit. The Tax legislation for this purpose is Company Income Tax Act (CITA) Cap C21 LFN 2004 c) Petroleum Profit Tax: This is a tax payable by entities that engage in the upstream in the petroleum industry. It is a tax on profit resulting from prospecting, extraction and transportation of petroleum, oil and gas. The tax in this respect is the petroleum profit Tax act PPTA Cap 13 LFN 2004. d) Capital Gains Tax: This is a tax payable by companies (whether profit making or not), individuals and non – corporate bodies on the gains arising from the disposal of items of capital nature. The relevant tax law is the Capita Gains Tax Act (CGTA) Cap 42 LFN 2004. e) National Information Technology Development Levy (NITDL). This levy was introduced into the Nigeria Tax System in 2007 by the National Information Technology Development Act of 2007 (NITDA). This Act provides for the establishment of the National Information Technology Development Agency (NITDA). The main objective of the Agency is to plan, develop and promote the use of information technology in Nigeria.

II) Indirect Taxes: “An indirect tax is a tax imposed on enjoyment of goods and services by an individuals as well as corporate persons. It is imposed on one person but paid partly or wholly by another, owing to a consequential change in the terms of some contract or bargain between them” They are regarded as consumption tax since the incidence of the payment will shift finally to the consumers. Examples of Indirect Taxes are:- a) Import duties/Tariffs b) Export duties c) Exercise duties d) Entertainment, pool and casino taxes e) Sales Tax f) Expenditure Tax g) Value Added Tax.

It is considered appropriate since the scope of this study includes Value Added Tax (VAT) to explain briefly what VAT. is This is a “Multistage levy collected on sales of goods and services at a flat rate of five percent. For the operation of VAT in Nigeria, the Federal Government promulgated the Value Added Tax act. 3. IMPORTANCE OF TAXES
One of the major ways of raising revenue by governments is through taxation. Apart from this function, which is the most visible to many, taxation helps to “achieve fiscal goals such as influencing the direction of investment and taming the consumption of certain goods and services”. From revenue generated from taxation, government, health care and construction of roads, other amenities and the administration of government.

4. DEFINITION OF TERMS (i) The Nigerian Tax System: For the proper understanding of this study, it is of utmost importance to state in clear term what constitutes a tax system in Nigeria. This has a tripartite component, namely: (a) The tax policy (b) The tax law and © The tax administration

a) The Tax Policy: Tax Policy refers to a statement of the objectives, principles, rules and modus operandi which are meant to guide the administration of taxation at all levels of government with a view to achieving set macro economic objectives. Tax policy provides direction for the future of the tax system of a nation. Tax policy represents a part of fiscal policy, while the other part of Fiscal Policy is the Expenditure Policy. Fiscal Policy of a nation is therefore a statement of the objectives, principles rules and courses pf actions of government relating to taxation and expenditure aimed at accomplishing set macroeconomic goals. Concerning the formulation of Tax policy, the Federal Ministry of Finance ( FMF) has the ultimate responsibility on the matter. The Federal Inland Revenue Service and the Nigeria Customs services are to make the policy proposals to the FMF. It is in line with this, that the Current National Tax Policy is being championed by the FMF. As earlier stated, taxation “is one of the major fiscal policy instruments used in regulating the economy, boosting investments, encouraging savings capacity, regulating inflation and so on. Since we operate under an economic environment that is constantly changing, it suggests that for tax policy to be relevant and useful, it must follow the dynamic nature of our economic environment. To attune with these changes, tax policies pronouncements are included in the Annual Government’s Budget.

Tax policy in “any government system is aimed by achieving the following: (i) To create a fair and equitable society: (ii) To create an economic society free of distortion to investment decisions; (iii) To encourage a fair allocation of savings amongst investment opportunities; (iv) To create incentive to hard work or risk in business in case of companies; (v) To attract foreign investments or at least, avoid capital flight to countries with lower taxes. (vi) To reduce evasion and avoidance and the growth of underground economy and encourage voluntary compliance; and (vii) To reduce the complexity of the system both for the tax administrator and for the taxpayers”.
The following are the consistent tax policies of Nigeria in the past two decades; (1)Pursuance of Low tax regime with the aim of reducing tax burden and thereby encouraging savings and investments.
(2) Deliberate shift from of emphasis from direct taxation to indirect taxation which is less prone to evasion.

(iii) Introduction of self assessment scheme to encourage Taxpayer participation in the tax assessment process which is considered more democratic in nature and realistic in approach.

(iv) Encouraging voluntary tax compliance in preference to the traditional coercive method

iv) Using the due process of law and the mechanism of an efficient tax administration to curb the menace of tax evasion and avoidance. v) Streamlining of Taxes with a view to avoiding multiplicity of taxes; vi) Minimizing and Streamlining of Tax incentives.

The Federal Executive Council of Nigeria (The FEC is the apex decision making body for the Executive Arm of Government in Nigeria) has approved a new Tax Policy for the country. The objective of the new Tax policy is to promote fiscal responsibilities and accountability, facilitate economic growth and development with stable resources for the provision of public goods and Services, address inequalities in income distribution, provide economic stabilization, pursue fairness and equity and correct market failures and imperfection. The new Tax policy was approved on the 20th of January 2010.
The then Minister of Finance, Dr. Mansur Muhtar had explained that the new Tax policy would enhance the ability of the government to exploit an alternative revenue sources, other than Oil and Gas. And also that the philosophy of the policy was based on the concept of creating a sustainable platform for revenue generation and healthy competition with the federating units, as well as balancing the need for effective and efficient tax system

(b) The Tax Law:
Part II Section 4(2) of the Constitutions of the Federal Republic of Nigeria 1999 vests the legislative power on items, included in the Exclusive Legislative List as set out in Part 1 of the Second Schedule to the 1999 constitution of the Federal Government. Taxation of incomes, profits and capital gains relating to the individuals or corporate bodies is among the list of items in the Exclusive Legislative List. The intent of the constitutions may be to ensure uniformity in the various tax laws. The administrations of the various taxes are however delegated to various tax authorities.

(c) The Tax administration:
This refers to the package of activities relating to the planning, organizing, directing and controlling the taxation function of the government in a way that best guarantee the attainment of set macro economic goals for a nation. The three tiers of government namely: The Federal, the State and the Local Government. They are usually referred to as the tax authorities. A tax authority is defined as a “person or body or persons responsible under a law of territory for imposing tax on the income of individuals and companies and for the administration of that law. Tax administrations involve three elements namely: the taxpayers, the tax authority and the tax laws. The laws prescribe the rights and obligations of the taxpayers as well as the limit of the tax authority. In the ancient days, the tax authority was coercive and would usually victimize the taxpayers because of the authority at its disposal. But in modern context, the taxpayer is respected as responsible citizen who is expected to perform this civic responsibility voluntarily, where he/she fails, enforcement machinery as provided in the tax law is used to deal with him/her.

The Tax authorities of the aforementioned three tiers of government derive their creation from the federal tax laws and they include:
The Federal Tax Authority: Federal Board of Inland Revenue (FBIR) Section 1 and 2 of CITA LFN 2004.
The State Tax Authority; State Board of Internal Revenue (SBIR) Section 87 (1)&(2) of Personal Income Tax Act (PITA), Cap P8 of LFN,2004 as amended.
The local government Authority Tax Revenue Committee Sections 90 of PITA, Cap P8 LFN, 2004 as amended.

The Federal board of Internal Revenue Service (FBIRS) exclusively administers the taxation of corporate bodies. On the other hand, the Personal Income is administered by the State Governments except the Personal Income Tax coming within the Income Tax Armed Forces and other Persons (Special Provision) Act 1972.
Various Legislation specifies the powers and duties of a tax authority.
These comprises in most cases: i) Power to raise assessment ii) Power to collect and account for the tax and iii) To receive representations from the taxpayer and their agents.
Through this interaction, a relationship is created between the tax authority and the taxpayer. 5. THE ORGANS OF TAX ADMINISTRATION
The Joint Tax Board (JTB) was created in the Laws by section 85B of the Personal Income Tax Act No 104 of 1993 to harmonize the tax administration of the country.
Section 85F of Personal Income Tax Act 1993 for each state of the Federation a joint State Revenue Committee (JRSC) with the following responsibilities according to section 85G. a) To implement the decisions of the Joint Tax Board. b) To advise the JTB and the state and local government on revenue matters. c) To harmonize tax administration in the state d) To enlighten members of the public generally on state and public generally on state and local government revenue matters and e) To carry out other functions assigned by the JTB.

i) Taxable person: Means an individual or body of individuals and any corporation sole, trustee or executor having any income which is chargeable to tax by any tax authority. ii) Assessment Year: This means a period of twelve months beginning from 1st of January. iii) Company: Means any company or corporation (other than corporate sole) established by or under any law in force in Nigeria or elsewhere. iv) Individual: Unless it is stated expressly, the term “individual” includes a corporation sole or body of individuals. v) Tax Compliance, avoidance and evasion: Understanding these three concepts is very vital in relation to the topic or this study. Tax enforcement procedures become necessary and relevant where there is a need of tax compliance in order to reduce tax avoidance and evasion. a) Tax Compliance: Tax compliance is the act or process of subjecting oneself, one’s income, business asset or expenditure to the demands of the tax law. This “implies a commitment or an obligation to observe the payment of tax” . Tax compliance may either be voluntary or enforced. Tax compliance is voluntary where a taxable person willingly discharges his/her tax obligations while a taxable person who has been coerced into fulfilling the demands or the tax is regarded as obeying enforced compliance. “Either way, tax compliance is universally held to be the boldest index to the efficacy of fiscal policies, the degree of compliance being a measure of the extent a tax objective may be realized”. b) Tax Avoidance; this is the arrangement of ones tax affairs in such a way as to legally reduce the tax affairs in such a way as to legally reduce the tax ability. Talking about tax avoidance, one is reminded of the obiter dicta of Lord Blyde in the English case of Ayrshine Motor Services and D. U. Ritcher Vs Commissioner for Inland Revenue: “No man in this country is under the smallest obligation moral or other, so as to arrange his legal relations to his business or property as to enable revenue to put the largest shovel into his stores. The Inland Revenue is not slow and quite rightly takes every advantage, which is open to it under the purpose of depleting the taxpayer’s pocket. And the taxpayer in the like manner is entitled to be astute to prevent so far as he honestly can, the depletion of his means by Revenues. Therefore, tax avoidance involves the use of the loopholes in tax legislation to avoid paying tax; for example, a taxpayer decides to save his money with Federal Savings bank to avoid paying tax on interest. The same taxpayer will have to pay tax on interest if he decided to save his money with any of the commercial banks instead of the Federal Savings bank. Furthermore, a taxpayer may decide to employ a tax adviser in order to take advantage of the tax laws. C) Tax Evasion: On the other hand, tax evasion is an illegal means of getting away with the obligation to pay tax, illegal method of reducing ones tax liability such as incorrect return by omitting or understanding ones income or non declaration of correct information constitute tax evasion and is punishable by fine or payment of double that amount which has been undercharged”.
In real practice, the dividing line between tax avoidance and evasion is very thin and as such, taxpayer should be very weary in engaging in tax avoidance otherwise he may run the risk of committing a tax evasion, which is a criminal offence.

6. CRITERIA OF TAXATION
There are four criteria for an ideal tax system: i) Buoyancy: a tax system should raise revenue and provide buoyancy of budgetary revenues needed to prevent underserved deficit from arising, preferably the revenue should grow more rapidly than Gross Domestic Product. ii) Neutrality: A tax system should be neutral i.e. it should not favour one activity over the other, unless this is a deserved political objective. A tax system is non-neutral when specific objectives are pursued through different exceptions and exonerations like the current trend of forcing some importers to pay levies on their goods on transit. iii) Predictability; the impact of a tax should be predictable. The taxpayer should know before he engages in an activity what his tax liability would be. There should be no surprises. In order to be predictable, tax legislation should be clear and not open to interpretation. However, while it is necessary for a tax to be predictable, it also has to adapt to the environment and to outside events. iv) Efficiency; A tax system should be efficient, it should be what it intends to do at least cost, for example, it should raise revenue at least cost. The role of the tax administration in aiming for efficiency is to reduce the possibility of evasion and tax avoidance. 7. SOME CRUCIAL ISSUES AFFECTING NIGERIAN TAX SYSTEM
Even undoing the damage of our economy since 1986 when Structural Adjustment Programmed (SAP), which has brought harsh economic conditions to the doorsteps of many Nigerians, was introduced will still leave us with the legacy of decades of low growth, low investment and a record of poor economic performance compared with record of economic performance of other countries. That is why this research work looks beyond today to the policies, which are needed in the years ahead to create and sustain job opportunities and ensure economic growth resulting in the improvement of the living conditions of the generalities of Nigerians. It is a strategy for economic recovery in which all can play their part – people in the private and public sectors, those who produce goods and those who provide services, managers, manual workers and self employed. Nigerians must not relapse into despair about the possibility of our national economy ever again producing a high level of goods and services.

8. TAX ENFORCEMENT PROCEDURES UNDER VARIOUS TAX LEGISLATIONS
Tax Enforcement Procedures are the operational provisions, guidelines and regulation that help to enforce tax compliance by a tax authority in respect of taxable person.
Some of these procedures may be geared towards voluntary compliance while others will have to compel compliance.

Tax legislation usually states the Relevant Tax Authority (RTA) to administer the tax provision. As an administrative body, a RTA normally acts as a quasi-legislative body with respects to rules making. Guidelines and regulations are issued by the tax legislation. Operationally, the guidelines, regulations and tax provisions in practice constitute the tax procedures. We shall now proceed to highlight enforcements provisions in each of the tax legislation in succession beginning with the Companies Income Tax Act (CITA) Cap C21 LFN 2004 which henceforth shall be referred to as CITA. 1. CITA Cap C21 LFN, 2004
Establishment, powers And Duties of RTA
CITA consolidates the provisions of the companies’ income Tax Act, 1961 with other provisions there to. It contains provisions in respect of assessment, collection and accounting for tax on income/profits of corporate organizations.
(Private/public) that engages in trade or business. Companies that engage in prospecting, extraction and transportation of petroleum oil or natural gas are outside the jurisdiction of CITA. The relevant tax legislation in this respect is Petroleum Profit Tax Act Cap. P8 LFN 2004 which will be discussed later.
Part 1 of CITA established the Federal Board of Inland Revenue (henceforth to be referred to as the Board) with its operational arm, that is, the Federal Inland Revenue Services (FIRS) section 2 of CITA vests the administration of the legislation on the Board as the RTA. This section goes on to specify in broad terms, the powers and duties of the Board. They include:

(1) Section 2 (1) CITA, which gives the Board the power as “deemed necessary and expedient for the assessment and collection of the tax and to account for such tax”. I consider this provision as the one that enables the FIRS to make all necessary guidelines and regulations, which facilitates the imposition and collection of tax under this legislation. (ii) Section 2 (2) of CITA provides that, in satisfaction of any tax due, or penalty or judgment debt due therefore, “the board may acquire, hold or dispose of any other property taken as security”. This provision is further reinforced by the power to distain on section 66 of CITA. Section 2(3) of CITA provides that “the board may sue and be sued in its official name”. And it “may authorize any person to accept service of any document to be sent, served upon or delivered to the Board”. v) Under section 2(4) (a) of CITA the Board has the power to “authorize any person within or outside Nigeria to perform an exercise, on behalf of the Board any power or duly conferred on the Board other than the power or duties specified in the first schedule or to be given or delivered to or served upon the Board under or in consequence of the Act and any subsidiary legislation made there under”. Section 2(4) (b) CITA authorizes the Joint Tax Board (JTB) to exercise the powers and perform the duties conferred on the on its behalf including those listed in the first schedule to the Act.
Provision under section 2(4) (a) as mentioned above forms the basis for the appointment of Consultants, agents etc particular note should be taken on the limitation imposed by this section.

The above mentioned provisions are general in nature but directly or indirectly enhance enforceability in tax assessment and collection. We shall now consider at specific provisions, which increase tax compliance under CITA. 2. Enforcement Provisions Relating to Tax Assessment
Tax assessed forms the basis for tax collection since collectible tax invariably depends on the total tax assessed. The under listed tax provisions relate to enforcement of tax assessed.

(1) Tax Rate
Certainties of the rate of tax to be applied on the total profits are specified under section 29 (1) of CITA. This is given as thirty kobo for every naira. Procedurally, this is taken as thirty percent. This rules out arbitrariness and it aids enforceability.
(2) Profit Chargeable
Section 8 of CITA specifies incomes and profits that are chargeable to this tax. This is done with the intention to intimate the taxable person whose incomes are to suffer tax under this law. Section 11 (1) of CITA states that profits of a Nigerian Company shall be deemed to accrue in Nigeria no matter where they have arisen and “whether or not they have been brought into or received in Nigeria” while the taxable profits derived from Nigeria.
(3) Dividend regarded as total profits for the purpose of paying full Tax.
Full payment of tax (at the rate of 30%) on dividend as if it was total profits in with the provisions of section 15A and 16(b) of CITA. Ordinarily, a Company without total profits ought not to pay except minimum tax, where applicable. But where such company pays out dividend to its shareholders not withstanding the situation of no total profits, the dividend will be subjected to tax at the appropriate rate of tax as if it was a total profit.

(4) Withholding Tax on Undistributed Profit
Payment of withholding tax on undistributed profit as if it was undistributed as dividend section 17 of CITA. This relates to a company controlled by not more than five persons.

(5) Artificial transaction
The Board has power to regard certain transactions as artificial by virtue of section 18 of CITA. Artificial or fictitious transactions have the effect of reaching the tax assessed and by extension, the tax collectible. The following transactions are considered to be artificial or fictitious by the Act. (i) Transaction between persons or whom either has control over the other; and (ii) Transaction between related persons.

(6) Turnover Tax
Section 26(1) of CITA gives the Board the power to assess tax on Turnover instead of total profits as stipulated in section 29(1) if “it appears to the Board that for any year of assessment, the trade or business produces either no assessable profits or assessable profits which in the opinion of the Board are less than what might be expected to arise from that trade or business or as the case may be, the true amount of the assessable profits of the company cannot be richly ascertained”. This provision applies to both Nigerian company and non-Nigerian company, which derives income from Nigeria.
(7) Minimum Tax
To ensure that companies which normally would have escape the payment of tax owing to: (a) Loss instead of assessable profit; and (b) Nil total profits, which produce less tax than, would be computed under the minimum tax to pay tax no matter how small, section 28 (A) of CITA provides for the imposition of Minimum tax. However, as a means of additional incentives in certain circumstances, the Minimum Tax would not apply to the following: i) A company carrying on agricultural trade of business as defined in sub-section 8 of section 9 of CITA. ii) A company with at least 25% imported equity capital; and iii) A company for the first four calendar years of its commencement of business. 8) Filing of returns and Audited Accounts. Section 41(1) of CITA, makes it mandatory for every company, at least once a year without notice or demand, to file returns with the Board. Sub-section 3 of section 41 stipulates the time period for the filing of such returns as follows: a) In the case of a company that has been in business for more than eighteen months, not more than six months after the close of company’s accounting year; and b) In the case of a newly incorporated company, within eighteen months from the date of its incorporation or not later than six months after the end of its first accounting period”. Section 41(4) of CITA provides for late returns penalty to enforce early submission of returns. 9) Power to call for returns, books, documents and information. Section 42 & 43(1) of CITA gives the Board power to call for returns, books, documents and information where it is considered necessary for the purpose of obtaining full information in respect of the profits of any company”. The provisions of these sections do not preclude any guideline in respect of tax audit, section 43(4) of CITA. 10) Power of Search and Seizure In an effort to increase tax compliance and reduce tax evasion, section 45A (1) (a) and (b) of CITA gives the Board the power to authorize any officer of the Board to enter (if necessary by force) “the premises, registered office, any other office, or place of management of the company or the residence of the principal officer, factor, agent or representative of the company at any time from the date of such authorization by the Board to conduct a search”. Section 45A (2) states that “such authority shall be sufficient warrant to search, seize and remove any records and documents found on such premises, office or residence of the principal officer, agent or factor of the company whether or not belonging to the company”. However, before these sections could be invoked there must be a reasonable ground to suspect that the company is committing tax fraud.

11. Board may require a company to keep records, books and accounts.
Owing to poor records keeping, the profit of a company may directly or indirectly be affected and as such it may not be fairly stated. Section 46(1) of CITA recognizing this fact gives the Board power to require a company to keep adequate records, books and accounts, if it has not been doing so.
12. Power to make assessment
With the introduction of self-assessment scheme, the obligation to make assessment is shifted to the taxable person. However, section 47 of CITA still gives the Board power to make assessment in the following instances (a) Section 47 (1). The company fails to file returns and audited accounts at the expiration of the time stipulate under section 41 of CITA. In this case, a Best of judgment (BOJ) Assessment is raised. c) Section 47(2) (b) of CITA. The audited accounts and the returns submitted by the company is not acceptable to the Board, a BOJ assessment will also be raised. d) Where in the opinion of the Board a company ought to pay tax but it failed to deliver any assessment on the company in accordance with sub-section 3 of section 47 of CITA. e) Where an assessment is required urgently in line with sub-section 4 of section 47, CITA. The FIRS officers normally refer to this as a jeopardy assessment and have to be raised urgently before a company goes down into oblivion. The maxim “delay defeats equity” readily comes to mind.

13. Power to Raise Additional assessment
Section 48(1) if CITA applies where the Board discovers or is of the opinion of anytime that any company liable to tax has not been assessed or has been assessed at a less amount than that which ought to have charged”. This power must however be exercised “within the year of assessment or within six years after the expiration thereof”. Within the period stated above, the assessment can be made “as often as may be necessary”. The limitation as to the time of raising the additional assessment is removed”. Where any form of fraud, willful default or neglect has been committed by or on behalf of any company.

3. Enforcement Provisions relating to Collection
Recovery and Repayment of Tax.
The efforts of a RTA will be measured by the amount of tax collected and not by the total sum of tax assessed where a huge proportion of it is still in arrears. Perhaps this informs the under listed enforcement provisions towards tax collection.

(1) Final and Conclusive Assessments
Section 58 of CITA ensures that where there is no valid objection to an assessment, the assessment becomes “final and conclusive” and all provisions relating to recovery of the tax and penalty can be applied on such assessment.

(2) Payment of Provisional Tax
This is under the provision of section 59(1) of CITA. A provisional tax is an advance payment of tax, which is equivalent to the tax paid in the immediately preceding year of assessment in one lump sum. Provisional tax is payable not later than three months from the commencement of each year of assessment. The provision helps to enforce payment of tax even before returns and accounts are filed for each year of assessment.
Section 59(6) of CITA however exempts those filing self-assessment from the payment of provisional tax.

(3) Payment of Tax Assessed (a) Payment of government assessment. This is the assessment raised by the FIRS itself as opposed to self-assessment. Generally, in this case, the assessment is to be paid “within two months after service of such notice upon the company”. Section 59(2) of CITA. (b) “A company filing self assessment shall pay the tax due within two months from the due date of filing the assessment in one lump sum or such number of monthly installments (not being more than six) as may be approved by the Board, “section 59(5) of CITA. (c) Where notice of objection or appeal has been given, the tax payable shall be in abeyance “until such objection or appeal is determined saved that the company shall have paid the provisional tax as provided in sub-section 1 of this section or the tax not in dispute, whichever is higher” section 59(3) of CITA.

(4) Deduction of tax at source
This is under the provisions of section 60, 61, 62 and 63 of CITA (a) Section 60 deals with deduction at source on interest, Royalties etc. at the rate of ten percent. (b) Section 61 deals with deduction at source on rent (c) Section 62 deals with the deduction at source on dividend (d) Section 63 deals with the Board, the power to recover any income tax assessable on any company whether or not an assessment has been made, from any payments made by such company.

Tax deducted at source is usually referred to as Withholding Tax. Withholding Tax is an advance payment of tax, which available as a ax credit against tax liability of the taxable person that suffered the tax deducted at source. Withholding Tax must be paid at the time payment is made to the person receiving the interest, royalty, rent, dividend etc or when the account of such person is credited whichever accrued first.
A person paying withholding tax is only acting as an agent of the person who suffers the tax. There is a serious sanction against the agent for failure to deduct after deduction. To enhance compliance, the time is stated at 200 percent of the amount not deducted or remitted in addition to the payment of the tax deducted plus interest at the prevailing commercial rate. Section 80(6) of CITA also gives power to the Board to refuse the defaulter the issuance of Tax Clearance Certificate even though it has discharged its own tax liability.

(5) Penalty and Interest on late payment of tax assessed
Sections 65 of CITA gives the Board power to imposed penalty and interest on tax due if payment is not made within the time stipulated under section 59 of CITA, in order to induce early payment. The rate of penalty is ten per cent while the interest is to be charged at bank lending rate.

(6) Power to distrain for non-payment of tax assessed
Section 66 of CITA gives the Board power to enforce payment of tax where an assessment is “final and conclusive”. By distaining on the taxpayer’s:

(a) Goods, or other chattels, bonds or other securities and: (b) Land, premises, or places in respect of which the taxpayer is the owner The property so distained can be disposed off subject to certain provisions under sub-sections 45, and 6 of section 66 to liquidate the tax due.
(7) Litigation against non-payment of tax assessed.
Section 67(1) of CITA states that “tax may be sued for are recovered in a court of competent jurisdiction at the place stated in the notice of assessment as being the place at which payment should be made, by the Board in its official name with full cost of action from the company charged therewith as a debt due to the Government of the Federation”

4. Self Assessment scheme was introduced into the Nigerian Tax System from 1991 assessment year.
Because of its important roles in enhancing tax compliance through assessment and collection functions, it deserves a special attention.
The Self Assessment System, as opposed to official (or Revenue) assessment, is a system in which the taxpayers are trusted to fulfill their obligations voluntarily by making up their tax returns and rending them to the tax office together with the tax payable”. Section40A of CITA now makes it mandatory for every company that is liable to file returns to do so by Self Assessment as from 1996 Assessment year. Prior to this recent provision the Self Assessment Scheme was made mandatory only to companies with Turnover of one million and above.
Section 40B of CITA requires the taxable person to submit returns which: (a) Include the computations of the tax payable by the company for the year of assessment ; and (b) Include a bank certified cheque for payment of the whole or part of the

tax due as computed
As an inducement to increase voluntary compliance, section 41A of CITA, provides for one percent bonus to any company who files it returns within the time stipulated provided there was no default in payment arrangement.
8. .5 Other Special Provisions to enforce compliance.
1. Power to pay reward for useful information supplied to the Board.
Section 82 of CITA encourages the public to assist the Board with useful information in order to enforce payment of tax and reduce evasion.
Any useful information so supplied is to be rewarded after the approval of the Finance Minister. 1. Tax Clearance Certificate
Section 80 of CITA provides for the issuance of Tax Clearance Certificate to any company who has fully discharged its tax liability. To enforce tax compliance, the Tax clearance person can carry out certain transactions as listed under section 80 (4) of CITA. 2. Information on new account by the banks to enforce compliance Banks are required by section 44 (1) of CITA to notify in writing the FIRS each month the names and address of new customers of the bank. Section 44 (2) gives the FIRS the power to request for information for the purpose of taxation from any person including a person engaged in banking business in Nigeria. 6. Penalty for Offences as enforcement provisions
(1) Penalty and Offences
Section 71 (1) of CITA imposes penalty on any person who fails to comply with the provisions of the Act.
(2) Penalty for making incorrect return Section 72(1) of CITA cap C21 LFN 2004 states that “every company which and every person who, without reasonable excuse. (a) Makes an incorrect return by omitting or understanding any profits liable to tax under this Act; or (b) Gives any incorrect information in relation to any matter or thing affecting The liability of any company to tax, shall be guilty of an offence and shall be liable on conviction to a fine of N200 and double the amount of tax which

has been uncharged in consequence of such incorrect return of information, or would have been so undercharged if the return of information had been as correct.” For any company or person to be liable as provided under this section, complaint, concerning the offence must have been in the year of assessment during which the offence was committed or within six years after the expiration thereof
(3) Penalty for false statement and returns
Section 73 of CITA states that “any person other than a company who one way or the other participates in rendering false statements and returns, shall be guilty of an offence and shall be liable on conviction to a fine to N1000 or to imprisonment for five years, or to both such fine and imprisonment”.
(4) Penalty for offences by authorized and unauthorized person.
Section 74 of CITA relates to penalty an offences committed by any person who is in the administration of the Act and any person employed in connection with the assessments and collection of the tax such offence include: (a) Demanding from any company an amount in excess of tax due. (b) Holding back for his own use or otherwise any amount from the tax so collect;

c) Renders a false return; and

d) Involves in defrauding any person or embezzling money and uses his

position to deal wrongfully with the Board.

2.9 Capital Gains Tax Cap C 1, LFN 2004 This legislation deals with the taxation of capital gains arisen on disposal of assets. We shall henceforth refer to this Act as CGTA. 1. The relevant Tax Authorities (RTA) are: (a) Federal Board of Inland Revenue in respect of capital gains accruing to: * Companies * Individuals who pay their personal income tax to FIRS in line with Personal Income tax Act, 2004.

These are: (1) Members of the Nigerian Armed Forces, that is, the Nigerian Army, the Nigeria Navy, the Nigerian Air Force and the Nigerian Police Force. (2) Officers of the Nigerian Foreign service; (3) Every resident of the Federal Capital Territory, Abuja and (4) Non-resident individuals with capital gains derived from Nigeria. b) States Board of Internal Revenue in respect of Capital gains accruing to individuals other than those listed in item 29.1. (a) (11) above.

Section 43 (1) of CGTA states that “Capital gains tax shall be under the care and management of the Board and the Provisions of Income Tax Acts”. Contained in schedule one of the CGTA
Section 12 (1) refers to Income Tax Act as (i) Personal Income Tax Act as; (ii) Companies Income Tax Act; and

(iii) Petroleum Profits Tax act.
In essence, most of the provisions of the legislations mentioned above are applicable to Capital Gains Tax.
These are: 1. Members of the Nigerian armed Forces, that is, the Nigerian army, the Nigerian Navy, the Nigerian air force and the Nigeria Police Force 2. officers of the Nigerian Foreign Service 3. every resident of the federal Capital territory, Abuja, and 4. Non resident individuals with capital gains derived form Nigeria.
B. States Board of internal revenue in respect of Capital gains accruing to individuals other than those listed in item 2.9.1 9a) (11) above.

2.9.2 Administration Provisions etc.
Section 43 (1) of CGTA states that “Capital gains Tax shall be under the care and management of the board and the provisions of income Tax acts.”

Contained in Schedule one of the CGTA
Section 12 (1) refers to income Tax act as: i) Personal income Tax act ii) Companies income Tax act: and iii) Petroleum profits Tax act
In essence, most of the provision of the legislations mentioned above is applicable to capital Gains Tax

2.9.3 Tax enforcement provision as it relates to Assessment, collection and recovery of Capital Gains Tax

a) By Virtue of Section 43 (1) of CGTA, the provision of CITA and personal income Tax decree are substantially applicable in respect of capital gains Tax. In the light of this, and from practical point of view, the following enforcement provisions as discussed under CITA are applicable to capital Gains Tax. They are: 1. Artificial transaction: this however, was specifically stated in Section 21 of CGTA. This provision is very similar to the one in CITA Cap 21 LFN, 2004 2. Filing of Tax returns and audited accounts. Any capital gains arising from disposal of chargeable asset must be disclosed separated in the Tax returns and audited accounts. 3. Power to call for returns, books documents and information. 4. Power of search and seizure. 5. relevant Tax authority any require a company to keep records, books and accounts 6. Power to make assessment. This is very much applicable since the issue of Self Assessment id not yet applicable o capital gains Tax. 7. Power to raise additional assessments. 8. Final and conclusive assessment. 9. Payment of Tax assessment a) Government assessment b) Where there is objection and appeal against the Tax raised.
10. Deduction of Tax at source. This is in respect of Section 63 of CITA only
11. penalty and interest on late payment of Tax assessed
12. power to distain for non-payment of Tax assessed
13. Tax clearance certificate. A company can be denied Tax clearance certificate if it failed to pay capital gains Tax due notwithstanding that it has paid all other Taxes dues.
14. Penalty for making incorrect returns
15. Penalty for offense by authorized and non authorized person
16. Penalty for false statement and returns.
17. Penalty for offences by authorized and unauthorized persons.

(c) Enforcement provision specific to CGTA Cap C1 LFN, 2004

1) Certainty of the rate of Tax: Chargeable gains are taxed at a flat rate of ten percent Section 2 (1) of CGTA. This makes the Taxpayer to be certain of its Tax liability
2) Certainty of what constitute Chargeable gains. Section 6 (1) of CGTA gives these as:

i. Capital sum received under policy of insurance, the risk of any kind of damage or injury to, or loss or depreciation or assets. E.g. life insurance Policy, loss of property etc. ii. Compensation in return for forfeiture or surrender of rights, or foe refraining from acquisition or ones landed property, damages for libel or slander. iii. Consideration for use or exploration of any assets. The gains here may arise for example when a lumps sum rather several lease rentals is received on the right granted to another person for the use of an asset. E.g. When mining right is granted to another person. iv. Capital sum received in connection with or arising by virtue of trade, business, profession or vocation. However, the amount chargeable is the capital gains not the total sum received. This relates to gains arising on disposal of a business as whole as a going concern basis rather that the disposal of the business assets on one for one basis. The gains therefore, will normally include an amount received in respect of Goodwill.

3) Meaning of Disposal

To facilitate enforcement, the Act explains when a chargeable asset is deemed to have been disposed off. Section 6 (1) CGTA states that there is “ a disposal of asset by a person where any capital sum is derived form a sale, lease, transfer, an assignment, compulsory acquisition or any other deposition of assets, notwithstanding that no asset is acquired by the person paying the capital sum.”

2.10 Personal income Tax act (PITA Cap P8 LFN 2004)
The legislation deals with the imposition of Tax on income of individuals, communities, families, and arising or due to a trustee or estate. Henceforth, we shall refer to these legislations as PITA 2004.

Section 2 of PITA, 2004 specified the relevant Tax authorities RTA) as follows:
a. Federal Board of Inland revenue in respect of the following categories of individuals.
1. Persons employed in the Nigeria Army, the Nigeria navy, the Nigeria air force and the Nigeria police force;
2. officers of the Nigeria foreign service
3. every residents of the federal capital territory, Abuja and
4. non-residents who derives income or profit form Nigeria

B. Each State Board of internal revenue on every resident individual of each state

Section 85 A, of PITA 2004, established the state board of internal revenue (SBIR) for each state of Federation, Section 85B (1) of PITA , 1993 states the functions and power of the SBIR, Among the various function and power Section 85B (1) (b) of PITA 2004 empowers the SBIR to do “ all such things as may be deemed necessary and expedient for the assessment and collection of the Tax and shall account for all amount so collected’ Section 85B (3) of PITA 2004, also empower the SBIR to authorize any person To

a. “ Perform or exercise on behalf on the state Board, any function, duty or power conferred o the state Board; and
b. receive any notice or other document to be given or delivered to or in consequence of this Decree and any subsidiary legislation made under it”

The above Section that is 85(b) (1) and 85(b) (3) formed the platform or which Tax consultants and Agents are engaged by the SBIR. However, the exercises of these powers are subject to limitations as contained in Section 85B (4)

2.1.0. Enforcement Provisions in PITA Cap P8 LFN 2004
To discuss these provisions we shall divide them into categories

a) those that are very similar to the provision in CITA Cap 21 LFN 2004

We shall refer back to some of the enforcement provisions discussed under CITA in this Section. To avoid repetition since the material contents of the two state the main headings together with the relevant Sections in PITA, 2004

o Artificial transactions Section 17, PITA 2004 o Filling of returns, Section 41 PITAL 2004, this however is within 90 days from the commencement of every year of assessment. o Power search and seizure, Section 52, PITA 2004 o power to call for returns, books documents and information, Section 46 PITA 2004 o power to raise additional Assessment, Section 54, PITA 2004 o Payment of Tax assessed , Section 67, PITRA 2004 i. Government assessment ii. Where there I objection to Tax assessed o Deduction of Tax source, Section 68,69,70,71 and 72 of PITA 2004 while Section 73 of PITA 2004 deals with penalty for failure to deduct at source o Penalty and interest on late payment of Tax assessed Section 75 and 76 of PITA 2004 o Litigation against non-payment of Tax assessed Section 77 of PITA 2004 o Self –Assessment Scheme, Section 44 of PITA 2004 together with an inducement of one percent bonus for compliance, Section 44A of PITA 2004 o Information on new account from the banks, Section 48 of PITA 2004 o Tax clearance certificate, Section 84 of PITA 2004 o Power to distrain for non-payment of Tax assessed Section 96 of PITA 2004 o Penalty for making incorrect returns, Section 87 of PITA 2004 o Penalty for offences by authorized and authorized persons Section 89 of PITA 2004 o Penalty for false statement and returns Section 88 of PITA 2004 o Penalty for offences by authorized and authorized persons Section 89 of PITA 2004

b) Other enforcement provisions applicable to PITA 2004 only 1. Persons Chargeable and returns To facilitate enforcement, the law states the categories of Taxable persons under Section 1 PITA 2004as follows: i. Individuals (including persons employed in the Nigeria armed forces that is, the Nigeria army, the Nigeria navy, the Nigeria air force and the Nigeria police force ii. Communities iii. Families iv. Income arising or due to a trustee or estate
Section 40(1), PITA 2004 specifies on whose name Tax may be raised to ensure that the request for Tax is not misdirect thereby increasing non-compliance. According to this Section, “a Taxable person shall be chargeable to the Tax: i) In his own name; or ii) In the name of □ A receiver, trustee, guardian, curator or committee having the direction, control or management of property or concern on his behalf.” Or □ Agent of the Taxable person as stated in Sections 4 and 49 (1) of PITA 2004.

2. Income Chargeable

The law also states incomes (whether from a source within or outside Nigeria) that are chargeable to enhance compliance. In reference to Section 3 or PITA 2004, these include: a) Gains or profit from any trade, business, profession, or vocation and b) Any salary, wage, fee allowance or other gain or profit from employment including gratitude’s, compens1ations bonuses premiums, benefits or other prerequisites allowed, given or granted by any person to an employee. 3. Proof of Claims
Under Section 33 of PITA 2004, certain relief are granted t a Taxable person in computing his income Tax, to ensure that the relief sought by7 the Taxable person are correct, the RTA may request for documentary evidence to support the clams in line with Section 35, of PITA 2004

4. Rates of Tax
The graduated rates of Tax as contained in schedule six to the PITA 2004 ensure that Taxable persons pay Tax according to their earning and liabilities

5. Employer to be answerable for Tax deducted.
This applies to Taxable persons who are employed by other persons.
Section 81 of PITA 2004 makes it mandatory for the employer to account for the Tax deducted from the emoluments of the Taxable person. Failure to comply attract penalty of 10 percent together with interest at commercial rate in addition to the Tax so deducted.

6. Power to enter and require information Section 95 of PTA 2004 gives a Tax Collector the power to enter any premises during the daytime concerning Taxation of any person

2.11. Petroleum profits Tax act (PPTA) Cap 13 204 The petroleum profits Tax Ordinance, 2959, no 15 described it as “an act to impose a Tax upon profits from the winning of petroleum in Nigeria, to provide for the assessment and collection therefore and for the purposes connected therewith, for easy reference, we shall henceforth refer to the legislation as PPTA

This act deals with the upstream activities in the Petroleum industry that I companies in the Petroleum operations. Petroleum operations in this sense involve: prospecting, extraction ad transportation of crude oil and natural gas. The downstream activities in the industry involving refining and marketing of refined petroleum products are under CITA Cap C21 LFN 2004.

Section 3 of PPTA state the relevant Tax Authority (RTA) as the Federal board of Inland Revenue (FBIR), and the duties and power of FBIR. Those that affect Tax enforcement in general terms are: a) To assesses, collect and account for the Tax b) in satisfaction of any Tax due under the Act, the FBIR can dispose of any property taken as security c) the FBIR can sue and be sued in its official name, d) The FBIR can authorize any person to perform its duties on its behalf subject to limitations stated in the first schedule to the Act. . This power paves way for the employment of consultants and agents. e) Section 6 of the PPTA give power to the Minister of Finance to make rules generally for the carrying out of the provisions of the Act from, time to time. This Section also authorizes the FBIR to specify from time to time the returns, claims statement and notices under the Act
2.11.1 Enforcement Provision in PPTA
These have been sub-divided into two categories
(d)Those that is very similar to the provision of CITA Cap C21, LFN 2004
In this respect, we shall highlight without giving details to avoid repetition. These are

1. Power to call for returns., books, documents and information, Section 29 and 30 of PPTA 2. Power to make assessment Section 33 of PPTA. this substantially the Same with that of CITA Cap C21 LFN 2004 except it should be noted that all assessments are from the FBIR since the issue of self –assessment is limited to CITA Cap C21 LFN 2004 3. Power to raise additional assessment, Section 34 of PPTA 4. Final and conclusive assessment, Section 40 of PPTA 5. Artificial transaction, Section 13 of PPTA 6. Calls for returns and information Section 17 PPTA 7. Litigation against non-payment of Tax assessed Section 45 of PPTA 8. Penalty and interest on late payment of Tax assessed Section 43 of PPTA the rate of penalty is five percent as opposed to ten percent under CITA Cap C21 LFN 2004. In addition, the issue of interest on the outstanding amount is not mentioned under PPTA. 9. Penalty for offences as enforcement provisions: i. Penalty and offences, Section 48(10 of PPTA Imposes penalty on any person who fails to comply with the provisions of PPTA. The fines imposed under PPTA are substantially higher than those imposed under CITA Cap C21 60 LFN 2004 ii. Penalty for making incorrect returns etc. Section 49 (g) of PPTA. this is very similar to that of CITA Cap C21 LFN 2004 except the fine is higher under PPTA iii. Penalty for false statement and returns, section 50(1) PPTA Similar to that of CITA except with higher penalty. iv. Penalty for offences by authorized and unauthorized person, Section 51 (1) of PPTA similar in al material respect to that of CITA Cap C21 LFN 2004 10. Deduction of t ax at source, Section 51` A (1) (2) (3) and (4) of PPTA. Penalty for failure to withhold the Tax. Section 50 A (1) (2) of PPTA. These are very similar to that of the provision under CITA Cap C21 LFN 2004 a. Enforcement provision applicable to PPTA Cap P13 LFN 2004 Only i. Profits Chargeable: To ensure that the Taxpayers are aware of the profits that are chargeable under this Act, Section 8 and 9 deals with profits chargeable, of each accounting period, Section 2 PPTA defines “accounting period in relation to a company engaged in petroleum.

b “A period of one year commencing on 1st January and ending on 31st December of the year, or
c. Any shorter period commencing on he day the company first makes a sale bulk disposal of chargeable oil under a programmed or continuous production and sales, domestic export or both, and end on 31st December of the same year or

2. Rate of assessable tax a. 85 percent of chargeable profit or b. 65.75 percent of chargeable profit depending on the size of the company.

3. Individual cannot engage in Petroleum operations: Section 22(1) of PPTA forbids any person (other than a company) from engaging in petroleum Operations.
4. Non-residents Companies:
These are chargeable to tax under this legislation as if they were resident companies in Nigeria, Section 23 PPTA
5. Manager of companies to be answerable
“ The manager or any principal officer in Nigeria of every company which is or has been engaged in petroleum operations shall be answerable for doing all such acts as are required to be done by virtue of this Act for the assessment and charged to tax of such company and for payment of such tax” Section 24 of PPTA.
6. Company wound-up
Where a company is being wound up or is under receivership, the charge to tax may be assessed in the name of the liquidator of the company, the receiver or any agent in Nigeria of the liquidator or receiver. The liquidator or receiver shall be answerable for the matter relating to companies under this legislation. Section 25 PPTA.
7. Tax avoidance by transfer where a company transferred substantially part of its assets to another person in a scheme to avoid tax chargeable or assessed under this legislation, the FBIR has the power to sue the person whom the assets were transferred to the tax due, section 26 PPTA
8. Filling to returns and Audited Accounts
Two types of returns are to be submitted: a. Estimates: Section 31 (1) of PPTA provides that not “ later than two months after the commencement of each accounting period of any company engaged in petroleum operations, the company shall submit to the Board a return, the form of which the Board may prescribe of its estimate tax for such accounting period” b. Audited Accounts For a company engaged in petroleum operations this shall be submitted within five months after the expiration of that accounting period. The audited accounts and copies of the particulars (not being estimates) shall contain a declaration, which shall be signed by a duly authorized officer of the company that the same is true and complete section 28(2) PPTA.

Under the PPTA the tax for each assessment year, which invariably is the accounting year, is first collected on monthly basis, based on the estimates submitted within 2 months of the accounting period. This however, is revised to actual when the audited accounts and returns are submitted within five months after the expiration of that accounting period. The process of submitting continuous production and sales. Domestic export or both and end on 31st December of the same year or D. Any period of less than a year being a period commencing on 1st January of the same year when the company ceases to be engaged in petroleum operation.”
In a nutshell the basis of chargeable profits under PPTA is usually referred to as “actual basis” this is in contrast to the “preceding year basis” under CITA Cap C21 LFN 2004

Section 9 (1) of PPTA described profits of accounting period as the aggregate of

i. The proceeds of sale of all chargeable oil sold by the company in that period ii. The value of chargeable oil disposed off by the company in that period and iii. The value of all chargeable natural gas in that period as determined in accordance with the fourth schedule to this act. iv. All income of the company of that period incidental to and arising form any one or more of its petroleum operations”.
For easy understanding, all what is stated above can be summarized as: Sales (item a) minus costs (items b and c) plus all other incidental incomes (item d).
Estimates with monthly payments obviate the need for self-assessment scheme PPTA.

9. Payment of Tax Assessed a) Where there is no objection section 42 of PPTA. This is payable in equal monthly installments (12 installments) plus a final installment (13th installment). The final installment is the difference between the actual tax assessed and the total of the 12 installments, which is based on estimates. The payment schedule is as stated below:

1st Installment March of the Accounting Period 2nd “ April of the “ “ 3rd “ May of the “ “ 4th “ June of the “ “ 5th “ July of the “ “ 6th “ August of the “ “ 7th “ September of the “ “ 8th “ October of the “ “ 9th “ November of the “ “ 10th “ December of the “ “ 11th “ January of the following Accounting Period 12th “ February of the following Accounting period 13th (final Installment) within 21 days of the service of Notice of Assessment. b) Where there is objection, section 41 of PPTA. The tax in dispute shall remain in abeyance while the FBIR may enforce payment of that portion of the tax which is not in dispute. c) Collection of Tax after determination of objection or appeal, section 44 of PPTA. The outstanding tax shall be payable within one month of the determination of the objection or appeal.
212 value Added Tax Act Cap V1, LFN 2004
Value Added Tax (VAT) is a new Tax in the Nigerian tax system. The operation of the law relating to this commenced on first January 1994. The law imposes tax on the supply of all goods and services except those exempted as contained in the schedule to the Value Added Tax Act. We shall henceforth refer to the Value Added Tax Act in the text as VAT Act.

Section 7 (1) of the VAT Act vests the administration of Federal Board of inland Revenue (FBIR) “Such things as it may deem necessary and expedient for the assessment and collection of the tax and shall account for all amounts so collected”. The tax is at a flat of five percent on vatable goods and services.

Enforcement Provision under the VAT Act. 1. Specification of goods and services section 2 of the Decree states that the supply of all goods and services except those listed in the schedule to the VAT Act are vatable. In essence, it means any goods or services not specifically listed in the schedule are vatable. 2. Certainty of the Rate of Tax Section 4 of the VAT Act states the rate of the tax to be five percent (5%) on vatable goods and services

3. Registration by taxable person Section 8(1) of the Vat Act compelled any taxable persons to register for VAT t or within six months of the commencement of business which ever is earlier. Section 8(2) of the VAT Act imposes penalty for failure to register as follows: a) N10,000 for the first month in which the failure occurs and b) N5,000 for each subsequent month in which the failure continues.” Section 28 of the VAT Act also provides for the sealing up of the premises of the taxable who fails to register. 4. Non-resident Company Non-resident Companies that carry on business in Nigeria are also compelled to register for VAT by virtue of section 8(B) (1) of the VAT Act. 5. Records and Accounts Section 9 of the VAT Act makes it mandatory for a person registered under the VAT Act to “keep such records and books of all transactions, operations, imports and other activities relating to taxable goods and services as are sufficient to determine the correct amount of tax due under the Act” section 29 of the VAT Act provides for a fine of N2,000 for every month in which the failure to keep proper records continues. 6. Government Ministries, Statutory Bodies and Agencies of Government appointed as agents of collection.

To enforce compliance by contractors and suppliers to Government, Ministries, Statutory Bodies and Agencies of Government, VAT charged by these contractors and suppliers are to be withheld by the government Ministries, Statutory Bodies etc and paid over to the FBIR in accordance with Section 8A(1) and 10(a)(1) of the VAT Act.

7. Evidence of registration for VAT

Section 8A(2) of the VAT Act provides that “every” contractor transacting business with a government Ministry, Statutory Bodies and other agency of the Federal, State or Local Government shall produce evidence of registration with the Board as a condition for obtaining a contract”.

8. Taxable person must render returns and payment of VAT due to the FBIR This should be done not later than 30th day of the month following the month in which the transactions took place, section 12 and 13 Vat Act.

9. Failure to render returns. a) When a taxable person fails to render returns or renders incomplete or inaccurate returns, the FBIR is empowered to use its best of judgment to assess the taxable person. Section 14 of the VAT Act. b) Section 31 of the VAT Act provides that a taxable person “who fails to submits returns to the Board is liable to a fine of N5,000 for every month in which the failure continues.” 10. Non-Payment of tax due.

Failure to pay the tax due at the stipulated time attracts penalty at the rate of five percent per annum plus interest at the commercial rate on the outstanding tax; section 15 of the VAT Act. 11. Litigation for non-payment of tax due

Section 16 of the VAT Act empowers the FBIR to enter into court proceedings for the recovery of tax due at VAT Tribunal section of the VAT Act.

12. Penalty for false document, information and statement: A person convicted of this offences is liable to a fine of twice the amount under-declared, section 21 of the VAT Act.

13. Evasion of Tax

Section 22 of VAT Act provides that “a person who (a) participates in; or (b) takes steps with a view to, the evasion of the tax by him or any other person, is guilty of an offence and liable on conviction to a fie N30,000 or two times the amount of the tax being evaded, which is greater, or to imprisonment for a term not exceeding three years.

14. Failure to notify of change of address

A taxable person is compelled within one month of its change of address to notify the FBIR otherwise it will be liable to pay a fine of N50,000, section 24 Vat Act

15. Penalty for failure to issue tax invoice section 25 of the VAT Act provides that a person who fails to issue tax invoice after selling VAT able goods or services. “is guilty of an offence and liable on conviction to a fine of 50perent of the cost of the goods or services fro which the invoice was not issued.”

16. Power of inspection

By virtue of Section 35 of the VAT Act, an authorized officer from the FBIR can enter the premises of a taxable person without warrant to carry out inspection of its VAT records, books and documents. In accordance with section 26 of the VAT Act, a person who resists an authorized officer from carrying out an inspection as stipulated under section 35 of the VAT Act is guilty of an offence and liable on conviction to a fine of N10,000 or imprisonment for term of 6months or both such fine and imprisonment.” 17. Failure to collect tax Section 30 of the VAT Act provides that “a taxable person, who fails to collect tax under this Act, is liable to pay as penalty 150 percent of the amount not collected plus 5 percent interest above the Central Bank of Nigeria re-discount rate”.

18. aiding and abetting commission of offence
Section 32 of the VAT Act imposes penalty on nay officer of the FBIR or any person who aids or abets the commission of any of the offences in the VAT Act. On conviction, the offender is liable t a fine of N50, 000 or to imprisonment for a term of 5 years

13. Operational Procedures to enforce tax Compliance
The preceding section of this chapter, we derailed the various provisions in the Nigerian System affecting enforcement of taxes. It must be noted that except the provisions are applied and made functional, they will remain paper tigers. We shall now proceed to discuss various ways through which the provisions are functional in practice. Those to be mentioned here are of common explanation in respect of various taxes discussed earlier on:

1. Tax intelligence
This is one of the operational arms within the Directorate f Assessment, Tax Audit, Special Tax Investigation and Intelligence of the Federal Inland revenue Services. The major function of this arm is to scout round for useful information that would boost tax collections. To achieve these goals the intelligence unit visits various town and cities within the country to look for defaulting taxpayers to compel them either investigation process to regularize their tax position.

Desk Examination
This is one of the functions of an authorized officer of the FIRS working in the Assessment Department or the Local VAT office. This is an audit process on the audited accounts and tax returns filed by the taxpayers to the VAT Office. As the name suggests, the examination of these returns are carried out within the premises of the tax office.

All the various tax laws as discussed previously give power to the Relevant Tax authority to request for further information in order to be satisfied on the returns filled by the tax payers. In line with this provision, queries are raised by the tax officers requesting for information from the taxpayers, after the tax officers must have scrutinized on their desks the returns submitted by the taxpayers, “The examination is basically to ensure the reasonableness, arithmetical accuracy and completeness of the information furnished in the returns.” Often, this effort gives rise to additional assessment on the taxpayers.

Tax Audit Process

Section 43(4) of CITA stated that calling for information as in the case of desk examination discussed above does not preclude the tax audit procedure section 35 of the VAT Decree also provides for the tax audit of taxable person. The tax audit procedure therefore cuts across all the various taxes discussed in this study. Tax audit is a routine examination and verification of the taxpayer’s records, books and documents to test compliance with the Tax Laws. Unlike the desk examination, which is carried out in the tax office, tax audit us usually conducted at the premises of the taxpayer. “in Nigeria, the primary purpose of the tax audit is to monitor and maintain the confidence in the integrity of the self-assessment system which was introduced on Nigerian Tax environment in 1991. it helps to improve voluntary compliance by detecting and bringing into account those who do not pay the correct amount of tax. “20

In summary tax audit process involves 21 a) Monitoring and compliance tests; b) Routine exercise not involving any enforcement powers c) Verification of areas, which are likely to yield additional tax.

Cases for tax audit are selected on the following criteria.

1) Refund cases 2) Excess Withholding tax 3) Tax Credit Confirmation 4) Nil returns 5) Persistence losses 6) Sectional basis etc

At the FIRS, there is a Tax Audit Branch, which carries out this special duty.

Special Tax Investigation

A tax investigation is an in-depth examination of the records, books, documents and financial affairs of a taxpayer suspected of tax evasion. Unlike a tax audit process which is a routine exercise to test compliance, a tax investigation has the objective to recover tax lost to the Relevant Tax Authority by the negligence or fraud of the taxpayer, and exact penalties thereon 22. it should be noted that, “once a case is taken up for investigation, it has a very high risk of presecution.”23

Special tax investigation normally involves: 24

a) Checking of tax evasion and avoidance scheme b) Power of search and seizure can be exercised c) Verification of all books and records of account and documents relevant to detect tax fraud. Selections of cases for special tax investigation are many and vary from internal referral, from field operations to external sources. 5. Litigation

The various tax legislations provide for litigation against any defaulting taxpayers in order to enforce the collection of the tax due. The litigation is usually in the regular court of law except in the case of VAT with the recent amendment establishing VAT tribunal to try VAT cases.

6. Appointment of Tax Consultants and Agents

Owing to various economic and political factors which affects negatively the availability or revenue to the three tiers of government in Nigeria, it become imperative for these governments to look into various ways in which to increase their revenue generation. This demand in recent years leads to increase in the appointment of tax Authorities. There is nothing usual in this trend since the tax provisions gives the RTA the power to do so if they wish. However, there are limitations to the extent of work, which a tax consultant and agent can do under the various tax legislations. These tax laws prevent the RTA from delegating the power to assess and collect tax to the tax consultants and agents.

The federal inland revenue Service has been using the tax consultants and agents in the areas of management information system including its computerization programme, research and statistics, VAT monitoring and censor exercise, training and withholding tax monitoring exercise. Most of the states Board of internal revenue have also employed the services of tax consultants and agents under the programme of “Accelerated Revenue Generation (ARG)” in an attempt to increase their Revenue generation. Summary This chapter, we have dealt with the various tax provisions, which direct or impact on the enforcement of tax compliance in the Nigerian Tax system.Some of these provisions are very similar with little or no variation.Those that are specific to particular tax legislation have been highlighted. Most central to these tax laws in an attempt to enforce tax compliances are: ▪ The Relevant Tax Authority can sue for the tax due. ▪ The power to raise additional assessment where necessary. ▪ The power to call for returns and full information on returns filed by the taxable person. ▪ The power of search and seizure ▪ The power to distrain on the property of the taxpayer. ▪ The power to inspect the records, books and documents of the taxpayer ▪ The power to compel taxable person to keep proper records, books and documents. ▪ The power to penalize defaulting tax payers ▪ Authority to appoint tax consultants and agents to carry out some of the functions of the Relevant Tax Authority ▪ The power to refuse the issuance of Tax Clearance Certificate to defaulting taxpayers Also discussed some operation procedures, which help to enforce tax payment. Issues under this include: Tax intelligence, desk examination, tax audit, cial tax intelligence against tax defaulters and finally the issue of tax consultants and agents. In the next chapter, we intend to evaluate the performance of the various ways in which the tax provisions have been applied practically to enforce compliance. We will consider the effectiveness or otherwise of these provisions and procedures
CHAPTER THREE
RESEARCH METHODOLOGY
3. The best estimates of the future will be based upon an analysis and projection of past results. This study is expected to give answer to the questions that were earlier raised in chapter one, such as: i) Are the taxpayers versed with the enforcement procedures of our tax laws? ii) Are the various enforcement brought to the notice of the taxpayers? iii) In what ways are the taxpayers included to voluntarily comply with payment of taxes? iv) Does the tax enforcement procedure deter taxpayers from evasion? Also the fact that i) Considering the rate of illiteracy in Nigeria, most taxpayers are not familiar with most of the enforcement procedures ii) Taxpayers education has not been pursued vigorously by the various tax authorities iii) Enforcement procedures are compulsory to combat evasion of taxes.

1. RESEARCH DESIGN In carrying out this research work, areas that are relevant to this study were drawn based on my knowledge of the topic of study and the information gained in the review of existing literature on tax.

3.2 DATA COLLECTION METHOD Data and information used in this research work are principally sourced from sample population by means of questionnaires and personal interview. The questionnaires essentially serve as a pilot means of creating awareness among the respondents and gathering information generally. Detailed interviews were then concluded with selected respondents based on their responses/answers to the questions asked in the questionnaire. The questionnaires were sop used for the following reasons to: I. Avoid unnecessary details, as responses to the questions are required to be brief. ii. Stimulate respondent’s interest in the research work as questions were asked in logical manner. iii. Allow respondent’s to express their view and opinion on their own words and in a brie and unambiguous manner. iv. Reach out to more people. V. Interview, which were then conducted as follow-up questionnaires administered, were conducted to seek for explanations on the points raised in the questionnaires administered. Also, the FIRS and journals will provide important data and information. 3. SOURCES OF DATA COLLECTION; Data was gathered from primary and secondary sources.

3.4 DESCRIPTION OF POPULATION The overall objection of this research project is to appraise the operation of the enforcement procedures in the Nigerian Tax System, hence the target population is the companies Income Tax in operators in Nigeria; those entrusted with the success of the Companies Income Tax, Personal Income Tax in the Country, and

These categories of people include: i The taxpayers ii Tax officials iii The tax practitioners/experts who the taxpayers especially the corporate bodies usually contract the services and also advise the taxpayers and government in the form of consultancy services. Iv Tax Consultant used by state government in Accelerated Revenue Generation.

3.5 SAMPLING PLAN Considering the nature of the population, the population will be divide into four strata viz: i The taxpayers ii Tax authority iii Tax practitioners and iv tax consultant used by state government

The strata as so identified a random sample approach will be employed to select respondents from each stratum, taking cognizance or each respondent’s responsibility and involvement in the Nigeria Tax System. Information records and views of each stratum will be taken collectively for the purpose of analysis of information and data so generated.

3.5 ADMINISTRATION OF QUESTIONNAIRE AND INTERVIEWS

A total of 60 questionnaires are to be distributed to respondents in the following numbers: the numbers of questionnaires to be distributed were limited based on finance and time constraint. • 15 questionnaires to respondents in the taxpayers stratum • 8 questionnaires to respondents in eth Lagos State Tax Authority Stratum • 15 questionnaires to respondents in the Federal Inland Revenue Services Stratum. • 7 questionnaires to respondents in Tax Practitioners stratum • Questionnaires to Tax Consultants engaged by state government (ARG)

The distribution is based on the number of people in each stratum and their importance to this research work. For follow-up interview, “the persons are to be selected from eth taxpayers” category and two each from other categories. Simple percentage shall be used to measure the awareness of the enforcement procedures of our tax laws. 3.6 RESEARCH INSTRUMENT Creative brain and imagination, paper, pen, computer, library and Internet. 7. METHODS OF ANALYSING DATA There are two methods of analyzing data; Statistical reasoning and logical reasoning. The researcher will make use of statistical reasoning. 3.8 HISTORICAL PERSPECTIVE.

CHAPTER FOUR DATA ANALYSIS AND PRESENTATION OF RESULT 4.1 INTRODUCTION In this chapter, the primary data obtained by means of structured questionnaire and oral; interview are presented and analyzed. 4.2 TABULATION AND ANALYSIS OF DATA In the course of conducting this study, the questionnaires were administered and interview conducted. A total of 60 questionnaires were administered on the people in each stratum, out of which 53 were returned and 50 were found to be properly and duly complete wit eh relevant information. Therefore, 50 questionnaires are used in the analysis. The results of the samples composition are presented in the following tables:

TABLE 4.2.1 EDUCATIONAL QUALIFICATION OF RESPONDENTS
|QUALIFICATION |NO OF RESPONDENTS |% |
|O/L |- |- |
|NCE/OND |- |- |
|HND/1ST DEGREE |20 |40 |
|POST GRADUATE |30 |60 |
|TOTAL |50 |100 |

The table above indicates that 20 (40%) of the respondents had HND and First Degree qualifications while 30 (60%) have postgraduate qualifications.

TABLE 4.2.2 CLASS OF RESPONDENTS
| CLASS |NO OF RESPONDENTS |% |
|TAX CONSULTANTS |- | |
|TAX PAYERS |- | |
|TAX OFFICIALS |- | |
|COMPANY EXECUTIVE |- | |
|OTHERS | | |
|TOTAL |50 |100 |

The table above shows that the respondents declined to fill the space provided on the questionnaire for organization, but they however disclosed from the interview conducted that majority of them are tax payers while the remaining belong to other categories.

TABLE 4.2.3 YEARS OF EXPERIENCE
|NO OF YEARS |NO OF RESPONDENTS |% |
|1-3 |15 |30 |
|4-6 |19 |38 |
|7-10 |6 |12 |
|10 and above |10 |20 |
|TOTAL |50 |100 |

The above table shows that 15 (30%) respondents have been between 1-3 yeas of experience, 19 (38%) respondents have 4-6 years of experience, 6 (12%) respondents have 7-10years of experience, while the remaining 10 (20%) have 10 and above years of experience.

TABLE 4.2.4 ON WHETHER RESPONDENTS ARE GENERALLY AWARE OF TAX COMPLIANCE
|OPTION |NO OF RESPONDENTS |% |
|TRUE |45 |90 |
|FALSE |- |- |
|NOT SURE |5 |10 |
|TOTAL |50 |100 |

Analysis of the table above shows that majority of the respondents who filled the questionnaires are aware that Tax Compliance is the act or process of subjecting oneself one’s income, business asset or expenditure to the demands of the Tax laws.

TABLE 4.3.5 VOLUNTARY COMPLIANCE IS WHERE A TAXABLE PERSON willingly discharges his/her obligation.

|VOLUNTARY COMPLIANCE |NO OF RESPONDENTS |% |
|TRUE |20 |40 |
|FALSE |25 |50 |
|NOT SURE |5 |10 |
|TOTAL |50 |100 |

The table above indicates that 20 (40%) respondents agreed top that Voluntary compliance in discharge their obligation but 25 (50) did not accept that it is voluntary in nature but the Tax Authority (s) employs force; while 5 (10%) are not sure whether its is voluntary in nature or forceful

TABLE 4.2.6 SHOULD THE STATE/FEDERAL GOVERNMENT ENFORCE THE LAWS MAKING NON-COMPLIANCE PUNISHABLE?

|NON-COMPLIANCE PUNISHABLE |NO OF RESPONDENTS |% |
|TRUE |10 |20 |
|FALSE |40 |80 |
|NOT SURE |- |- |
|TOTAL |50 |100 |

The analysis of the table above indicates that 10 (20%) respondents want the State/Federal Government to enforce the laws making non-compliance punishable while 40 (80%) respondents do not want the State/Federal Government to enforce the Laws making non-compliance punishable.

TABLE 4.2.7 HAS VOLUNTARY COMPLIANCE ENHANCED THE STATE/FEDERAL REVENUE
|VOLUNTARY COMPLIANCE |NO OF RESPONDENTS |% |
|TRUE |12 |24 |
|FALSE |32 |64 |
|NOT SURE |6 |12 |
|TOTAL |50 |100 |

The table shows that 12 (24%) respondents remarked that voluntary tax compliance has enhanced State/Federal Revenue; 32 (64%) respondents are of opinion that voluntary tax compliance have not enhanced State/Federal Revenue while the remaining 6 (12%) respondents are not sure voluntary compliance has enhanced State/Federal Revenue. Table 4.2.8 ARE THE TAX PAYERS VERSED WITH THE ENFORCEMENT PROCEDURES OF OUR TAX LAWS

|VOLUNTARY COMPLIANCE |NO OF RESPONDENTS |% |
|TRUE |7 |14 |
|FALSE |41 |82 |
|NOT SURE |2 |4 |
|TOTAL |50 |100 |

Above table indicates that 7 (14%) respondents believed that taxpayers are versed with the enforcement procedures, 41 (82%) are of the opinion that taxpayers are not versed with the enforcement procedures of our Tax Laws; while 2 (4%) are not sure whether the taxpayers are versed wit the enforcement procedures.

TABLE 4.2.9 WHICH OF THESE ENFORCEMENT PROCEDURES OF OUR LAWS SHOULD BE ADOPTED TO ENSURE COMPLIANCE
|OPTIONS |NO OF RESPONDENTS |% |
|HEAVY PENALTIES |22 |44 |
|SEALING UP OF THE COMPANY |4 |8 |
|CHARGED TO COURT |13 |26 |
|ANY OTHER (SPECIFY) |11 |22 |
|TOTAL |50 |100 |

The analysis above shows that 22 (44%) respondents claimed that Heavy penalties should be adapted to ensure compliance, 4 (8%) supported that sealing up of the company in default should be employed, 13 (26%) are of the opinion that the defaulting taxpayers should be charged to court while 11 (2%) were of the opinion that other measures should be employed.

TABLE 4.2.10 HAS THE TAX ENFORCEMENT PROCEDURES DETERRED TAXPAYERS FROM TAX EVASION
|OPTION |NO OF RESPONDENTS |% |
|YES |15 |30 |
|NO |28 |56 |
|NOT SURE |7 |14 |
|TOTAL |50 |100 |

From the above table, the 15 (30%) respondent claimed that the tax enforcement procedures deterred tax payers from tax evasion, 28 (56%) respondent claimed that eth tax enforcements procedures has deterred taxpayers from tax evasion, while 7 (14%) are not really sure.

TABLE 4.2.11 CONSIDERING THE RATE OF ILLITERACY IN NIGERIA, MOST TAXPAYERS ARE NOT FAMILIAR WITH THE ENFORCEMENT PROCEDURES.

|OPTION |NO OF RESPONDENTS |% |
|TRUE |18 |36 |
|FALSE |30 |60 |
|NOT SURE |2 |4 |
|TOTAL |50 |100 |

From the above analysis 18 (36%) supported the fact that because of the arte of illiteracy in Nigeria most taxpayers are not familiar with the enforcement procedures; 30 (60%) do not agree that it is the rate of illiteracy that made taxpayers not to be familiar with the enforcement procedures while 2 (4%) are not sure whether it is really the arte of illiteracy that affects the taxpayers not to be conversant with the enforcement procedure in the tax system.

TABLE 4.2.12 THE TAXPAYERS HAVE NOT BEEN ADEQUATELY EDUCATED BY THE VARIOUS TAX AUTHORITIES ON THE NEED TO CARRY OUT THEIR CIVIC RESPONSIBILITIES.
|OPTION |NO OF RESPONDENTS |% |
|YES |50 |100 |
|NO |- |- |
|NOT SURE |- |- |
|TOTAL |50 |100 |

The table above shows that all the 50 (100%) respondents said “Yes” that the taxpayers have not been adequately educated on the need to perform their civic responsibilities.

TABLE 4.2.13 HAS THE TAX ENFORCEMENT PROCEDURES IN NIGERIA TAX SYSTEM BEEN STRONG ENOUGH TO ENCOURAGE TAXPAYERS TO VOLUNTARILY COMPLY WITH THE PAYMENT OF TAX
|OPTION |NO OF RESPONDENTS |% |
|YES |- |- |
|NO |50 |100 |
|NOT SURE |- |- |
|TOTAL |50 |100 |

From the above analysis 50 (100%) claimed that the enforcement procedures in the Nigerian Tax system are not strong enough to encourage taxpayers to voluntarily comply with the payment of tax. TABLE 4.2.14 TAX DRIVE MOUNTED BY TAX INSPECTORS OF TAX AUTHORITIES HAS YIELDED MUCH RESULT.
|OPTIONS |NO OF RESPONDENTS |% |
|0-20% |- |- |
|21-40% |- |- |
|41-60% |11 |22 |
|61-80% |32 |64 |
|81 and above |7 |14 |
|TOTAL |50 |100 |

The above table indicates that 11 (22%) respondents said that the tax drive has yield 41-60% result, 32 (64%) respondents are of the opinion that the result is between 61-80% while the remaining 7 (14%) agreed that tax drive has yielded 81% and above result.

TABLE 4.2.15 HOW WOULD YOU RATE A SHIFT FROM GOVERNMENT ASSESSMENT TO SELF-ASSESSMENT TO ENCOURAGE TAXPAYER’S PARTICIPATION IN THE TAX ASSESSMENT PROCESS?

|OPTION |NO OF RESPONDENTS |% |
|HIGH |- |- |
|AVERAGE |45 |90 |
|LOW |5 |10 |
|TOTAL |50 |100 |

The above table indicates that 45 (90%) respondents said self-assessment has encouraged Taxpayers participation in the tax assessment on the average while 5 (10%) respondents are of opinion that eh rating is low TABLE 4.2.16 IS TAX COMPLIANCE EASY TO ENFORCE?

|OPTION |NO OF RESPONDENTS |% |
|YES |23 |46 |
|NO |27 |54 |
|NOT SURE |- |- |
|TOTAL |50 |100 |

The table above indicates that 23 (46%) respondents said that Tax Compliance is easy to enforce while the remaining 27 (54%) respondents said that Tax Compliance is not easy to enforce.

TABLE 4.2.17 DO YOU SUPPORT THE ENGAGEMENT OF TAX CONSULTANTS IN ENFORCING TAX COMPLIANCE

|OPTIONS |NO OF RESPONDENTS |% |
|YES |- |- |
|NO |47 |94 |
|NOT SURE |3 |6 |
|TOTAL |50 |100 |

From the analysis of the table, 47 (94%) of the respondents are of the opinion that Tax Consultants should not be engaged in enforcing Tax Compliance while 3 (6) are not sure of what should be done as regards that.

TABLE 4.2.18 DO YOU AGREE THAT THE USE OF TAX CONSULTANTS SHOULD BE DISCONTINUED AND RESTRICTED ONLY TO THE SUPPORTIVE AND SECONDARY FUNCTIONS OF THE TAX AUTHORITY?

|OPTIONS |NO OF RESPONDENTS |% |
|YES |47 |94 |
|NO |3 |6 |
|NOT SURE |- |- |
|TOTAL |50 |100 |

The table above shows that 47 (94%) respondents agreed that the use of Tax Consultants should be restricted only to supportive and secondary functions of the tax authority while 3 (6%) said their functions should not be restricted.

TABLE 4.2.19 TAX AGENTS AND ADVISERS TO TAXPAYERS SHOULD PLAY A MAJOR ROLE IN ENSURING VOLUNTARY TAX COMPLIANCE BY THEIR CLIENTS

|OPTIONS |NO OF RESPONDENTS |% |
|YES |50 |100 |
|NO |- |- |
|NOT SURE |- |- |
|TOTAL |50 |100 |

The table shows that all respondents agreed that Tax agents and advisers to Taxpayers should play a major role in ensuring voluntary tax compliance by their clients.

4.3 PRESENTATION OF INTERVIEW REPORT From the analysis of the data collected and the interview conducted a lot of hidden facts were revealed despite the fact that the respondents were evasive in their responses to most of the questions posed during the conduct of this interview.

TAXPAYER’S EDUCATION It is a common saying that “Ignorance of the Law is no excuse” and as such a big responsibility is placed on the taxpayer to ensure he knows his obligations and rights under the various tax legislative in Nigeria Tax System. These obligations and rights are as given by the respondents are summarized below:

The primary obligation of the taxpayer is that he must: (i) Register for tax payments: (ii) Determine the amount of tax payable; (iii) Pay correctly and on time all taxes due or withheld on payment made including tax penalties; (iv) File a return in respect of taxes payable; (v) Keep and produce on demand all books of account, records, documents and returns necessary for the ascertainment of tax liability; (vi) Answer all queries and attend to notices or summons served by the tax authorities; (vii) Co-operate with and allow tax offices full access to premises, office or residence to search or remove anything required for investigating tax chargeable or bringing up a case in the law court. (viii) Give information concerning any other person or company specified in a notice by the tax authorities. (ix) Pay to the tax authorities all or par of any part or person who has defaulted in his tax obligation-if the tax authorities so direct; x) Have a representative or tax officer designated to answer all questions of tax payments; xi) Do anything as may be required by the tax authorities for a smooth administration of the tax policy.

Rights: In general terms the rights of a taxpayer normally consist of: (i) The right to appoint a tax consultant or tax office to represent him in the tax office; (ii) The right to dispute an assessment; (iii) The right to any within the stipulated time given by law; iv) The right to appeal to a separate independent body in the event of dispute.

Illiteracy: In a third world Country like Nigeria where the level of literacy is still low, it is a tall order to expect the taxpayers to be versed with the tax laws: Since the taxpayer is not aware of his obligations and rights, it is almost certain that he will be ignorant of the fact that the law will make provisions for the enforcement of that obligations where they are not voluntarily complied with. However, in the case of illiterate individuals who are self-employed, has the laws been enforced?

Certainly, the answer is no. For example every individual who is working for a living has obligation to pay tax under the Pay As You Earn (PAYE) System of personal income tax. But most of these individuals are illiterate and in most cases are self-employed. They consider the payment of tax to be the responsibility of hose individual in the organized sector of the economy; that is those earning salary and wages from offices.

Even when some of these illiterates individuals are wealthy and as such they become the majority shareholders in limited liability companies, the effect of lack of education still affects their level of voluntary compliance when it comes to tax laws. It is these types of companies that you found no records keeping or where they are kept, they are usually in incomplete.

Here, there is a high degree of evasion (sometimes not deliberate but through lack of education and poor records keeping) in PAYE of the employers (including the owners of the companies). Corporate tax and Value Added Tax.

The fact that the majority of our taxpayers are illiterate does not mean they cannot acquire tax education. It only means that tax authorities have to design tax education programmes that will incorporate the interests of the people at eth grassroots rather than focusing only on eth elite group.

One of the “Primary objectives of taxpayers education is to instill into the citizenry the culture bordering on voluntary compliance to reduce the incidence of enforced compliance which increases the cost of collection.

Inadequate taxpayer’s education has made Nigeria taxpayers believe erroneously on the Nigerian Tax System that: (i) No immediate or apparent advantages are derivable from voluntary compliance; (ii) There is compulsory transfer of ownership of money belonging to individuals to corporate purse; (iii) There are allegations of improper use of taxes by government; (iv) Taxes are burden and are of recurring nature; (v) There is an intrusion into taxpayers’ privacy, especially when they are under interview; (vi) There is inefficiency on the part of tax Law administrators especially when it comes to making tax refunds of tax payers; and (vii) There is complete lack of taxpayer’s education.

The views of the taxpayers as stated above are not totally misplaced because they have been left to grope in the dark fro too long until very recently when the tax authorities especially the FIRS started given proper attention to the education of Taxpayers as all embracing including the following: (a) GIFT ITEM Year after year, calendars, diaries, table pads, cigarette lighters and stickers are produced and distributed free – of – charge to the general public. These gift items normally carry the inscription of FIRS with various slogans exhorting members of the pubic to pay their taxes. Examples of these slogans are: - “Be patriotic, pay your tax as at when due” - It’s a crime to make false tax returns; stop it” - Towards voluntary compliance” - A good citizen makes his tax returns regularly, do you?” - “Taxpayer is king” - “Opt for self-assessment and file your returns promptly” - “Be a responsible citizen, pay your tax” - “Pay your tax to help government provided infrastructure like roads, hospitals, schools to make life easy” - “It pays to pay tax”

(b) Mass Media These include the use of radio and television jingles especially at the onset of VAT. The Executive/Chairman of the FIRS had also appeared on many occasions on Nigerian Television Authority (NTA) Network programme, “Tax Matters and other Media Houses to sell and explain tax products.

(c) Own Publications Tax guides, brochures and information circular are usually published by FIRS to assist taxpayers in the following areas: i) Informing them of new tax laws, procedures and guidelines ii) Explanations and interpretations of some legal jargons in a way that it will be understandable to the layman.

(d) Workshops and Seminars This is usually targeted toward some segments of the economy depending on the need especially when explanations are required on new tax policies fro example, a workshops on withholding Tax and VAT was organized specifically for government ministries, parastatals and agencies.

(e) Taxpayer Services “IN each of the Integrated Tax offices and Large Tax offices, it has become mandatory that a Taxpayer Services set up and headed by an experienced officer. Their main functions among others are to make publications available to taxpayers on call, assist taxpayers by directing them to the appropriate officers to be seen, and attend to oral enquiries from either taxpayers, agents or advisors”. Taxpayer Education drive through advisory visits, workshops, and the use of media in targeting areas of least compliance. Complaints, inquiries and complaints handling. Dispute resolution activity and collaboration/External Services liaison.

(f) Nigerian Tax News Journal To spread tax information to the general public the FIRS commissioned the publication of a quarterly journal, the Nigerian Tax News” in 1996 and recently Gauge also a quarterly journal. This journal which is distributed free – of –charge is made available to libraries of all Higher Institutions in Nigeria, notable corporate Organizations, Accounting and Laws firms and some individuals who are tax Practitioners and Administrator.

It cannot be over stressed that taxpayer’s education is of paramount importance in the enforcement of tax. IT is even more important when it comes to voluntary tax compliance because this is the modern trend in the tax system all over the world. But it should be admitted that the Nigerian Tax System had failed in the past in this respect until about six years ago. Our situation however, is not irredeemable moreso that we have commenced various taxpayers education programmes to win the confidence of the general public.

4.4 Review of Operational Procedures On the issue of how these operational procedures have succeeded in enforcing tax compliance in the Nigerian Tax System. (a) Tax Intelligence In the opinion of the respondent, the effectiveness of this procedure is below average. This is more glaring when you talk of personal Income Tax especially those who are self-employed. These sets of citizens hardly pay tax because the tax intelligence function is very weak in most of the State Tax Authorities. Such traders with one enterprises or the other, Contractors and artisans are never brought to the tax net. Intelligence information such as the lists of Withholding Tax Deductions and Business Name Registrations are never valued as important even where they are available. It means individuals who are carrying on businesses most of which are very viable but who have not been filling tax returns are not compelled to do so because the information that could provide a lead to them are never given serious consideration.

In regard to the Federal Tax Authority, there is a separate unit saddle with intelligence functions. It should be noted however, that many corporate organization abound everywhere, which have never filed tax returns talkless of paying tax. It can therefore be concluded that the tax intelligence procedure both in the State and Federal Tax Systems despite its high potency in enforcing tax compliance has been rendered ineffective owing to administrative ineptitude. However, the preference fro voluntary tax compliance (especially at the Federal level) instead of the “traditional coercive method of taxation” may be the major factor behind this lapse.

(b) Desk Examination The relevance of this procedure is reducing gradually with the introduction of the tax audits procedure. However, owing to shortage of human resources, it is not feasible at the moment for tax audit to entirely displace desk examination. This process is geared mainly towards voluntary tax compliance as against enforcing tax compliance. It is a very slow process in obtaining information form the taxpayers since queries raised by the Inspector of Taxes may not be responded to until an average of four months have elapsed. Sometimes, the taxpayers complained of having to carry a lot of documents from their organizations to the tax office. They consider this as cumbersome and time wasting. Despite its shortcomings, it is still serving a useful purpose in ensuring that at least each tax returns filed by taxpayer is scrutinized for completeness and reasonableness.

(c) Tax Audit This compliments the self-assent programme and confirms the reliability or otherwise that should be placed on the returns filed by the taxpayer. Since company is now deemed to be self-assessment flier, operationally, and on routine basis, the yearly, tax returns from every company should go through Tax Audit process. As earlier stated, this process should gradually replace the desk examination of tax returns. But on practical note, no Tax Authorities including the Federal Tax Authority has been able to meet up adequately with this challenge. It requires a lot of human resources who are well qualified in the fields of Accountancy, Taxation and Law.

In enforcing tax compliance tax audit process like the desk examination process is not designed to focus on this aspect. It is rather geared toward voluntary tax compliance but in real life situation; it assists in discovering cases of tax evasion where this is noted, such cases are usually referred to Special Investigation Branch or Litigation Department for further action. Subject to the limitation of manpower requirement, the Tax Audit Process Notwithstanding its short life span (it becomes very visible in the FIRS in 1991) has accomplished to some extent the set targets. It relevance is highly noted by the various Tax Authorities, Taxpayers and the Tax Consultants/Advisers to the Taxpayers. To the Tax Authorities, it facilities on the spot assessment in deterring the level of reliance that could be placed on eth tax returns sent in by the taxpayers through the self-assessment scheme. In regards to the taxpayers and their tax adviser, it is a sporadic and short exercise, which saves them from the rigour of answering desk examination queries that may take months to finalize. (d) Special Tax Investigation This is one of the major enforcement procedures in the Nigeria Tax System. It is instituted to actualize most of the enforcement provisions of the various tax laws. Essentially, issues relating to search and seizure, detraining on the property, litigation and imposition of penalties on taxpayers are usually associated with tax investigation. Once a tax investigation commences, it may eventually lead to one or more of the above-mentioned provisions being invoke on the tax evader. Tax investigation is a special thing and as such it is not a common routine exercise like the tax audit process. Under normal circumstance, a tax not recover within 6 years after the end of the assessment year to which that tax relates is considered statute barred in line with section (48(1) of CITA. Other tax Laws have similar provisions. However, section 48(1) of CITA has a provision, which removes the limitation of time where fraud, willful default or neglect has been committed by or on behalf of any company. A taxpayer must therefore be suspected of tax evasion before it can be brought for tax investigation.

In regard to payment of taxes by individuals, be it Personal Income tax or Capital Gains Tax, the impact this special tool has not been felt. It is common knowledge that the wealthy individuals in our society are serious tax evader. They display their opulent wealth everywhere for people to see inform of frivolous donations, exotic cars etc, but the issue of tax payment is considered irrelevant No tax investigation has even been conducted on them because in most cases they are regarded as scared cows that must be spared.

Most of these people are Chief Executive of Companies. They are not part. They are not part of the staff payroll and such; they do not pay tax through Pay Tax as You Earn Scheme. The tax intelligence with the tax investigation procedures should have been used to force them to pay the tax due from them. Corporate taxpayers are ware of this provision, which the FIRS have been employing when the need arises. The Federal Tax Authority has a unit for this purpose that is called the Special Investigation Branch. Cases of suspected tax fraud are transferred from the Area Offices through the desk examination process, from the Management of FIRS through information on tax evasion as provided by the general public and finally from the tax audit process. Where there is a permanent structure like the Special Tax Investigation of the FIRS, the name Special Tax Investigation become very fearful to some taxpayers and even their tax advisers. This characteristic geared up some companies toward voluntary tax compliance, which is favourably preferred to enforce tax compliance.

Where a company is under tax investigation, it is expected to make available al its accounting records, books and documents for examination usually at the company’s premises. Failure to voluntarily allow access to these records etc, the tax investigations may invoke the search and seizure provision. But search and seizure is rarely used because most of the taxpayers involved are prepared at that stage to allow access to their accounting records.

With tax investigation, all doors are opened since it supposes to be a through probe to the financial and tax matters of the suspected it therefore, follows that investigators must collect sufficient evidential material during the process of investigation. A proper tax investigation therefore follows the due process of law.

Tax investigation as an enforcement procedure has not been fully utilized because of manpower requirement. Tax investigators should be seasoned tax administrator with wide range of experience investigation exercise is not done and finalized in hurry, at times it spans up to two or three years before completion. This time period is sometimes unacceptable to the taxpayer and its consultants who prefer a shorter time period. With all its limitations, special tax investigation has not performed badly in combating the issue of tax evasion involving corporate taxpayer. However, this cannot be said of individual taxpayer.

(e) The Tax Consultant/Agents No topic in the last two to three years in Nigeria has generated much heated debate and public discussion than the issue of the Tax Consultant/Agents to the various State and Federal Governments in Nigeria.

In particular, the discussion centers mostly on the appointment by some States Governments under the Accelerated Revenue Generation (ARG) Programme.

In evaluating the appointment of the Tax consultants the main issues for consideration are as follows: (i) The constitutionality of the appointments (ii) The relevance of Tax Consultants in revenue generation engagement (iii) The effective suppression of the taxpayer rights, in particular the demise of the appeal commissioners. (iv) The principle of deemed income. (v) The use or threat of force in the pursuit of tax compliance.

Constitutionality: It is interesting to note the diverse opinions of this matter. Among those who consider the appointment illegal referred to various sections of PITD and concluded that “none of the provisions of the legislation gives any of these bodies the right to delegate any of the powers granted to them”.

Another respondent summed up the issue when he stated “it is trite law that where a statute confers a power on a body as in the case of the Board of International Revenue of a State, it is that body and that body alone that can exercise the power conferred by Law”. The power to assess and collect tax is vested under the state Law on the Internal Revenue Board of a state. The personal Income Tax Decree 1993 No 104, of 1993 h as no provision where a Tax Authority can delegate its powers to assess and collect tax.

The Governor of a State cannot in law appoint by executive fiat, a person or group of persons to exercise the powers conferred by law of the state on another person. For him to do so, he must first of all amend the law by an edict. Unless and until this is done, the purported appointed of Consultants with the present duties assigned to them is void in law.

The only Tax Authority recognized by law i.e. Personal Income Tax Decree 1993, No 104 of 1993, is the Tax Authority of a state and that is shown above the state Internal Revenue Board. Any other person or persons appointed without an amending edict is wrong in law.

Among the various reasons proffered to justify that there is nothing unconstitutional about the appointment of Tax Consultants. One of the respondents said, “The Maxim Delegatus non-protest Delegare (You should not delegate what has been delegated to you) is only applicable to delegated legislation. Activities of revenue consultants are not legislative in nature more so as they cannot make laws. There is nothing irregular about the appointment of Tax Consultants if they adhere strictly to the performance of the auxiliary duties.

It should also be note that both sections 2(1) CITA and 85(B) (1) (b) PITA empower the Federal Board of Inland Revenue and State Board of Internal Revenue to do all such things as may be deemed necessary and expedient for the assessment and collection of tax. Presumably this legitimizes the use and indeed the appointment of Consultants.

Section 2(4)(a) CITA also empowers the Federal Board of Inland Revenue by notice in the Federal Gazette or in writing authorize any person within or outside Nigeria to perform or exercise, on behalf of the Board, any power or duty conferred on the Board other than the powers or duties specified in the first schedule to the Act. It is therefore, lawful for the tax authorities to engage consultants for any purpose under the law. Since section 2(4)(a) CITA and 85(B)(4) PITA stated expressly those powers or duties that cannot be delegated by the Federal Board of Inland Revenue and State Board of Internal Revenue respectively, it will be misleading to ignore these exceptions. On the final note, the appointment of Tax consultants by the various Tax Authorities is not outlawed by any of the tax legislation but using them to exercise powers or duties expressly vested in the various Tax Authorities only will be clearly unconstitutional. In the words of J.K. Naiyeju “the primary functions of assessment, collection and accounting for taxes could not be delegated to anybody who is not an official of the tax authority. This is the practice all over the world”.

Relevance of the Tax Consultants Are consultants relevant in tax administration? Yes, they are, but their use must be with military dispatch that is for a short period and to correct a malady permeating the system for which no internal cure has been found.

A Consultant cannot and should not take the place of the relevant tax authority neither should the consultant render the relevant authority idle.

The work of a consultant in tax administration should be basically that of straightening out identified creases in the workings of the tax authority.

The functional relevance of the Consultant in Tax Administration is that of training, by brining in fresh ideas to moribund ways of tax administration as well as being involved in strategic planning for the implementation of new ideas. The need for tax consultants had been well captured in the preceding paragraphs as enumerated by some of the respondents. The Joint Tax Board (JTB) is not against the use of Tax Consultants if they are restricted to secondary functions such as data collection, provision of tax information, conduct of feasibility study, training, computerization, monitoring etc.

Suppression of Taxpayers Rights: On this issue, most respondents reacted by analyzing the rights of a taxpayer. For example, an aggrieved taxable person under the PITD has the following right: (i) Section 57(1) “if a person disputes an assessment he may apply to the relevant tax authority by notice of objection in writing to review and to revise the assessment.”

The taxpayer has thirty days from the date of service of eth notice of eth assessment in which to request for the revision. (ii) Section 57(3) where the RITA disagrees with the taxpayer in a2mending the notice of assessment the taxpayer has the right to receive notice or refusal to amend the assessment from the RTA. (iii) Within 30 days of receiving the notice of refusal to amend the assessment, the taxpayer has the right to appeal to the Body of Appeal Commissioners by virtue of section 60, and where there is no Body of Appeal commissioner; the appeal can be made directly to the High Court within the same time limit, section 64(2). (iv) Section 62(5) “a taxpayer who appeals against an assessment shall be entitle dot be represented at the hearing of the appeal”. (v) The taxpayer shall be entitled to a certified copy of the decisions of the Appeal Commissioners if a request is made within three months of the decision section 62(2) (vi) The right of appeal to the High Court within 30 days after the date on which the decision of the Appeal Commissioner was given if the taxpayer is aggrieved by such decision, Section 64(1) (vii) The taxpayer has the right to appeal to the Court of Appeal and thereafter to the Supreme Court of Nigeria, Section 64(1) viii) In respect to payment of an agreed tax, the taxpayer has 2 months within which to settle the tax, section 67(1).

With the advent of the Tax Consultants, the rights of the taxpayers as listed above were infringed upon without impunity.

Where appeal was allowed it was it was to be made within 15 days as against 30 days stipulated by law. Payment of undisputed tax was to be effected within 10 days contrary to 2 months provided by the law. In some instances appeal to the Appeal Commissioner was never allowed by the Tax Consultants talk less of the right by the taxpayer to take his case from the High Court through to the Supreme Court.

Deemed Income In the opinion of most of the respondents this is one of the ways in which the Tax Consultants wrongly applied the law. What is within the law is the power of the RTA (under sections 53(2)(b), 53(3) and 54(1) of PITA to issue a best of judgment assessment where it believes there is an additional liability.

Employing standard rates to determine what the income of employees ought to be as if employment contracts are the same for every organization is irrational and inequitable to the employees and their employers who are forced to pay tax on the deemed income instead of paying tax on the actual salaries and wages to their employees. The deemed Income fro determining the correct income tax due from the individuals of foreign nationality who are resident in Nigeria may conflict with the terms and spirit of various tax treaties signed by the majority of the commonwealth and developed nations. Liaising with the foreign citizens who are resident in Nigeria would have been more appropriate without adverse effects in the diplomatic and economic relations with those other countries.

Since salaries and wages is one of the allowable expenses in computing income tax of companies under CITA and PITA, it became imperative for the FIRS and Joint Tax Board to come out with Pubic Notice to warn the Tax Consultants to put a shop to the illegal act.

An extract from the FIRS Public Notice issued in 1997 reads as follows: The attention of the FIRS has been drawn to the practice whereby tax charged on the “deemed” element of salaries, wages, emoluments and similar remuneration computed by consultants in the employment of some state Government for the determination of tax payable on employment income. It has therefore become necessary to issue this Notice for the information of all public auditors, tax consultants and the Management of Corporate bodies and or the enlightenment of the general public that this practice has no basis in the laws, in Nigeria. Accordingly, such basis will not be allowed, by the FIRS as deductible expenses chargeable against the income of the Company.

The position of the law on the allowable remunerations as salaries, wages, emoluments and similar remunerations is clear. Only the actual expenses incurred for such payments are allowable. I has to be emphasized that other basis of determining remuneration that the actual expenses will not be allowed.

It was crystal clear from the various comments referred to above that the Tax Consultant, invention of the deemed salary was completely alien to the various tax laws in Nigeria.

Threat or Use of Force This aspect actually gave the Tax Consultants its very bad image in the yes of the general public. Because of the way many companies were sealed off using armed policemen and military personnel, the Tax Consultants were referred to as Tax contractors without “human face.”

The power to distrain for non-payment of tax under section 96 of PITD is one of the primary powers of SBIR, which cannot be delegated as expressly provided in section 85(B)(4) of PITA. The use of Task Force by the Consultants to close down the premises of taxable persons who were alleged to we tax was therefore unfortunate since law could not support it. It must be noted that the use of force to close down business fro alleged tax liabilities which the taxable persons were not given rights to appeal as earlier discussed, had negative impacts on the investment opportunities in particular and the Nigeria economy in general. According to one of the respondent, “such a practice has general economic consequences as the nation may be perceived by outside investors as one in which their property rights are n ot respected. The perceived risk of investing in Nigeria may increase to the detriment of the overall tax and government policy objectives of encouraging foreign investment.”

The use of Tax Consultants in the Nigerian Tax System Is not illegal, as some people wants us to believe. However, the duties assigned to the Tax Consultants by whoever appointed them may be the bone of contention. Clearly stated, the Tax Consultants should not be made to perform the primary functions of the various Tax Authorities, as to do so will be ultra vires. They can only be used for secondary functions, which not in anyway enforced tax compliance but which will generally help in voluntary tax compliance.

It must be noted that the use of Tax Consultants to carry out illegal duties was made possible in Nigeria because we are operating under the military rule, which in itself is an aberration of segregation of power and the rule of law. Having this in mind, we should not expect Tax Consultants appointed by military rulers to behave differently from their mentors after all “whoever play the piper dictates the tune”.

Litigation Most of the penalties for various offences under different tax legislations cannot be imposed until after conviction by competent courts of law. But looking at the procedures in our courts of law, will prosecution of tax offenders ever help to enforce tax compliance?

Most of the respondents said, no because a case may take several years before it is finally determined. By the time the case is determined, the issues raised may have become belated owing to passage of time.

For example, the case between Shell BP VFBIR in respect to Accounting year 1973 was only determined finally in the Supreme Court of Nigeria in 1994, that is 21 years after the end of the accounting year in questions. It must be not that Shell-BP was nationalized into what is known today as the African Petroleum AP PLC. How can situation like this enforce compliance?

Problems like the one noted above may have been the basis for establishing Tribunal to try offenders in respect to Vat offences, which in my own opinion is a good gesture, which will speed up he determination of cases referred to it.

4.5 SUMMARY OF FINDINGS i. Very many people who are self-employed are not aware of the enforcement procedures in eth Nigerian Tax Systems and they do not know that it is mandatory to pay tax. ii. It is the opinion of government tax officials that the established tax procedures are adequate and effective but review of such procedures does not come regularly and timely, and the implementers of these v tax procedures do not show commitment to their job. iii. It is the general opinion of respondents that the use of Tax Consultants in the assessment and collection f taxes on behalf of governments be discontinued.

Though the appointment of Tax Consultants was considered as legitimate within the various tax laws. However, the use to which they could be put is limited within the tax laws. Tax Consultants are relevant in the Nigeria Tax System but is should be used to aid voluntary tax compliance rather than employing them to coerce taxable persons into paying taxes, which in the first instances have not been properly determined owing to the abuse of rights of taxable persons. iv. Litigation of tax defaulters ought to be seen as helping to enforce tax compliance but it is rather said that our Courts procedures are too slow fro any meaningful impact to be made. v. It is clear from the study that Revenue Collection has good prospect in Nigeria.

CHAPTER FIVE

SUMMARY, RESEARCH FINDINGS, RECOMMENDATIONS AND CONCLUSION

This concluding part is designed to highlight the main parts in this project work. Finally, suggestions will be made on how to reinforce the various procedures of our tax legislations.

5.1 SUMMARY The first part, introduced us to main objectives of the study. It discussed about the obligations of the citizens in respect of payment of various taxes. The option opened to governments in form of enforced tax compliance if citizens failed to discharge their tax obligation voluntarily. This chapter went on to highlight enforcement procedures such as Self-Assessment, the power of Search and Seizure, Litigation of tax defaulters and power to distrain on the property of the taxpayers to recover the tax due as some of the key areas to the project. We concluded this chapter by stating the scope and the organization of the project.

In chapter two, we discussed the theoretical framework of taxation as a concept. We defined taxation as a compulsory levy paid by citizens to Government to provide funds for the running of the Government and also for the provisions of social amenities such as roads, schools, hospital etc. We mentioned direct and indirect taxes as the two major types of taxes. Direct taxes are taxes on income while indirect taxes are taxes on enjoyment of good and services. This chapter also explained some taxation terms, which were consider necessary for the understanding of the study. It explained that Nigeria Tax System includes: the tax policy, law and administration. We defined Taxable persons as an individual or body of individuals and any corporate sole, trustee or executor having any income, which is chargeable to tax by nay tax authority. We also defined Assessment year, Company and individual. This chapter also discussed explanations on tax compliance, avoidance and evasion. We looked at tax compliance as an act of obedience to tax laws and payment of taxes. This obedience however may be voluntary or compelled. Tax avoidance relates to the use of loopholes in the tax laws to reduce tax liability while tax evasion deals with illegal ways of not fulfilling ones tax liability.

Chapter two also dealt with literature review. We examined in line with the project objectives various tax legislations in Nigeria. Reviews of some textbooks on taxation were carried out. Magazine and Newspaper cuttings relating to the topic issue were also reviewed. In particular, the review covered the following tax legislations: i) CITA Cap. P8 2004 LFN ii) CGTA Cap. C1 LFN;1990 iii) PITA Cap. P8 2004 LFN iv) PPTA Cap. 13 LFN 1990 v) VATA CapV1, LFN 2004 vi) NITDA ACT 2007 vii) FIRS Establishment Act of 2007

We defined enforcement procedure as operational provisions, guidelines, and regulations which help to enforce tax compliance by a tax authority in respect of a taxable person.

From the various legislation lists above, we identified some of the key enforcement provision and procedures as follows: (a) The power of the Relevant Tax Authorities (RTA) to sue for recovery of tax due. (b) The power of the RTA to acquire, hold and dispose of any property taken as security in satisfaction of tax liability. (c) The power of the RTA to distrain on the property of the taxable person. (d) The power of the RTA to assess on Turnover where there are no total profits or where in the opinion of the RTA, the total profit is unacceptable. (e) The power of the RTA to regard certain transactions as artificial or fictitious if they were not affected at arm’s length. (f) The power of the RTA to assess on minimum tax to ensure that every taxable person pays tax to the government. (g) The power of Search and Seizure where it is necessary by the RTA to have access to eth accounting records, documents and books of the taxable person for the purpose of examining them for additional tax yield. (h) The payment of provisional tax, that is, an amount equivalent to the tax paid in the immediately proceeding year or assessment in one lump sum to ensure payment of tax is enforced even before tax returns are filed with the RTA. (i) The deduction of tax at source which commonly referred to a withholding tax was discussed as form of advance payment of tax which helps to track down taxable person in respect of tax. (j) Tax Clearance Certificate (TCC) was discussed as one of the means of enforcing payment of tax taxable person are expected to present it before they can effect some business transactions especially with government, government agencies and public limited liability companies. (k) Tax Offences and sanctions for offenders were also discussed.

We concluded this chapter by examining some of the practical guidelines such as tax intelligence, desk examination and tax audit process, special tax investigation, appointment of tax Consultant/agents and litigation of tax defaulters.

Tax intelligence functions deals with scouting round or carrying out surveillance visits in respect of taxable person with the purpose of obtaining useful information, which can assist the RTA to assess and collect tax from the taxable person. The desk examination and tax audit process compliment the self-assessment scheme to ensure tax compliance. The process was discussed as being routine in nature unlike tax investigation exercise, which is targeted towards tax evader to compel him to pay due from him.

Appointment of tax consultants was considered in the light of the various RTA to increase their revenue generation. With this purpose in mind, they were asked to assess and collect taxes instead of engaging them to carry out secondary functions such as data collection, computerization training etc. Litigation of tax defaulters to recover tax due was also examined in this chapter.

Chapter three of the study dealt with the Research Methodology.

Chapter four dealt with the evaluation of the various enforcement provisions, proceedings and guidelines with the aim of determining their level of effectiveness in the efforts of the RTA to enforce tax importance of taxpayer’s education as a major factor affecting eh success or otherwise of any enforcement procedures. We tried to gauge the performance level of each at the following procedures: - Tax Intelligence - Desk Examination - Tax Audit - Special Tax Investigation/Criminal Investigation - Appointment of Tax Consultants - Litigation of Tax Defaulters

5.2 CONCLUSION
In conclusion, we should now pinpoint some of the major inferences highlighted by this study, which directly or indirectly have impacts on the performance of the enforcement procedures in the Nigerian Tax Systems.
1. It is noted that each of the tax legislation discussed in this study has adequate provisions, which will ensure hat every taxable person discharges its tax obligation voluntarily or involuntarily. These provisions are very similar in all the tax legislation discussed. The effect is that taxpayers, tax advisers, tax administrators, students and other interested parties who may wish to study them have their job simplified.
2. That taxpayer education is a major factor for consideration in any Tax System. IF taxpayers are adequately enlightened through tax education, the need for tax enforcement, which is more costly than voluntary tax compliance, will be reduced. That the RTA most especially the FIRS, are now recognizing this fact and as such they have instituted various ways to educate the taxpayers.
3. That the tax intelligence work has not been vigorously pursued and as such it has not sufficiently contributed towards tax enforcement despite its high potency in this regard. Majority of our rich individuals who even flaunt their wealth everywhere pay little or no tax. It is noted that if tax intelligence is efficient and effective most of them should have been brought under tax investigation to ensure tax evade are recovered.
4. That desk examination and tax audit process is essentially a voluntary tax compliance exercise rather than a tax enforcement procedure. However, this process sometimes helps to establish a prima facie case of tax evasion, which can then be taken for full tax investigation.
5. That tax investigation is one of the major tools in tax enforcement. On the Federal Level, companies have started to note the impacts of tax investigation. Taxpayers and their adviser fear this procedure, which is time consuming, and portray the taxpayer in bad light. At the state level with respect to personal income tax, it is uncertain if any individual has been brought to tax investigation otherwise people would be more cautious in displaying their wealth. Tax investigation may call for eth use of search and seizure; distrian on the property of the tax evader and his prosecution in the court of law.
6. That the appointment of the Tax Consultants by the various RTA is valid within the Nigerian Tax System. What is considered irregular in the whole process is the use by some state Government of Tax consultants to carry out the primary function of tax assessment and collection specifically vested only in the SBIR by the tax legislation. That Tax Consultants are very relevant if they are used mainly for secondary functions of data collection, training, computerization, monitoring of withholding Taxes etc. That the use of armed personnel by the tax consultants to seal off companies premises was wrong abinitio since they were not expected to assess and collect taxes directly. It is however noted that this practices was made possible because Nigeria still operates under the Military rule, which in itself is an aberration. That the practice of the Tax Consultants has been affecting the investment climate and the Nigerian economy negatively and as such, the use of Tax Consultants should be limited to the performance of secondary functions, which may assist in voluntary tax compliance rather than using them to enforce tax. That the abuse of the taxpayers’ rights by the tax consultants should be discontinued immediately.
7. That the litigation of the taxpayers is low as a result of the slow procedures in our courts of law. Owing to this fact, it is deduced that the prosecution of the taxpayer though an enforcement procedure is not seriously felt.

5.3 RECOMMENDATIONS
My candid recommendations fro the future in respect of tax enforcement emanate from the major conclusion reached as stated above-

Taxpayers should be educated on the advantages of prompt discharge of their civic obligation in regard to payment of taxes. They should be made to be aware of the available sanctions against defiance. Tax agents and advisers to

Taxpayers should play a major role in ensuring voluntary tax compliance by their clients

The self employed members of the public, especially petty traders should be taught the advantages of bookkeeping in their business and the engagement of tax practitioners to oversee their tax affairs in the tax offices.

Government must not overtly or covertly give the impression that the taxes being collected are not meant for the welfare of the public. The utilization of the tax collected must be apparent in order to encourage voluntary tax compliance instead of enforced tax compliance.

Tax evasion should be made a criminal offence in Nigeria and accelerated hearing should be given to tax prosecution by the court.

The broad objectives of the tax system should be the focus rather than the narrow objective of revenue generation only at all cost which is the major practice of some state governments who are making use of the Tax Consultants under the ARG Scheme. The long run effects of the damages they are inflicting on the economy must be weighted against the short term increased in revenue generation.

The use of external tax consultant for the primary assignments of the tax authorities should be discontinued and restricted to only the supportive and secondary functions of the authority.

The taxpayers’ rights must be preserved. In all tax matters, the due process of law must be followed.

That the tax base in respect of personal income tax should be expanded to cover all taxpayers and not just those in employment within the organized private sector and government. All taxable persons in the unrecorded or unregulated sector of the economy who are unknown to the tax authorities must be brought to the tax net.

Tax-intelligence work should be made more vibrant so as to compliment the tax investigation exercise. Many of the wealthy individuals in our society who are not fulfilling their tax obligations adequately should go through tax investigation exercise.

In order to enhance our revenue base that will be able to augment the income from oil-sector meet the ever-increasing challenges of natural development both that the Federal, State, Local Government level, we propose the following tax collection and management approach: i) Today administrative constraints and the relatively small size of many tax bases impose limits on the ability of government to use tax system positively to influence resource allocation and distribution of income and property. The issue should be addressed by widening the scope of our revenue base and ensuring that what is collected actually gets to the official account. ii) Tax rates should be realistic and the cost of management brought to possible minimum level; iii) Tax collection should be proactive in orientation and implementation; iv) Evasion of tax should be eliminated, by ensuring that those who are self-employed with big income, pay adequately. To this end, those responsible for tax collection should be properly equipped to achieve this objective; v) Judicious use of special taxes like education and ecological ones. vi) Improving VAT collection and sharing modalities so that those who worked hard should receive adequate rewards. vii) Derivation income to be properly accounted for by the various recipients. viii) About 2% increase from federation monthly allocation account to states and local councils who excel in revenue collection and management as a form of incentive: ix) Money collected from the toll gates to be ploughed back into proper road maintenance. x) Terminal benefits of workers of all categories to be tax fee. This will enable retirees have adequate fund to settle down; xi) Proper training for customs, inland Revenue and Local government officials involved in tax matters; xii) Prompt and full remittance of PAYE to relevant authorities; xiii) Low paid people to be tax free in order to enhance their purchasing power and thereby stimulate demand and economic growth; xiv) Reduction of the current 10% tax of dividend warrant to 2% in order to encourage middle income earners to invest and help to expand the economic partnership in the country; and xv) Introduction of latest technology in collection of revenue from companies especially oil companies in order to minimize fraudulent practices.
The efficiency of taxation administration implies that the resources invested in collecting revenue are marginally low compared to the output. Effectiveness of taxation in a similar breath means that a tax law does not only exist but is also administered to achieve desired goals. In both cases, the issues of tax equity horizontal, vertical and on compliance come in; and the need to pursue them through the engagement of Consultants become irresistible.
The business of tax administration has continued to reflect the dynamics and complexities of modern life. The effect is that official taxation functions can hardly be effectively performed if left entirely to the tax officer who often is unshackled by bureaucratic conservatism.
The need for professionals who specialized at selling ideas that could support tax administrators is compelling, therefore.

BIBLOGRAPHY 1. A.O Ogunde, “Administration of Income Tax Laws in Nigeria: The Accountant’s Points of View”. Paper presented at the 8th Annual Senior Officers Conference of the Federal Inland Revenue Departments, Lagos 16th November 1978, and P.19. 2. E. Afe Ogundele, Value Added Tax (VAT) Theory and Practice Libriserve Ltd, Lagos (1996) 3. Federal Inland Revenue Service, Training Lecture notes for Inspector of taxes, Module II Taxation 1-Law and Administration. 4. K. Naiyeju, Value Added Tax: The facts of a positive Tax in Nigeria, Lagos pag Public Affairs (1997) 5. J.K Naiyeju, Critical issues in Taxation and Tax Management in Nigeria”. Nigeria Tax News Vol. III No. 2 April- June (1997) 6. K. Okengwu FIRS Refreshers Course for VAT Inspectors “VAT Audit Producers” (1998) 7. M.A.C Dike, FIRS Nigeria “ The Tax Audit Process” 8. M.A.C Dike, Legislature and Regulatory Framework for Enforcement Programmes in Nigeria “ Lecture Paper Development at Commonwealth Management Development Programme, Achimota Accra, Ghana, July-August 1995 9. Manuwe Kuewumi, “ The Substance of Tax Compliance” Nigeria Tax News Vol. II No. 3 September (1996) 10. Osita Agelu. “ Taxation and Tax Management in Nigeria (1999)

QUESTIONNAIRE
Dear respondent,

This questionnaire is part o a thesis organized to fulfill the requirement of MPA PROGRAMME in LAGOS STATE UNIVERSITY. The purpose of this study is to determine whether enforcement procedures in the Nigerian Tax System can be useful for Optimum revenue generation in Nigeria.

Please note that information provided shall be treated with strict confidentiality.

Thanks for your co-operation

Yours faithfully,

OKHAGBUZO S.O

QUESTIONNAIRE

Please tick as appropriate

TO BE COMPLETED BY TAXPAYERS, TAX CONSULTANTS, COMPANY EXECUTIVES

SECTION A

1. NAME (optional) ………………………………………….

2. AGE: ( ) 25 years and below ( ) 26-40 years ( ) 41- 50 years ( ) 56 years and above

3. Highest Educational Qualification ( ) O/L ( ) NCE/OND ( ) HND/ 1st DEGREE ( ) Postgraduate

4. Please state your class ( ) Tax Consultants ( ) Taxpayers ( ) Tax officials ( ) Company executives ( ) Others (please specify).

5. Numbers of years of job experience ( ) 3 years and below ( ) 4-6 years ( ) 7-10 years ()10 years and above
SECTION B
ENFORCEMENT PROCEDURES IN THE NIGERIA TAX SYSTEM

1. Tax compliances is the act or process of subjecting oneself, one’s income, business asset or expenditure to the demands of the Tax. Law? ( ) True ( ) False ( ) not sure

2. Whereby a taxable person willingly discharges his/her tax obligation, it is said to be voluntary compliance ( ) True ( ) False ( ) not sure

3. To make it obligatory for people to comply with the Tax Laws, should the state/Federal Government enforce the laws making non-compliance punishable? ( )Yes ( ) No

4. Enforce Compliance is brought about when the Tax Authorities have to compel the taxable person to discharge his/her responsibilities. ( ) True ( ) False ( ) not sure

5. Has voluntary tax compliance enhance the State/Federal Revenue ( ) True ( ) False ( ) not sure

6. Which of the following measures should the Authorities use as inducement to voluntary compliance. ( ) offer of useful information to the Federal/State Inland Revenue Services, ( ) Issue tax Clearance certificate to any company that has fully discharged its tax liability. ( ) Payment of one percent bonus to any company that files its returns within the time stipulated provided there is no default in payment arrangement. ( ) any other (specify)

7. Are the taxpayers versed with the enforcement procedures of our tax laws ( ) Yes ( ) No ( ) Not sure

8. Which of these enforcement procedures of our laws should be adopted to ensure compliance? ( ) Heavy penalties ( ) Sealing up of the company ( ) charged to Court ( ) any other (specify)

9. Have the tax enforcement procedures deterred taxpayers from tax evasion? ( ) Yes ( ) No ( ) Not sure 10. What measures would you suggest to create awareness of the enforcement procedures? a) ………………………… b) ………………………… c) ………………………… d) ………………………….

11. Considering the rate of illiteracy in Nigeria, most taxpayers are not familiar with the enforcement procedures ( ) Yes ( ) No ( ) Not sure

12. The taxpayers have not been adequately educated by the various Tax Authorities on the need to carry out their civic responsibilities. ( ) Yes ( ) No ( ) Not sure

13. Has the enforcement procedures in Nigerian tax system been strong enough to encourage taxpayers to voluntarily comply with the payment of tax. ( ) Yes ( ) No ( ) Not sure

14. Tax drive mounted by Tax Inspectors of the Tax Authorities has yielded much result. Confirm with your rating of effectiveness. ( ) 0-20% ( ) 21-40% ( ) 41-60% ( ) 61-80% ( ) 81% and above. 15. How would you rate a shift from Government to self-assessment to encourage taxpayer participation in the tax assessment process? ( ) High ( ) Average ( ) Low

16. Is Tax compliance easy to enforce? 17. Do you support the engagement of Tax Consultants in enforcing Tax Compliance? ( ) Yes ( ) No ( ) Not sure

18. Has your Organization been visited by Tax Consultants for the purpose of enforcing. Tax Compliance ( ) Yes ( ) No ( ) If yes, how often? ( ) Quarterly ( ) Half yearly ( ) Yearly ( ) Others (specify)

19. Do you agree that the use of external Tax Consultants should be discontinued and restricted only to the supportive and secondary functions of the Tax Authority? ( ) Yes ( ) No ( ) Not sure

20. Tax agents and advisers to taxpayers should play a major role in ensuring voluntary tax compliance by their clients. ( ) Yes ( ) No ( ) Not sure