AN EVALUATION ON THE EFFECT OF TAX ADMINISTRATION ON REVENUE GENERATION

CHAPTER ONE INTRODUCTION 1.1 Background of the Study Taxation serves as a fundamental tool in driving national development by providing the financial resources needed for government expenditure on various initiatives aimed at promoting growth across all sectors. Adedokun and Oyesiji (2015) highlighted the essential role of taxation in supporting a country’s internal development, regardless of the nation's size or economic strength. This growth can stem from both direct and indirect taxation sources. As noted by Ibadin and Oladipupo (2015), taxation is a powerful mechanism that fosters socio-economic development in all countries, irrespective of their developmental status. Similarly, Darono (2015) emphasized that a central responsibility of any effective government is to maintain economic stability, ensure income redistribution, and deliver crucial services for the public's welfare. To keep pace with expanding development initiatives, governments must take proactive measures in mobilizing revenue. Efficient revenue mobilization offers a range of benefits to both governments and citizens. According to Gurama and Mansor (2015), effective revenue collection can be achieved through several strategies, including improved cash flow, enhanced cash management, precise cash forecasting, increased interest earnings, fair treatment of taxpayers, strong budgetary control, and the successful execution of government projects. Isaac (2015) noted that revenue collection is complex due to challenges in tax assessments, collection processes, and legal issues arising from revenue delays. To ensure that public income aligns with expenditure, revenue is typically sourced from federal excise duties, corporate and personal income taxes, borrowing, interest income, customs duties, service fees, and levies. However, while collecting revenue may not be difficult, the greater challenge lies in ensuring its efficient and transparent management. Tax administration refers to the organized and impartial process by which tax authorities evaluate and collect taxes from individuals and businesses. Its primary purpose is to ensure fairness, reduce evasion, and promote accountability. Soyode and Wausi (2015) describe tax administration as the set of procedures governments employ to plan and implement programs for citizen welfare effectively. In Nigeria, tax administration is executed by various bodies, including the Joint Tax Board at the federal level, the Federal Inland Revenue Service (FIRS), the State Internal Revenue Services in each state, and the Local Government Revenue Authorities, all with clearly defined tax responsibilities. These bodies are mandated to collect tax revenue on behalf of the government to finance public programs and services. Tax revenue refers to the funds collected through various tax instruments such as levies, PAYE (Pay-As-You-Earn), property transfers, rental incomes, and social security contributions (Wikipedia, 2019). Despite the substantial revenue collected through these sources, the absence of an effective and efficient tax administration system could undermine the entire tax process. Proper revenue collection and management can yield positive outcomes. Odusola (2016) acknowledged that the government has consistently faced challenges in generating sufficient revenue to meet its obligations. Though significant tax revenues have been collected over the years, they have been insufficient to fund national expenditures fully. Odusola further noted that Nigeria's economy has long depended on oil revenues, which are influenced by global market fluctuations. These fluctuations in supply and demand have created instability and hindered sustained development. Appah (2010) asserted that a country’s socio-economic progress depends largely on the availability of funds to implement critical infrastructure projects. Emmanuel (2018) stated that achieving developmental goals hinges on the government’s ability to raise revenue through efficient and well-managed tax systems. Ganyam, Ivungu, and Anongo (2019) emphasized the need for governments to strategically combine revenue from domestic and foreign sources to pursue national development goals effectively. According to Samuel, Adewole, and Idih (2019), one of the government’s foremost responsibilities is to prevent economic collapse by fostering an enabling environment that supports the growth of all economic sectors. This can only be accomplished with a solid revenue base and a skilled workforce. In an effort to modernize revenue systems, the government introduced an integrated tax management approach that includes the use of technology for registration, filing, payment, electronic taxpayer accounts, and internal audits. Additional features include electronic tracking of goods, risk management systems, and unified cash receipting systems. Furthermore, measures were taken to improve the collection of turnover-based taxes and revenues from sectors like real estate and mining. The overarching goal of these reforms was to enhance the effectiveness and efficiency of tax administration, thereby boosting revenue collection at the federal, state, and local levels (Muthama, 2016; Gitaru, 2017). However, despite automation, Nigeria’s tax system has yet to meet its annual revenue targets (Adam International, 2018). Against this backdrop, the present study seeks to examine the impact of tax management on revenue generation. 1.2 Statement of the Problem Tax administration evaluates a taxpayer's willingness to fulfill their obligations, particularly when taxpayers are aware of the potential costs and consequences of noncompliance (Sulman, Akintayo, Kasum & Bamigbade, 2019). An ineffective tax system discourages compliance and allows room for political interference, ultimately resulting in reduced government income (Adedoyin & Adekanmi, 2016). In Nigeria, tax revenue plays a critical role in financing government activities. Therefore, it is imperative to have a tax administration system that is both effective and efficient. Despite its importance, the current state of tax administration in Nigeria is worrisome. Challenges include inadequate tools for tax officials, insufficiently trained personnel, poor transportation infrastructure making rural tax collection difficult, limited training programs for tax staff, lack of a complete database of taxpayers and businesses, low levels of taxpayer education, staff shortages, poor remuneration for tax personnel, delays in taxpayer payments, ineffective detection methods for tax evasion, and a weak internal control system (Nto, 2016). Osunwole, Oluwatosin, and Adeyemi (2019) agreed that issues in Nigeria’s tax administration stem from poor planning and inflexible tax laws, assessments, and collection procedures, all of which contribute to system inefficiencies. This disorganization has opened the door to political interference, allowing unqualified and inexperienced individuals to be appointed to tax-related roles. Such conditions reflect the systemic issues in Nigeria’s tax administration. As a result, this study investigates the impact of tax management on revenue generation. 1.3 Objective of the study The broad objective of the study is to evaluate the effect of tax administration on revenue generation . The specific objectives is as follows i.To examine the effect of efficiency and effectiveness of tax administration on revenue generation of Bayelsa State. ii.To ascertain the relationship between tax payers’ enlightening on tax payment and revenue generation in Bayelsa state. iii.To determine the effect of tax evasion and avoidance on revenue generation in Bayelsa state. 1.4 Research questions The following questions have been prepared for the study i.What is the effect of efficiency and effectiveness of tax administration on revenue generation in Bayelsa state? ii.Is there a relationship between tax payers’ enlightening on tax payment and revenue generation in Bayelsa state? iii.What are the effect of tax evasion and avoidance on Revenue Generation in Bayelsa state? 1.5 Research hypotheses The hypotheses have been formulated for the study Ho1: Efficiency and effectiveness of tax administration has no significance effect on revenue generation in Bayelsa state. Ho2: There is no significant relationship between tax payers’ enlightenment on payment of tax and revenue generation in Bayelsa state. Ho3: Tax evasion and tax avoidance have no significant effect on revenue generation in Bayelsa state. 1.6 Significance of the study The study's results will assist practitioners in formulating suitable policies and procedures to mitigate obstacles in tax compliance. The study's findings contribute to the current information and provide essential suggestions. These recommendations are not only intended to aid regulators in policy creation but also to enhance the efficiency of tax administration for non-residents. Presently, the overall amount of income collected from the states is influenced by tax management methods, which include self-assessment practises. The reported results will assist federal and state governments in evaluating tax regulations pertaining to the self-assessment of people and the collection of tax income from firms and individuals. Furthermore, it will serve as a valuable point of reference for researchers interested in doing future studies on the issue. 1.7 Scope of the study The study focuses on the effect of tax administration on revenue generation . Hence, the study will examine the effect of efficiency and effectiveness of tax administration on revenue generation of Gombe State,ascertain the relationship between tax payers’ enlightening on tax payment and revenue generation in Gombe state and determine the effect of tax evasion and avoidance on Revenue Generation. 1.8 Limitation of the study Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection (internet, questionnaire, and interview), which is why the researcher resorted to a moderate choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced. 1.9 Definition of terms Tax: a compulsory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions. Tax management: the management of finances, for the purpose of paying taxes