THE PROBLEMS FACING PERSONAL INCOME, THE ADMINISTRATION IN RURAL COMMUNITIES(A CASE STUDY OF UGWUAJI COMMUNITY IN ENUGU SOUTH LOCAL GOVERNMENT AREA OF ENUGU STATE)
This chapter contains a review of existing literature related to the subject-matter (personal income taxation)For this purpose the chapter is subdivided into sub themes dealings with:
[widget id=”related-posts-by-taxonomy-2″]
- Historical background and development of income taxation in Nigeria
- General principles and practice of income taxation
- Purpose of personal income taxation
- Assessment and collection of personal income tax
- Administration of personal income tax in Nigeria
- Methods of income tax collection
- Rural income tax notice and receipt
- Summary of literature reviewed
2.1 HISTORICAL BACKGROUND AND DEVELOPMENT OF INCOME TAXATION IN NIGERIA
The history of the what is now called personal income tax (PIT) can be said to date back to the age of organized society. Prior to the period of the European colonization, there were various forms of personal income taxation dating back to the days of our great ground fathers whereby communities tax prosecute community projects, to help the community withstand aggression or attack or any kind of evil against community
In fact, it has been discovered and believed that the inter-tribal or inter community wars were aimed at conquering prospective tribute payers to the domineering community while the later, in turn, provides security to the weaker ones.
During this era, Nigeria’s cheerfully paid their taxes in kind by rendering free services such a clearing the bush paths, digging toilet pits, wells and on for the benefit of the community as a whole. Courtesy saying that self help is the best help
Failure to render such services usually resulted in creature of properties which might be retained until payment of money or what represents money (VLA1981). This is still being practiced in various parts of (villages or town) of this country today more especially in rural communities of which Ugwuaji community of Enugu State is a typical example. Historical has it that the elders and the wealthier members of the community contributed palm wine, yams and money for entertaining the communal laborers. Whom prepaid the food as their own contribution. Masquerade were employed to enforce compliance with the rules governing the community works.
The earliest trace of any form of direct taxation was in the northern region of Nigeria. The organized form of administration by Emirs, who are highly respected leaders, and the spirit of Islam which made it possible for people to contribute towards charity, laid a sound foundation in Northern Nigeria. Prior to 1990, there were a number of levies and forms of personal income. Taxes on agricultural products and live stocks like the “Zakka” the Kurdein, and Jangali, taxes. The Zikka tax prescribed by the Holy Koran was cried on Moslem for charitable, religious and educational purposes. The tax base was grains and cattle Kundin Kaja, an agricultural tax was levied on non-Moslems. The “Shukka Shukka” was paid by farmers as plantation tax.
Different communities within the Emirate were subjected to Kharet or community taxs. In addition, there existed a form of death duty called “Grades and a type of gift to the supervisor termed Gaisue” (chukwu 1995).
John .f. (1963) wrote that in Nigeria, income taxation in modern form began in 1949 although there was a simplifies type of tax dating back to 1927, and Northern Nigeria was one of the first section in Africa to use direct personal taxation under the Fulani Emirs prior to the advent of the British. There is no doubt therefore, that complete system of direct taxation existed in Northern Nigeria before the advent of colonial era.
In the Western part of Nigeria where kings and chiefs existed tributes, toils and arbitrary levies and fees provided the main sources of revenue to different kingdoms. In Ibadan, Oyo and Ife, there were animal urines special contributions at special festivals and fees collected through the head of the families.
In Eastern part of Nigeria there was no organized central authority and this accounts for non existence of taxes in the area. However, each community uried her citizens usually, equally when they want to execute a project.
It is true therefore to say that payment of taxes in cash and in kind and different other forms took place in different parts of Nigeria long before the advent of colonial rule. But the system of operation / administration of such taxes differed from one are to another and from one ethic group to another. This lack of uniformity posed a serious problem to the Royal Nigeria company in the 1880s (Obingene .F. Onuarah 1988). There was the need to remove duplications, irregularities and arbitraries in taxation in order to unify and streamline taxation in the whole area now called Nigeria. This is the genesis of Modern income tax and operating legislation.
On the history of modern income tax in Nigeria, (J.K Nai yeju 1988) stated that income tax was first introduced in Nigeria in 1904 by the late Lord Lugard when community tax was operational in Northern Nigeria, Hitherto, taxes were paid in kind. In 1917, the first ordinance on tax came on board and applied to both Northern Nigeria and southern regions
The first law as the 1904 land revenue proclamation in which the procedures of the taxes were collected by the natural rulers (Emirs) at that time and shared between then and the government. This is against the earlier procedure where what was collected is used in maintaining g the Emirates. From this now law, the natural rulers’ (Emirs) portion would be used for the Emirate according to the Emirs discretion, hence he handles such, while the other is assume to be used for running the government of the whole country. Lord Lugard, later in 1906 enacted the native revenue proclamation which replaced the 1904 land revenue proclamation. It aimed at unifying all the existing forms of taxation then
The 1917 native revenue ordinance replaced the 1906 proclamation and regulated the imposition and collection of taxes from native. The 1917 ordinance was extended to both the Northern and southern parts of Nigeria, but it was grudging accepted in the south. As there were no recognized traditional rulership and non acceptance of the south, it was difficult for Lugard administration to introduce the native revenue ordinance (1917) in these area. There were many attempts to impose this ordinance in cheerful and peaceful manners but they were always met with resistance notably in Owerri, Calabar and Aba. However, after the amendment of the 1917 native revenue ordinance, Lugard succeeded in extending it to the Eastern province in 1928.
The Oba of Benin was the first of the southern rulers to accept direct taxation in 1917. it was later introduced in Yoruba areas of Ibadan and Egba in 1918 under the native revenue ordinance. It was not until 1927 that the native revenue (Amendment) ordinance was duely enacted to apply to the Eastern provinces including Warri and Asaba District / Divisions to be effective April, 1928. The introduction of direct taxation was resented in various parts of the south. It sparked disturbances in Warri province (Where there was even physical opposition to assessment and census) and Kwara areas of the old Northern region. Mach to peoples’ surprise, the collection of tax went from minor incidents in Onitsha and Ogoja provinces. The Ogoja province, the people of Ezza and Izzi in Abakaliki Division bluntly refused to pay and meetings held to resolve the issue were broken up by women (Ndichiaku 1987). It is believed that up to today, the Ezza and Izzi people still resist tax and should like to do anything possible to make sure that they did not pay tax. Tax officials on revenue clashing with them (chukwu 1995)
But it was in Aba in then Owerri province that women registered the strongest and most organized resistance against the government to tax them. This was evident in the Aba riots of 1929 that resulted to the loss of thirty (30) and thirty (30) wounded (commission paper 1930).
In 1937, both the native direct taxation ordinance and non-native income tax protectorate ordinance were passed and these ordinance included discrimination in direct taxation between the native and non-native. They were later replaced by the direct taxation ordinance of 1943, which consolidated all earlier ordinance on attempts to unify direct taxation in the country. The direct taxation ordinance of 1940 empowered native authorities to tax Africans in their areas of jurisdiction while the income tax ordinance of 1943 governed the taxation of non-Africans and companies. These ordinances were the foundation of our modern Nigerian taxation laws. The ordinance however maintained the discriminatory nature of the tax system between native and non-native. Under the direct taxation ordinance, rates of taxes and the basis of computing income varied among local administrations that they were unscientifically administered and seriously lack uniformity.
According to C.S Ola (1981), the legal history of personal income tax in Nigeria may be traced back to the enactment of the ordinance, administrative officers administered the direct taxation ordinance unscientifically and without any form of uniformity by levying taxes on incomes of both Africans and Europeans in the federal territory of Lagos
The Europeans in the former regions were not subjected to tax in the regions in which they were resident. Cocoa farmers were not taxed at all, and this has been suggested as the cause of wealth of people living in the areas where cocoa was grown. Known incomes of Africans in these days were comparatively too small and revenue must, of necessity be small taxation policy than appeared to be known on a choice between bureaucracy (tax administration officials) and democratization of the system, i.e. The introduction of politicians as representation into the system and the former was preferred and practiced. Various taxes such as community tax, poll tax, miners tax and also on existed in different areas. Between 1953 and 1956, there were no substantial changes in the tax laws expect merely updating the tax rates.
In the early 1950s, there evolved a federal system of government and income tax ordinance of 1943 was retained as a federal matter which governed the taxation of non-Africans and companies while he 1940 ordinance become a regional affairs and governed the taxation of Africans in different regions. Each of the three regions-Northern, Western and Eastern was empowered to pass laws for the taxation of African resident in their regions.
In 1956, the Eastern region government took over most of the direct taxing powers of the local government and established the present income taxation, largely to finance / universal education. Consequently, Easter region introduce the income tax law No. 16 of 1957, while the Northern retained the 1943 taxation ordinance. These were the first indigenous law to the be enacted.
It is curious that the Eastern region which was the last to accept any form of taxation in Nigeria was the first to introduce a comprehensive regional finance law that serve as a model for regions
