A CRITICAL EXAMINATION OF THE IMPACT OF
ELECTRONIC COMMERCE ON FEDERALLY COLLECTED TAXES IN NIGERIA
CHAPTER ONE
1.0 INTRODUCTION
Over
the years Nigeria has rely on the collection of tax as a major source of
revenue for the government. In some
selected areas of Nigeria for instance Benue state during the time of crises
experienced from election; most of the taxes collected in Benue state were
taken to Enugu state.
It
happens like this some part of Nigeria. Now what is tax?
Well
tax is certain amount of money realized or successfully collected from an
individual or company by the federal government of Nigeria to develop the
economy of Nigeria.
One
can pay tax in different ways; according to (Kasipillai 2003, Mahdzan,
2005). He stated that tax can be
collected from a Gains or profits from a business for whatever period of time
carried on. It can also be
collected from a gains or profit employment, dividends, interest or discounts.
He then went on to state that tax can also be collected through rent, royalties
or premiums.
Hadacolarl
(2008) stated that one of major challenges of tax in Nigeria is the
administration of tax. He went further to state that the institution that is to
administer taxes effectively is really lacking behind in Nigeria. And the
procedure to recover the tax money by the audits department appears to lagging
behind.
Hadacolarl
also believes that one of the major challenges to tax administration in Nigeria
is the multiplicity of the taxation process.
The
audit department is not the only one failing on their responsibility to monitor
the growth of tax in Nigeria; look at the federal Inland Revenue service for
some time now has also failed in most of their goals in government core areas
of tax systems and administration on revenue generation. Most of these are as a
result of the success of tax evasion and avoidance among income tax payers
mostly in some state like Enugu, Anambra and Ebonyi state in the south east
area of Nigeria. This reveals the accounts for a consistent drop in the volume
of collection (Eze, 2010) on the same vein, according to Okauru (2010) in her
address on FIRS core mandate of Tax revenue collection, identified
counterfeiting company income tax clearance certificates, misuse of FIRS
documents, embezzlement of funds through incomplete cheques belonging to FIRS as
the major factors that contribute to poor revenue generation in Nigeria and
however, supported the legal department of the FIRS reinforced prosecution
machinery with high profile prosecution cases across the country. This
according to her will serve as a deterrent to recalcitrant tax offenders (FRS
2010).
Binang,,
(2010) in support of Okauru added that banks should confirm all requests for
opening new FIRS accounts from headquarters as a way of discouraging fraudulent
accounts used in siphoning government tax funds. This is to ensure minimization
of the potential effects of inadequate tax systems in Nigeria.
Kiabel
and Nwokah (2009) show that the prevalence of tax evasion and avoidance
especially among income tax payers in Enugu, Anambra and Ebonyi States of South
East Nigeria made government of these states engage the services of tax
consultants in order to generate much needed revenue. This notwithstanding, the
problems of bad administration of taxes leading to lack of transparency in the
management of taxpayers’ money and problems of poor tax reliefs and allowances
that later lead to tax evasion and avoidance still persist. (Kiabel and
Nwikpasi 2010). Current experience indicates that all is not well with the
Federal Inland Revenue Service (FIRS). Okauru (2011) affirms as follows for the
Federal Inland Revenue Service.
Electronic
commerce may be referred to as the use of communications technology such as the
Internet to purchase, sell and market goods and render services to customers or
end-users. The internet has really brought some many changes in the economy of
Nigeria in the aspect of tax. According to (Mary – Anne, 1998) she stated that E-
commerce offers a level playing ground for large businesses, as well as small
and medium- scale enterprises (SMEs)
to operate in the global market-place; and for regional
businesses and communities to
participate in social, economic and cultural networks seamlessly across
international boundaries.
Most
of the large businesses in Nigeria pay taxes and these taxes are in respect to
the size of income the company make and the number of employees in that
company.
Not
quiet long the Nigeria National Tax Policy (NTP) set out a goal to eliminate
bottlenecks and leakages in Nigeria’s tax system. These force the tax
authorities both at the state level and federal and local level to identify all
areas where there are leakages in Nigeria tax system and to minimize and
nullify these lapses. Some of these leakages may include the assessment,
collection and utilization. The use of some of these internet aided devices
such as point of sales (POS) device, internet banking and mobile banking and
others are the routine experience not the ascending mobile Nigeria but also the
rural- urban migrant.
There
are some of these business and companies that does virtually all their business
online uses the internet devices to make payment and the tax will not be
accounted for and these have strong effect of the Tax department in Nigeria.
1.2 STATEMENT OF
PROBLEM
The
research work on the examination of the impact of electronic commerce on
federally collected taxes in Nigeria has some critical issues to look at for
the purpose of this research work such as the limitation in the collection of
tax because of the use of point of sales (POS).
Some
companies work from home and do all their business through the internet.
Organizations like these might not be paying tax.
Electronic
commerce has really made transaction very easy but it still has its draw backs.
How can the federal government of Nigeria tax sector realize their tax from
such organizations? This became a problem to solve. Many researchers has tried
to investigate a better way of solving this problem and the most interesting
aspect of the electronic commerce is that it transacts more business in large
amount of money than the offline businesses in Nigeria. Take Jumia, and other
e-commerce site in Nigeria. The number of staff of that company could be
relatively small but the business the company is undertaking is very high since
the internet made it easy.
1.3 RESEACH QUESTIONS
1.
What are best ways of collecting tax from big businesses in Nigeria and why has
the federal government of Nigeria not adopting the method?
2.
Does the collection of tax have any effect on the gross domestic product of
Nigeria?
3.
How effective is the collection of tax in Nigeria?
4.
What are the roles of auditor in tax collection in Nigeria?
5.
In what ways can the federal government of Nigeria impose tax on the e-commerce
sites in Nigeria?
6.
Is the federal government of Nigeria imposing much tax on the SMEs in Nigeria?
7.
What role do the FIRS play in the collection of taxes in Nigeria?
1.4 RESEARCH
HYPOTHESIS
H0: there is no
significant effect of tax on GDP of Nigeria.
H1: there is significant
effect of tax on the GDP of Nigeria.
H0:
there is no significant relationship between the e-commerce and tax collection
in Nigeria.
H1:
there is significant relationship between the e-commerce and tax collection in
Nigeria.
1.5 AIM AND
OBJECTIVES OF STUDY
1.
To investigate the roles and the impact of the FIRS in the collection of tax in
Nigeria.
2.
To examine the impact of the SMEs on the gross domestic products of Nigeria.
3.
To examine the effectiveness in the collection of tax in Nigeria.
4.
To determine the easiest way and the best way of collecting tax in most of the
e-commerce company.
5.
To determine the effect of tax collected on the GDP of Nigeria.
1.6 SIGNIFICANCE OF
STUDY
By
the end of this research work we shall be able to determine the effect of tax
collected on the gross domestic product of Nigeria. The study will also show
the relationship between the tax collected and the electronic commerce in
Nigeria. It will also recommend the best way to handle the effect of tax on the
small and medium scale industries in Nigeria.
1.7 SCOPE OF STUDY
The
study will make use of questionnaire as primary source of data using either
interrogation method or through distribution of the questionnaire for the
respondents to fill. And the secondary data will be gotten from the CBN
statistical bulletin and other related articles such as journals and wiki
books.
1.8 LIMITATION OF
STUDY
Ø FINANCIAL
CONSTRAINTS: due to the lack of adequate finance the researcher was unable to
cover most of the area like buying enough materials online and travelling to
visit some of the tax offices so as to get more information.
Ø TIME
CONSTRAINTS: because the writer’s involvement in other research activities, he/
she could not really have enough time to do more research on the topic but was
able to get a meaning points together about the topic.
1.9 DEFINITION OF
TERMS
Ø TAX:
This is the small amount deducted from someone’s salary after a period of time.
Ø E-commerce:
this called electronic commerce which is the buying and selling through the use
of internet.