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Z
n
Where, n is minimum sample size required,
2 /
Z is the value of the standard normal ordinate at %
level of significance and is the predetermined margin of error. Hence, at the 5%level of
significance, 96 . 1
025 . 0 2 /
= = Z Z
Z
n
That is, we need a sample size of at least 150 to arrive at a sample with a sampling error of at most
8%. Hence, our sample size is 150 taxpayers. Also, the annual collections from January 2010 June
2013 were used.
Two types of data are collected for this paper. Primary data are obtained from the population sample
in the study area and questionnaires were administered on them to validate the information. The
questionnaires were delivered by hand for effective collection. Also, secondary data are obtained from
the record of collection of the Kaduna State Board of Internal Revenue Service, published journals,
articles, text books, and surfing of internet. The demographic data of respondents were analyzed using
tables, charts and percentages while Chi square was used to test the significance of the descriptive
statistic and to validate the research hypotheses at an alpha level of 5% and (n-1) degree of freedom.
Furthermore, T-test was used to validate the research hypothesis on revenue generation. The t-test is a
procedure used for comparing a pair sample means to see if there is sufficient evidence to infer that
the means of the corresponding population distributions also differ.
Discussion
7
The main objective of this paper is to evaluate the major effect of the amended personal income tax on
the revenue generated by kaduna state board of internal revenue. The independent sample t-test is
applied to investigate the increase or otherwise in revenue generation as a result of the Personal
Income Tax (amendment) Act, 2011.
At a level of significance of 0.05, the decision criterion is to reject H
0
if |t| > t
0.05
at n
1
+ n
2
- 2 degree
of freedom.
Where:
1
X = mean of pre- amendment revenue generated
2
X = mean of post-amendment revenue generated
sp = Pooled Standard Deviation. Where
sp =
2
) 1 ( S ) 1 (
2 1
2 2 1 1
+
+
n n
S n n
where :
S
1
2
=
1
) (
1
1 1
n
X X
S
2
2
=
1
) (
2
2 2
n
X X
1
n = Number of items in pre-amendment revenue generated
2
n = Number of items in post-amendment revenue generated
Table 1: Calculation of Variance of Revenue generation - Pre- amendment
Quarters N000,000
X
N000,000
X
1
X
N000,000
(X
1
X )
2
1 1,170 (438) 191,844
2 1,248 (360) 129,600
3 1,245 (363) 131,769
4 1,468 (140) 19,600
5 1,689 81 6,561
6 1,600 (8) 64
7 1,737 (129) 16,641
8 2,086 478 228,484
9 2,227 619 383,161
2 1
2 1
1 1
n n
sp
X X
t
+
=
8
Total 14,470 1,107,724
Source: Statement of Internal Revenue Collection KSBIR
1
X =
Z1
n
1
X =
14,470
9
= 1,608
S
1
2
=
1,107,724
8
= 138,466
Table 2: Calculation of Variance of Revenue generation - Post- amendment
N000,000
X
N000,000
X -
2
X
N000,000
(X
2
X )
2
1 1,664 (83) 6,889
2 1,735 (12) 144
3 1,773 26 676
4 1,794 47 2,209
5 1,769 22 484
TOTAL 8,735 10,402
Source: Statement of Internal Revenue Collection KSBIR
2
X =
8,735
5
= 1,747
S
1
2
=
1,42
4
= 2,601
Therefore, in order to arrive at our calculated |t| we will first find the value of SP
sp =
2 5 9
601 , 2 ) 1 5 ( 138,466 ) 1 9 (
+
+
Sp = 305.25
Therefore, our calculated |t| will now be:
|t| = 1.46
5
1
9
1
25 . 305
747 , 1 608 , 1
+
= t
9
From tables, the critical value at an alpha level of 5% set at a degree of freedom of (n
1
+ n
2
-2) i.e. 12
is 1.782. This is higher than the computed |t| which suggests that the null hypothesis should be
accepted.
This indicate no any significant increase in terms of voluntary compliance by tax papers neither does
the new tax regime increase the amount of revenue generated by the state. To furthermore, explain
why the outcome of the paper we investigated the tax papers view on the effect of the new tax regime
on tax avoidance and tax evasion.
The Taxpayers View on effect of the Personal Income Tax (Amendment) Act, 2011 on Tax
Avoidance
Table 3: Inferential statistic of the taxpayers view on the effect of the Personal
O E O
E
(O
E)
2
(O
E)
2
E
40 35.5 4.5 20.25 0.57
38 35.5 2.5 6.25 0.18
39 35.5 3.5 12.25 0.35
25 35.5 (10.5) 110.2
5
3.11
25 23.3 1.7 2.89 0.12
24 23.3 0.7 0.49 0.02
23 23.3 (0.3) 0.09 0.00
21 23.3 (2.3) 5.29 0.23
19 22.5 (3.5) 12.25 0.54
20 22.5 (2.5) 6.25 0.28
22 22.5 (0.5) 0.25 0.01
29 22.5 6.5 42.25 1.88
18 20.8 (2.8) 7.84 0.38
20 20.8 0.8 0.64 0.03
18 20.8 (2.8) 7.84 0.38
27 20.8 6.2 38.4 1.85
TOTAL 9.93
Income Tax (Amendment) Act, 2011 on tax avoidance in Kaduna State
The critical value from table at an alpha of 5% set at a degree of freedom of (C-1) (R-1) i.e. 9 is 16.9.
The computed X
2
(see table 1) is 9.93 which is lower than the tabulated X
2
. This result suggests that
the taxpayers responses is statistically insignificant, thus, the null hypothesis is accepted. i.e. the
taxpayers do not agree that the amended Act will curb tax avoidance in any way.
The Taxpayers View on effect of the Personal Income Tax (Amendment) Act, 2011 on Tax
Evasion
Table 4: Inferential statistic of the taxpayers view on the effect of the Personal Income Tax
(Amendment) Act, 2011 on tax evasion in Kaduna State
O E O
E
(O
E)
2
(O
E)
2
10
E
40 36 4 16 0.44
38 36 2 4 0.11
39 36 3 9 0.25
27 36 (9) 81 2.25
25 22.7
5
2.25 5.06 0.22
24 22.7
5
1.25 1.56 0.07
23 22.7
5
0.25 0.06 0.00
19 22.7
5
3.75 14.0
6
0.61
19 22.2
5
3.25 10.5
6
0.47
20 22.2
5
2.25 5.06 0.22
22 22.2
5
0.25 0.06 0.00
28 22.2
5
5.75 33.0
6
1.48
18 21 3 9 0.43
20 21 1 1 0.05
18 21 3 9 0.42
28 21 7 49 2.33
TOTAL 9.35
At an alpha level of 5% set at a degree of freedom (C-1) (R 1), the critical value from tables is 16.9.
The computed X2 (see table 7) is lower than the tabulated X2. This result suggests that the null
hypothesis should be accepted i.e. the taxpayers do not agree that the amended Act will curb tax
evasion in any way.
The findings of the research work revealed that the taxpayers do not see any positive changes that the
Personal Income tax (amendment) Act, 2011 can have on tax avoidance neither do they agree that the
changes has any positive effect on tax evasion. In the spaces left for further suggestion, some opined
that Nigerians are used to avoiding and evading tax, so since it is their habit, a reduction in the tax will
not make them change. Moreover, JTB admin (2013) opined that some taxpayers hide behind the
lapses of the Act to avoid tax since the Act allows an employee who maintains dual residence to have
a right to exercise discretion as to where he declares as place of residence in his employment records
with an employer as a result they will choose a state that they know they will pay less tax as a place of
residence. Others opined that as long as the Government does not solve the problem of multiple
taxation in Nigeria, Nigerians, will keep on avoiding and evading taxes. While some others advised
that measures such as effective campaign on the importance of paying tax, and using the taxpayers
money for physically evidenced infrastructures will do the great job.
Not only that, from the records of income generated gotten from the Kaduna state Inland Revenue
Service, when subjected to statistical test, it was discovered that the Personal Income Tax
(Amendment) Act, 2011 does not improve revenue generation in Kaduna State. Therefore the paper
found no any significant increase in terms of voluntary compliance by tax paper neither does the new
tax regime increase the amount generated by the state.
Conclusion and Recommendation
11
The personal income tax law 2011 has not successfully encouraged tax papers to voluntarily comply
with self-assessment and compliance. The new law has not succeeded in driving the force of change
that will minimize the incidence of tax avoidance and tax evasion. It has therefore not improved the
revenue generated by the state boards of internal revenue. Although, personal income tax (PIT)
constitutes 80% of total income generated in Kaduna State, revenue generated from direct assessment
constitutes only about 3% despite the large number of people in business, trade, and vocations in
Kaduna State. This goes a long way to tell us that either tax evasion/avoidance has eaten deep into the
fabrics of our system or that the tax administration is poor. This was corroborated by the fact that in
spite of the amendment of Personal Income Tax (PIT) Act which was aimed at increasing revenue
generation, it does not impact positively on tax evasion, nor tax avoidance neither does it improve
revenue generation in Kaduna State from our findings.
For any organization to achieve its objectives, a lot depends on its financial strength and its manpower
that must be willing, qualified and sufficiently motivated. Therefore, Kaduna State Board of Internal
Revenue Service (KSBIRS) needs to be financially supported and should employ suitable and
qualified personnel who are willing and capable to use acceptable method of income generation. It is
the recommendation of the paper that more has to be done on the law to reduce the loop holes that
allow tax papers to manipulate the law to their advantage. Again, the law must be reviewed to have
stringent punishment for defaulters. Authorities must also provide services to the tax payers to
convince them that the tax they pay provides benefit to them.
Furthermore, the Kaduna State Board of Internal Revenue Service (KSBIRS) staff should undergo
training and workshop on proper administration of Personal Income Tax in the state and how to curb
tax evasion and minimize tax avoidance at regular intervals. Kaduna State Board of Internal Revenue
Service (KSBIRS) could also infuse into the tax force, professional tax administrators of diverse fields
who will assist the Board beef up income generated. Members of the public are also to be educated
and awareness created through various means such as publications, electronic media, community
leaders and the likes, in order for both the rural and urban dwellers know the need to pay their taxes as
at when due. Self-assessment forms which are filled by individuals should be carefully scrutinized
before issuance of tax clearance certificates. Proper investigations and calculations should be carried
out by the Kaduna State Board of Internal Revenue Service (KSBIRS) into the accounts of business
units in the state when returns are made in order to avoid over/under assessment of tax payers.
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