Taxation part 2

If you missed part 1, read it here

PROBLEMS ASSOCIATED WITH TAX COLLECTION
Some of the difficulties encountered by tax collectors include in Nigeria:

1. Failure to fulfill civic responsibilities: Many people do not fulfill their civic responsibilities of paying tax as at when due.

2. Failure to declare real income: Many workers and corporate bodies, especially those in private firms, do not declare their real incomes.

3. Failure to meet people's expectation: Many people have the believe that the money they pay as tax should be used only for provision of social amenities. They will resist payment of tax if these anticipated amenities are not provided.


4. Tax evasion: High taxes scare potential payers away.

5. Insincerity of tax collectors: Majority of tax collectors are not sincere as they pay a little of what they collected to the government and put the remaining in their pockets.

6. Lack of book of account: Majority of traders and small scale businesses do not keep proper book of account for the purpose of proper tax assessments.

7. Wrong belief of the people: Many people think that the money collected is for tax collectors therefore refuse to pay tax.

8. Mismanagement of government fund: Embezzlement and misappropriation of government fund by those at the corridors of power usually kill people's morale or interest to fulfill their civic obligation of paying tax.

INCIDENCE OF TAXATION
Incidence of taxation refers to the point at which tax burden finally rests. The burden here refers to the amount paid as tax. The incidence or burden of taxation therefore lies on the person who finally pays the tax.

Types of incidence of taxation
1. Formal incidence: It refers to the initial effects of tax on the tax objects, that is, tax payer. It shows where the initial burden of taxation lies. For direct tax, the burden of tax is borne by the payer while the producers or manufacturers bear the tax in case of indirect taxes.

2. Effective incidence: It makes reference to who bears the final burden of taxation. With reference to direct taxes, the payer bears the full (initial and final) burden of taxation. For example, a person who pays income tax bears the full burden of tax and he cannot shift to another person, In the case of indirect taxes, the burden of taxation may be borne by the producer (seller) or consumer or shared between them. The extent to which either or both of them bear the burden of taxation will depend on the elasticity of demand for the commodity which is taxed.

• incidence of indirect tax when demand is perfectly inelastic: The burden of an indirect tax on a commodity whose demand is perfectly inelastic is borne by the consumer. In this case, the whole tax burden can easily be shifted to the consumer by the producer in the form of higher prices because increase in price does not bring about any change in quantity demanded.
• Incidence of indirect tax when demand is perfectly elastic: If demand for a commodity is perfectly elastic, the producer or seller will bear the whole burden of taxation. This is so because any attempt to increase the price will make the demand for the product fall to zero. The tax burden under this situation cannot be passed to the consumer.
• Incidence of indirect tax when demand is moderately elastic or moderately inelastic: In this case, the burden of taxation will be shared between the producer and the consumer. The more elastic the demand for a commodity is, the greater the burden of taxation the producer or seller bears.
• Incidence of indirect tax when demand is unitary: If the demand is unitary, the tax burden is shared equally between the producer (or seller) and the consumer.