Structural analysis of tax administration and revenue generation in Lagos State, Nigeria (2006-2015)

Abstract

Taxation as a potent fiscal policy instrument through which infrastructures and social services that drive the development process of any society has been adjudged to be ineffective in most of the states in Nigeria. The increasing cost of running government coupled with dwindling revenue has led various State governments in Nigeria especially (Lagos State) in formulating strategies to improve their revenue base. The study examined comprehensively the contribution of taxation to the internally generated revenue of Lagos State through efficient and effective tax administration. The study used both primary and secondary data. The primary data were sourced mainly from the administration of questionnaire to 200 members of staff of Lagos State Internal Revenue Service while, the secondary data were however sourced from Lagos State Internal Revenue Board and National Bureau of Statistics for the period of 2006-2015. To achieve the aim of the study, descriptive statistics, Correlation analysis with the use of Autoregressive distributed lag (ARDL) were used to find out the contribution of taxation to the internally generated revenue of Lagos State. Also, conventional Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) were used to determine whether or not the data was stationary. Bound co-integration test was used to determine long run dynamics of the variable used in the study. The result showed that the identified various forms of taxes contributed significantly to internally generated revenue in Lagos State except direct assessment component of personal income tax. The findings of the study also revealed that PAYE and other revenue were the major determinants of internally generated revenue meaning that other sources of IGR are not contributing enough particularly direct assessment and road taxes with PAYE co-efficient of 2.368 P=0.000 at 1% level of significance, while other revenue has coefficient of 1.300 P=0.006 at 5% level of significance. Direct assessment with co-efficient of -1.775 P=0.290, F-statistic 13.84, adjusted R-square value .708 and Durbin-Watson of 1.8 respectively. The study concluded that the implementation of various fundamental programmes and forward looking strategies of the state tax administration has impacted significantly on the internally generated revenue in the state.