Title Page
Table of Contents
1.0 Introduction
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Research Question
1.5 Purposes of the Study
1.6 Research Hypothesis
1.7 Scope and Limited of the Study
1.8 Definition of Terms


2.0 Literature Review
2.1 Meaning and Purpose of Taxation
2.2 History of Taxation in Nigeria
2.3 Types of Taxes
2.4 Classification of Taxes
2.5 Principles of a Good Tax System
2.6 Purpose of Taxation in Nigeria
2.7 Administration of Personal Income Tax in Nigeria
2.8 Ascertainment of Income
2.9 Procedure for Assessing Personal Income Tax in Relief
2.10 Income Tax Relief
2.11 Tax Avoidance and Tax Evasion
2.12 Problem of Personal Income Tax Administration
in Nigeria
2.13 Offences and Penalties
2.14 Objectives of Personal Income Tax Revenue Deduction
and Allowance


3.0 Research Methodology
3.1 Research Design
3.2 Sampling Size and Sampling Technique
3.3 Method of Data Collection
3.4 Research Instrument
3.5 Method of Data Analysis
3.6 Limitation of the Methodology
4.0 Data Presentation, Analysis and Interpretation
4.1 Data Presentation
4.2 Data Analysis
4.3 Analysis of Secondary Data
4.4 Analysis of Primary Data
4.5 Analysis of Response to the Questionnaire and Test of


5.0 Summary of Findings, Conclusion and Recommendations 104
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendations
Appendix (Questionnaire)

Before the advent of colonial rule in Nigeria, taxes were mostly levied in kind which took the form of individual contributions to communal welfare. Free and compulsory services such as clearing of road and bush by the community were common. It was also common that people set aside part of their harvest for the kings and those in authority annually. These types of activities were free but made compulsory and constitute taxes.
Thus, there has been a particular system of direct taxation prior to the colonial era which varied from one part of Nigeria to the other and this varied significantly from the normal structure of modern taxation known today.
In Nigeria, each level of government is supposed to have access to sufficient financial resources to carry out effectively its duties and responsibilities. This will ensure the preservation of its autonomy. Whether of cash or of kind, taxes as a source of government revenue have been paid before the advent of colonial rule in Nigeria. Of all the type of taxes in Nigeria, Personal Income Tax has been prove to be one of the most effective.
Personal Income Tax can be defined as an annual statutory contribution levied by the government on public expenditure. The Decree 104 of 1993 as amended by Decree 31 of 1996 specified the tax liability on:
i. Trust or settlement
ii. An individual resident deemed to be resident in Nigeria.
iii. Body of individuals and corporate deemed to be resident in Nigeria.
In nutshell, Personal Income Tax is paid by an individual that is carrying on trade, vocation or practising his trade with a company in partnership etc. Peachman (1968) said that, “Personal Income Tax is widely regarded as the fairest method of taxation yet devised. It is the major element of progression in modern tax system and permits differentiation of tax burdens on the basis of family responsibilities and other personal circumstances of tax payers”.
The first general Personal Income Tax was introduced in 1979 in Great Britain where it has been in effect continuously since 1842. Despite the early example, other countries were slow in adopting this tax. It was used for a brief period in United State during and after the civil war and it was permanently enacted following the ratification in 1913 of the sixteenth amendment to the constitution. It spread quickly during and after the world war, and became a mass tax in many countries during the second world war. Today, the Personal Income Tax raises substantial amounts of revenue in all industrialized countries of the free world and is employed, although in a lesser extent, in most under developed countries of the world.
Basically, Personal Income Tax can be divided into two forms namely:
a) Direct Assessment
b) Pay-As-You-Earn (P.A.Y.E)
DIRECT ASSESSMENT: This is a form of Personal Income Tax that is payable by self employed persons residing in Nigeria during the Year of Assessment (Y.O.A) or tax year.
PAY AS YOU EARN: This is a form of Personal Income Tax in which the tax liability is deducted directly from their monthly earnings. It is paid by the government employees.
Personal Income Tax can not be discussed in isolation, Nigeria tax system must be discussed briefly. Criticisms of the Nigeria Tax System usually focus on two main aspects. It’s structure and its administration. At the structural level, it has been suggested that the tax provisions do not adequately reflect the peculiar socio-economic character, goals and problem of the country. At the administrative level, it is agreed that the machinery and procedures followed in implementing the tax system are inadequate and therefore, account for the consistent low yields and inter-group inequities in examining the tax system for possible improvement. Therefore, it would be appreciated and appropriate to give attention separately to the two major aspects of structure and administration.
There are other forms of taxes apart from Personal Income Tax. These are:
i. Company Income Tax
ii. Petroleum Profit Tax
iii. Withholding Tax
iv. Value Added Tax
v. Capital Gain Tax
vi. Education Tax
COMPANY INCOME TAX: This is a form of tax charged on profit of all companies established and operating in Nigeria and all companies partly established in Nigeria.
PETROLEUM PROFIT TAX: This is a tax chargeable upon the profit of any company engaging in petroleum exploration, development, production and sales of crude oil.
WITHHOLDING TAX: This is a tax deducted at source from payments made to a taxable personal for the supply of goods and services.
VALUE ADDED TAX: This is a form of tax payable only by individuals that consumes VATable goods and services. It replaces the Sales Tax and its rate is currently 5%.
CAPITAL GAIN TAX: This is a tax paid on the capital gain accrued from the disposal of any classes of assets that once qualified as a Qualified Capital Expenditure.
EDUCATION TAX: This tax is charged for the development of education in Nigeria. It is charged at the rate of 2% on the assessable profit of any company registered in Nigeria.


The study intends to address the following area of problem confronting Personal Income Tax Revenue in Nigeria with respect to Ekiti State.
i) Insufficient contribution of Personal Income Tax to revenue generation in the state.
ii) Why all other sources are not as prominent as PAYE
iii) The problem of technicality in reducing the tax payable by individuals.
iv) The penalty set in Personal Income Tax Decree 104 of 1993 for prevention of tax avoidance and evasion are not in operation.
The following questions will be addressed in this study:
i) Has Personal Income Tax contributed sufficiently to the revenue generated in the state?
ii) Is Direct Assessment as prominent as PAYE as a source of Personal Income Tax Revenue?
iii) Is there any technicality in reducing the tax payable by individuals?
iv) Are the penalty set for prevention of tax avoidance and evasion effective?
In a broader knowledge, it will be noticed that the revenue generated in a state through taxation takes a portion of the total revenue for the state. The importance of this sum will be known if no amount is being generated from tax. And at the same time, since personal income tax takes a substantial percentage of the total tax accrued, then there should be greater respect given to the collection and administration of Personal Income Tax in the state. The economy of a state is being determined by the availability of fund that can be generated in the state in order to finance the developmental projects in such state. By so doing, the standard of living of people will be improved. In nutshell, personal income tax contributes to the development of a state and the standard of living of the residents.



The aim of this study is to put some displaced matters under personal income tax into the appropriate place they ought to be. In other words, the aim of this research work is to look into the earlier stated problems and how they can be control. These aims are to:
i) Investigate and ascertain whether the current Administrative structure as spelt out in PITA facilitates the attainment of the objectives of PITA i.e. Revenue Generation.
ii) Analyse the various tax component of PITA as a source of revenue to the relevant tax authority.
iii) Evaluate the implementation of the penalties spelt out in the PITA and the effectiveness of such penalties.
iv) Evolve policy or make recommendations in order to improve the implementation of PITA.
The research hypothesis for this study are:-
Ho: The contribution of Personal Income Tax to revenue generation is not sufficient.
Hi: The contribution of Personal Income Tax to revenue generation is sufficient.
Ho: P.A.Y.E does not contribute the highest percentage of Personal Income Tax Revenue in Ado-Ekiti.
Hi: P.A.Y.E contribute the highest percentage of Personal Income Tax Revenue in Ado-Ekiti.
Ho: Personal Income Tax payers do not display any technicality of reducing the tax payable.
Hi: Personal Income Taxpayers do display technicality in reducing the tax payable.
Ho: Penalty set to curb Personal Income Tax avoidance are not in operation.
Hi: Penalty set to curb Personal Income Tax avoidance are in operation.
This study focuses on evaluating the Personal Income Tax Revenue in Ekiti State Nigeria. This research work concentrates on less prominence and publicity of other sources of income covered by PITA aside from Pay As You Earn (P.A.Y.E), its administration, assessment, collection and the problems and difficulties faced by the relevant tax administrations and the payer of such tax. Personal Income Tax is a multi-dimensional issue and its facets cannot be covered in a small volume like this within this time constraints.
Despite the limitations in the scope of the paper, a lot of difficulties were encountered during the study. Some of the staff of the Internal Revenue Board were not ready to give information reason being that it is against the law to divulge tax information to an unauthorized staff of the board. In most cases, the researcher was mistaken for an agent gathering information for one panel of inquiry or the other. And some members of staff that saw the need for this research and attended to the researcher’s data needs do not have access to some of the tax payers’ files and records.
PITA: Personal Income Tax Act
PAYE: Pay As You Earn
ITMA: Income Tax Management Act
JTB:- Joint Tax Board
SBIR: State Board of Internal Revenue
FAMILY INCOME: Money received by a recognized family under a law or custom in which the several interests of individual members of the family cannot be determined during a given period.
COMMUNITY INCOME: Money received by a village or other indigenous communities during a given period of time.
PERSONAL INCOME TAX (PIT): This is a tax imposed on chargeable income of any person other than corporate bodies.
CHARGEABLE INCOME: The chargeable income of an individual for any year of assessment is the difference between his total income and personal relief granted under the income tax law.
YEAR OF ASSESSMENT: A period of twelve months commencing on the first day of January and each subsequent period of twelve months.
TAX AUTHORITY: The person or body of persons responsible under the law of a territory, imposing income tax, usually the internal revenue board of a state.
PAY AS YOU EARN: A system whereby an employee pays income tax on his or her current earnings, when they become payable by his or her employer.
DIRECT INCOME: This is income derived from the excessive of carrying on trade, business, vocation or employment, or any previous employment.
UNEARNED INCOME: This includes income other than employment trade, vocation or from other sources. For example, investment.
ACCESSSABLE INCOME: The income of an individual for a year of assessment is the income of a person from all sources with reference to the relevant basis period.
PRECEEDING YEAR BASIS: This is the assessment of tax on the income or profit from trading in the previous year computed in the current year.
TAX EVASION: This is a situation where a tax payer fails to report a source or seeks to reduce his tax liability by understating his source of income to the authority.
TAX AVOIDANCE: A process whereby the tax payer uses due process of law pay less than he ought to pay or avoid payment of tax.


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