ACCOUNTING FOR WITHHOLDING TAX OPERATION: ITS RELEVANCE
No of pages
|MS Word & PDF|
The custom academic work that we provide is a powerful tool that will facilitate and boost your coursework, grades and examination results. Professionalism is at the core of our dealings with clients
For more project materials and info!
Call us here
- BACKGROUND OF THE STUDY
The responsibilities of government toward its citizen include provision of infrastructure facilities security important welfare development project, to improve the standard of loving to promote economic development etc. It is quite obvious that such activities will only be possibly carried out through the support from an efficient and effective financial base.
The financial base can be gotten from various sources including “Taxation”.
Taxation can simple be define as the concept and science of imposing tax as the citizen (Sun Ni 2009). Tax in the other hand is a compulsory levy imposed by the government through its agents and for which it is not bound to offer service or consideration (Ola 2006).
Tax is levied on income (individual) profit (enterprise and companies). Capital (capita gain tax) and consumption (tariff) of a subject (citizen). Basically, taxes are classified into direct and indirect taxes. This classification is based on how the taxes are paid.
Direct taxes are levied on individual or institution examples of direct taxes in Nigeria are personal income tax (including PAYE) company income tax, capital gain tax, withholding tax.
Indirect taxes are levied on manufacturers or wholesalers and importance of goods is passed on to the ultimate consumers in the form of price increased. Indirect taxes include customs duty, exercise duty, stamp duty, vat etc. (Ola 2006).
There are many types of tax system in Nigeria, which include personal income tax, company income tax, capital gain tax, vat, withholding tax systematic.
This study intends to examine the tax system known as withholding tax system as well as its relevant and adequacy. Withholding tax is an advance payment of income tax. It is deductive at the point of neither payment nor when credit is taken, whichever comes earlier for the specified activities.
Any cooperation or incorporated body who is a recipient of the payment or the credit for the specified activities or services is therefore liable to suffer tax (Ola 2006).
Withholding tax can also be tax collection device that can be built into any type of tax. It is a system in which a debtor is empowered by law to withhold a certain percentage of the money due to his creditor and pay it over to the government in lies of the tax to be paid lat and on that sum by the creditor. It is deductible as source (Ishola 2010).
The withholding tax system was introduced by section 9 (21c) of degree 98 of 1979 and section 4 (5) of decree 80 of 1977. The purpose is to bring the prospective taxes payer to the tax notices. There by widening the income tax base. In other words, withholding tax system is used to track down tax payers and the income which may otherwise not be reported by them.
Withholding tax is among other things nothing more than a collection, machinery to curb tax evasion.
It is not a separate tax on its own suffices is to say that it is a payment on account of income tax and is available as set off against tax assessment of relevant periods. It is common knowledge that the percentage of voluntary compliance with the law on taxation matters by the citizen and indeed corporate bodies is very negligible and the need for government to generate as which revenue as possible is imperative.
This justified the need for the law on withholding tax system.
- STATEMENT OF THE PROBLEM
Before the introduction of withholding tax system, the government realized with great concerned the increase in incidence of tax evasion among recipients particularly landlords and shareholders.
Similarly, the ineffective manner of deducting tax from board of directors’ members of the companies especially those who hold multiple O. chains directorship was equally of great concern to the government.
This study provides answer to the following questions:
- Has the implementation and administration of tax fully understood by the practitioners?
- Does the system (withholding tax) bring effectiveness in deducting from the recipient?
- Has withholding tax system brought any good to Nigerian economic?
- Can anything be done to improve its adequate and relevance in Nigeria tax system?
- Is there any punitive measure for the tax evader put up by the government?
- OBJECTIVE OF THE STUDY
This study will examine the relevance and adequacy of the withholding tax system in Nigeria with the aim correcting uniformed impression about its implementation.
The need to understand the withholding tax operation in Nigeria cannot be over emphasized the study will include the need for effective and efficient financial base for the government as imperative. The study will also look into how withholding tax is efficiently managed in order to generate adequate revenue from the source. Other specific objective includes.
Explain to taxpayers, the public and other interested parties on how the withholding tax operates.
- Give other important aspect in the implementation and administration of the system.
- Attempt to evaluate the adequate of the system in line with its stated objectives.
- JUSTIFICATION OF THE STUDY
The study should the immense benefit to the tax payers, public and corporate organization that suffer the tax. The more they were informed the more livelihood of understanding and appreciation of the usefulness of the system and more importantly the less they lively to evade tax.
The study served as a mechanism or tool for investment decision-making process for the investors. Finally, the study is set to reawaken government to their responsibility by making necessary amendments and additional provision to the withholding tax law in Nigeria.