AN INVESTIGATION INTO THE EFFECT OF TAX MANAGEMENT ON THE GENERATION OF GOVERNMENT REVENUE

CHAPTER ONE INTRODUCTION 1.1 Background of the Study Taxation is fundamental to national development as it generates essential funds that governments use to finance projects promoting growth across various sectors. Adedokun and Oyesiji (2015) emphasize that taxation significantly influences a country’s internal development regardless of its size, deriving growth from both direct and indirect taxation sources. Ibadin and Oladipupo (2015) affirm that taxation serves as a powerful tool for socio-economic progress in any nation, no matter its development status. Darono (2015) further highlights that a key responsibility of an effective government is to maintain economic stability, redistribute wealth, and provide vital services to citizens. To support ever-increasing development demands, governments must take proactive measures in revenue collection. Efficient revenue generation offers multiple benefits for both governments and citizens. Gurama and Mansor (2015) argue that effective revenue collection can be accomplished through improved cash flow, better cash management, precise cash forecasting, significant interest earnings, fair taxpayer treatment, sound budget control, and the successful completion of projects. Isaac (2015) notes that the revenue collection role is complex due to tax assessment processes, collection procedures, and legal disputes arising from delayed revenue. Government revenues come from various sources such as federal excise taxes, corporate and individual income taxes, borrowing, interest earnings, customs duties, fees, and levies. However, while collecting funds might be relatively straightforward, managing and regulating their use effectively remains a significant challenge. Tax administration entails the structured, impartial processes by which authorities assess and collect taxes from individuals and businesses. The central aim of tax administration is to uphold fairness and objectivity, while minimizing tax evasion. Soyode and Wausi (2015) define tax administration as the government’s procedures for planning and executing programs that promote citizen welfare. In Nigeria, tax administration involves multiple bodies including the Joint Tax Board at the federal level, the Federal Inland Revenue Service (FIRS) across various states, State Internal Revenue Services, and Local Government Revenue authorities, all tasked with collecting taxes to finance governmental initiatives. Tax revenue includes income from levies, PAYE, rentals, property transfers, and social security contributions (Wikipedia, 2019). Despite the significant revenues collected from diverse channels, the lack of an efficient and productive tax administration can render the system ineffective. Proper tax collection and management lead to positive outcomes. Odusola (2016) observes that the Nigerian government has long struggled with inadequate funds to meet its obligations. Although large sums have been generated from taxes, these have been insufficient to cover expenditures over time. Odusola also points out Nigeria’s heavy reliance on oil revenue, which is subject to the fluctuations of global market demand and supply, causing economic instability. Appah (2010) states that a country’s socio-economic advancement depends on available funds for infrastructure projects. Emmanuel (2018) contends that government success in developmental objectives depends heavily on efficient tax collection. Ganyam, Ivungu, and Anongo (2019) stress that governments must strategically combine domestic and foreign revenues to effectively meet citizens’ needs and development goals. Samuel, Adewole, and Idih (2019) add that avoiding economic collapse requires creating a conducive environment for micro and macroeconomic growth, which depends on a strong revenue base and capable workforce. To improve tax management, the government introduced an integrated tax system using technology for registration, filing, payments, electronic taxpayer accounts, and internal audits to ensure compliance. This modernization also includes electronic shipment tracking, risk management, and a unified cash receipting system. Additionally, it covers a comprehensive plan for collecting turnover taxes and taxes from real estate and mining sectors. The objective of modernizing Nigeria’s tax system was to enhance the efficiency and effectiveness of tax administration across all government levels (Muthama, 2016; Gitaru, 2017). However, despite automation efforts, Nigeria has yet to meet its annual tax revenue targets (Adam International, 2018). In light of this, the study seeks to evaluate the impact of tax management on revenue generation. 1.2 Statement of the Problem Tax administration involves assessing taxpayers' willingness to comply with tax laws, especially when they understand the consequences of noncompliance (Sulman, Akintayo, Kasum & Bamigbade, 2019). Ineffective tax administration reduces taxpayers' willingness to comply and may invite political interference, ultimately causing revenue loss (Adedoyin & Adekanmi, 2016). In Nigeria, tax revenue forms a significant part of government income, making effective and efficient tax administration critical. Yet, the current state of tax administration is problematic. Challenges include inadequate equipment for tax officials, shortage of skilled tax collectors, poor road infrastructure limiting access to rural areas, insufficient training, lack of comprehensive taxpayer databases, poor taxpayer education, understaffing, low wages for tax officials, delayed payments by taxpayers, ineffective identification of tax evaders, and weak internal control systems (Nto, 2016). Osunwole, Oluwatosin, and Adeyemi (2019) also note that problems stem from poor planning and inflexible tax laws, resulting in disorder. This disorder enables political influence and involvement of government officials in tax matters, sometimes leading to the appointment of unqualified staff in tax roles. Such issues reflect the broader challenges faced by tax administration in Nigeria. Therefore, this study examines the impact of tax management on revenue generation. 1.3 Objective of the study The broad objective of the study is to examine impact of tax management in 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 impact of tax management in 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