Project Materials

A CRITICAL EXAMINATION OF THE IMPACT OF ELECTRONIC COMMERCE ON FEDERALLY COLLECTED TAXES IN NIGERIA.

Chapter one

Introduction

Over the years, Nigeria has relied heavily on tax collection to generate revenue for the government. During the election upheavals in various areas of Nigeria, such as Benue state, the majority of the taxes collected were transferred to Enugu state.

It happens like way in various parts of Nigeria. Now, what is tax?

Well, tax is a set quantity of money realised or successfully collected from an individual or company by the Nigerian federal government in order to boost the country’s economy.

According to Kasipillai (2003) and Mahdzan (2005), tax can be paid in a variety of ways. He argued that taxes might be levied on business gains or earnings for any period of time.

It can also be obtained from gains or profits from employment, dividends, interest, or discounts. He went on to say that taxes can also be collected via rent, royalties, or surcharges.

According to Hadacolarl (2008), one of the most significant tax difficulties in Nigeria is tax administration. He went on to say that Nigeria’s tax administration is woefully inadequate. The audits department’s mechanism for recovering tax money appears to be falling behind.

Hadacolarl also believes that one of the most significant problems to tax administration in Nigeria is the complexity of the taxation system.

The audit department is not the only one failing to monitor the increase of taxes in Nigeria; for some time now, the federal Inland Revenue Service has also failed to meet most of its targets in the government’s primary areas of tax systems and revenue collection.

The majority of these are the consequence of successful tax evasion and avoidance among income tax payers, particularly in states such as Enugu, Anambra, and Ebonyi in Nigeria’s south-east.

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 supported the legal department. According to her, this will deter obstinate tax offenders (FRS 2010).

Binang (2010), in favour with Okauru, suggested that banks validate all requests for new FIRS accounts from headquarters to discourage bogus accounts used to syphon government tax funds. This is to reduce the possible effects of Nigeria’s poor tax systems.

According to Kiabel and Nwokah (2009), the prevalence of tax fraud and avoidance, particularly among income tax payers in the South East Nigerian states of Enugu, Anambra, and Ebonyi, prompted the governments of these states to hire tax consultants in order to earn much-needed money.

Despite this, the problems of improper tax administration, which leads to a lack of transparency in the management of taxpayers’ money, as well as insufficient tax reliefs and allowances, which lead to tax evasion and avoidance, persist. (Nwikpasi and Kiabel, 2010).

According to current experience, the Federal Inland Revenue Service (FIRS) is not doing well. Okauru (2011) confirms the following for the Federal Inland Revenue Service.

Electronic commerce can be defined as the use of communication technology, such as the Internet, to buy, sell, and market goods and services to clients or end users. The internet has brought significant changes to Nigeria’s economy, particularly in terms of taxation.

According to (Mary – Anne, 1998), e-commerce provides a level playing field for large and small businesses (SMEs) to operate in the global market, as well as for regional businesses and communities to seamlessly participate in social, economic, and cultural networks across international borders.

Most significant firms in Nigeria pay taxes based on their income and the number of employees.

Not long ago, the Nigeria National Tax Policy (NTP) established an objective of eliminating bottlenecks and leakages in Nigeria’s tax system. These need tax officials at the state, federal, and municipal levels to identify all instances of leakage in Nigeria’s tax system and to minimise and eliminate these lapses.

Some of these leakages may include assessment, collecting, and utilisation. The usage of some of these internet-enabled technologies, including as point-of-sale (POS) devices, internet banking, and mobile banking, among others, is a common experience not only for the emerging mobile Nigeria, but also for rural-urban migrants.

Some of these businesses and corporations conduct almost all of their transactions online, using internet devices to make payments, and the tax is not accounted for, which has a significant impact on the Nigerian tax department.

1.2 Statement of The Problem

The research on the impact of electronic commerce on federally collected taxes in Nigeria contains certain key aspects to consider for the aim of this research, such as the limitation in tax collection due to the use of point of sale (POS).

Some businesses operate entirely online, with employees working from home. Organisations like this may not be paying taxes.

Electronic commerce has made transactions much easier, but it still has some drawbacks. How can the federal government of Nigeria’s tax sector collect taxes from such organisations?

This became a problem to be solved. Many scholars have attempted to study a better means of tackling this problem, and the most intriguing element of electronic commerce is that it transacts more business for a larger sum of money than offline firms in Nigeria.

Consider Jumia and other e-commerce sites in Nigeria. The number of employees at that company may be modest, but the business it is conducting is quite large because the internet has made it easy.

1.3 RESEARCH  QUESTIONS

1. What are the best methods for collecting taxes from large corporations in Nigeria, and why has the federal government of Nigeria not adopted them?

2. Does taxation have any effect on Nigeria’s GDP?

3. How effective is tax collection in Nigeria?

4. What are auditors’ duties in Nigerian tax collection?

5. How can the federal government of Nigeria levy taxes on Nigerian e-commerce websites?

6. Does Nigeria’s federal government impose a high tax on SMEs?

7. What function does the FIRS play in Nigeria’s tax collection system?

1.4 Research Hypothesis

H0: Taxes have no meaningful effect on Nigeria’s GDP.

H1: taxes have a considerable effect on Nigeria’s GDP.

H0: There is no substantial correlation between e-commerce and tax collection in Nigeria.

H1: There is a significant correlation between e-commerce and tax collection in Nigeria.

1.5 Aim and Objectives of the Study

1. Investigate the FIRS’s functions and impact on tax collection in Nigeria.

2. Examine the impact of SMEs on Nigeria’s GDP.

3. To assess the effectiveness of tax collection in Nigeria.

4. Determine the most efficient and effective method of collecting taxes in the majority of e-commerce companies.

5. Determine the impact of tax collection on Nigeria’s GDP.

1.6 Significance of the Study

By the completion of this research, we will be able to determine the impact of tax collections on Nigeria’s GDP. The study will also examine the relationship between tax collections and electronic commerce in Nigeria.

It will also make recommendations on how to appropriately address the impact of taxes on Nigeria’s small and medium-sized industries.

1.7 SCOPE OF THE STUDY

The study will use a questionnaire as its major source of data, either through questioning or by distributing the questionnaire to respondents for completion. Secondary data will be gathered from the CBN statistical bulletin and other relevant items such as journals and wiki books.

1.8 LIMITATION OF STUDY

Financial constraints prevented the researcher from covering most of the area, including purchasing materials online and visiting tax offices for further information.

Ø TIME CONSTRAINTS: Due to other research activities, the writer did not have enough time to conduct additional research on the topic. However, they were able to gather meaningful points about it.

1.9 Definition of Terms

TAX: This is the modest sum deducted from someone’s salary after a period of time.

E-commerce refers to purchasing and selling through the internet.