THE EFFECT OF TAX ADMINISTRATION ON TAX COMPLIANCE: CASE STUDY, THE DIVISIONAL CENTER OF TAXATION BUEA
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The effect of tax administration on tax compliance in Buea has been in an increase with a high impact on both the taxpayers and tax authorities due to poor administration and collections of taxes, lack of proper enlightenment of the importance and procedures of tax payment, and inefficient management of taxpayers. These are the negative effects that affect government revenue generation which is targeted to meet her basic functions like provision of basic amenities for her citizenry in the nation. This research study aims to evaluate the effect of tax administration on tax compliance. The research design adopted in this study was the survey research method. The data source used here is mainly Primary. It was used in collecting information that was analyzed using simple percentages and hypotheses tested using chi–square statistical method at 0.05 level of significance for validity and to make decisions. Findings show that there was a rampant incidence of tax evasion and avoidance, and the tax administration in the Divisional tax Centre is inadequate, not effective, and not efficiently managed thus: ineffective management hinder tax administration and collection. The researcher, in the final analysis, drew a lasting conclusion, some of which are: – the apathy of state people towards payment of tax could be amended by involving them in the decision making of tax administration, collection, and utilization of the tax. The environment should be made better by both the government and its agencies. The staff of the Divisional tax Centre should be well remunerated and ensure adequate administration of tax laws following the laid down rules and regulations.
In developed and developing countries there is a wide range of taxes and levies that affect individuals and companies, citizens and foreigners, manufacturers and marketers, workers, and pensioners. Cameroon taxes range from value-added tax, personal income tax, company tax, mining tax, forestry tax, petroleum tax, tollgate fee, weight station fees, and another method of tax collection. These include national employment fun, communal tax, council tax, CRTV TAX, and FEICOM imposed at different levels to enable the government to provide certain essential services and facilities to the population.
The government plays the piper and dictates the tune. Ogundele (1999:8) states that government intervention in an economy takes many forms. The degree of intervention differs from country to country, depending on the form of the political model adopted in the governance of the country. The intervention referred to is tax, which is a well-planned economy that affects every aspect of human endeavor.
Anyanwu (1997:18) opines that tax administration is tax policymaking and collection as well as expenditure programming at all levels of government. It involves the controlling, organizing, directing, monitoring, planning, and management of government revenues and expenditure. Furthermore, the long term role of tax administration is to collect all registered taxes at minimum cost, as well as execute government programs as efficiently as possible by avoiding waste. Thus government needs to boost its revenue adequately. One such medium through which government can generate funds to fuel its economic development projects and goals is taxation. Tax is a compulsory levy imposed by the government through its agents on its subjects or his property to achieve some goals. These goals are usually directed towards improving the general standard of living in the country. In the same vein, Arnold and Mclntyre (2002) define tax as a compulsory levy on income, consumption, and production of goods and services as provided by the relevant legislation. The government needs funds to provide developmental projects and social services and as a result, imposes various taxes on its citizens, properties, and companies that fall within the tax bracket.
The ability of the government to administer tax determines the available revenue via taxation for the business of governance Bird (2015). Complying by taxpayers to the tax levied reveals the effectiveness of the tax administration system in place. compliance refers to the fulfillment of all tax obligations as specified by the tax law freely and completely. It is submitting a tax return within the stipulated period correctly stating the income, and deduction, paying assessed taxes by the due date, and paying levied tax. Thus, tax administration is a veritable tool for improved tax compliance in any given economy.
Administering the tax law of a country should serve the public interest. That is, it should meet the need of the government and the people of the country served by the government. Individuals do not like paying taxes, and they take a variety of actions to reduce their tax liabilities. Some of these actions can be classified as tax avoidance, or the legal reduction in tax liabilities by practices that take full advantage of the tax code, such as income splitting, postponement of taxes, and tax arbitrage across income that faces different tax treatment. Tax evasion as pats of these action consists of illegal and intentional actions taken by individuals to reduce their legally due tax obligations. Individuals and firms can evade taxes by underreporting incomes, sales, or wealth; by overstating deductions, exemptions, or credits; or by failing to file appropriate tax returns.
For the United States, the most reliable estimates suggest that the amount of unpaid federal individual and corporate income taxes totaled $127 billion for 1992, with an annual growth rate of 10 percent since 1973 (Internal Revenue Service, 1988, 1990, 1996). Other taxes at other levels of government are also subject to nonpayment. Tax evasion is important for many reasons. The most obvious is that its presence reduces tax collections, thereby affecting taxes that compliant taxpayers face and public services that citizens receive. Evasion creates misallocations in resource use when individuals alter their behavior to cheat on their taxes, such as in their choices of hours to work, occupations to enter, and investments to undertake. Its presence requires that government expend resources to deter noncompliance, to detect its magnitude, and to penalize its practitioners. Noncompliance alters the distribution of income in unpredictable ways. Evasion may contribute to feelings of unfair treatment and disrespect for the law. It affects the accuracy of macroeconomic statistics. More broadly, it is not possible to understand the true impact of taxation without recognizing the existence of tax evasion.
Cameroon tax system is declarative. This means every individual doing business comes at the end of the month to state the amount he or she made as revenue for that period. The tax system consists of three regimes which include the Global tax, simplified tax, and real tax regime each having its own tax administration saddled with the responsibility of identifying taxable individuals, companies, and properties; assessing the taxes that need to be levied; collecting the taxes and remitting same to the respective governments as and when due. General Tax Code (2020).
The appropriateness and effectiveness of the tax administration in place normally determines the revenues that would be collected and remitted to the various tax administrators at the different levels of governments. All of these tax policies determine the level of tax compliance. Therefore, since increase tax compliance contributes significantly to the total revenues generated by the government of Cameroon, effective and efficient tax administration must be put in place.
However, among the many problems confronting tax administration in Cameroon, is how to ensure voluntary compliance on the part of the taxpayers. Tax being a commodity nobody wants to buy; the tax authority is hardly liked by taxpayers who perceive him as a government toll collector. The problem of the tax authority is worsened by the poor performance of most state governments in terms of the provision of amenities for the taxpaying public. Lack of confidence and mutual distrust in government represented here by the tax authority, gave rise to voluntary compliance difficulties. Tax laws in Cameroon are complex and difficult for the common taxpayer to understand, and some cases are problematic even for literate officials. In addition to a lack of understanding, many taxpayers are unaware of the existence of a certain tax. This coupled with the understaffing, poor remuneration for the tax officials, the inability of the taxpayers to pay on time, lack of information, the laziness of the tax official, uncooperative taxpayers, and the habit of ‘quick –fix’ solutions-encourages the use of the best judgment approach. This may be a manifestation of the poor tax education and weak fulfillment by tax authorities of their responsibilities about public awareness.
Ocheoha (2000) asserts that tax is a commodity nobody will want to buy if buyers are given the opportunity of choice because the tax is an imposition. He explains that government imposes taxes primarily to raise the revenue required to cover the cost of general administration and defense. He contends that the cost of general administration includes paying of personnel emoluments, salaries, wages of leaders or those in authority, their aides, as well as the salaries of civil servants, police, and military personnel. Today the purposes of taxation have assumed a wider dimension hence the government uses it as a veritable tool of administration. Therefore, the status and standing of taxation as a subject worthy of study cannot be overemphasized.
Given the above, this study will attempt to answer the question of, what is the effect of tax administration on tax compliance? Due to clarification, the following questions should be considered;
- What is the effect of tax administration on tax compliance?
- Is the tax administration of Buea effective in managing its taxpayers?
- To what extent has a lack of improper enlightening of taxpayers affected tax administration?
- What are the difficulties that arise in the process of implementing tax laws?
The main objective of this study is to examine the effect of tax administration on tax compliance. The specific objectives are to;
- To know if the tax administration in Buea has been effective in managing it, tax payers.
- To analyze the extent to which a lack of improper enlightening of tax payers has affected tax administration.
- To know the difficulties that arise in the process of implementing tax laws.