An Assessment of Personal Income Tax as a Source of Revenue Generation in Nigeria

Abstract

Personal income tax is the tax paid by individuals from both the formal and informal sectors of the economy. While those on employment pay as the earn which is popularly known as pay as you Earn (PAYE), those on personal income or informal sectors are directly assessed based on the income they generate from their entrepreneurial ventures, which is also known as Direct Assessment. The aim of this paper is to assess the contribution of personal income tax as a source of revenue to Kaduna state. Data for the analysis were basically sourced from the secondary source, using published data from the office of the Kaduna state accountant general’s office. The paper found that there is a significant difference between the amount generated as internally generated revenue and the amount incurred as total expenditure, which automatically indicates the incapacitation of the internally generated revenue to cater for the states’ total expenditure. On the other hand, there is also a significant difference between the amount generated as internally generated revenue and the amount of revenue generated by the states over the period of the study. This is also an indication that there is a higher reliance on the federation account for the states revenue. It is recommended that states must look inwards and develop strong strategies to enhance their internally generated revenue, most especially with the dwindling prices of oil in the international market.

Keywords: Personal Income Tax, Revenue Generation and Nigeria

JEL Classification: Tax