This study was carried out to examine personal income taxation incidence in " Nigeria economic; implication and effect on the employees(A case of Agege local Government Area, Lagos State) The entire research work was divided into five major parts which .include: Introductory aspect ,which is chapter on containing introduction, Background of the study, statement of problem, Research methodology , Data collection , Research questions, Research hypothesis ,Scope of study ,Limitation of the study and Definition of terms. Chapter two dealt with the reviews of literature and talk extensively on personal income tax as written by different authors .It contains the following Administrative organization, Composition of State Board of Internal Revenue ,Duties of State Board of internal Revenue ,Joint Tax Board .Personal income rate Personal Allowance and Relief, Assessment of personal income Tax, Objectives and Appeals, Personal income Tax Enforcement, incidence of Taxation on workers and economic implication on employees .The third chapter is the methodology of the research which encompasses Introduction ,Features of the study population, Sampling Design and procedures, Research Design, Methods of data collection ,Methods of Data analysis and Limitation of methodology .Chapter four involves introduction, Presentation of data, Analysis of Data, Test of hypothesis, Discussion of Result .Lastly chapter five contains summary, recommendation to the employees, government and public at large and Conclusion.



The concept taxation has been in practice in Nigeria prior the advent of British who colonized Nigeria, though it was practiced in various forms by the various communities in the Northern, Western and Eastern Nigeria. In the Northern more definite organized and sophisticated tax system was operational than anywhere else in the country. The following forms of taxation was recognized; Zakat. tax levied on Moslems for charity ,religious and educational purposes. Kurdin-Kasa tax payable on landed properties for agricultural purposes. Shukka-Shukka, tax payable on crop and Jangali ,tax levied on livestock. In Western Nigeria, the most popularly identifies taxes are: Isakole, tax levied on land used by local communities who are normally expected to pay obeisance to the local chief .It is paid by community to a superior king.  Owo-ori, tax levied compulsorily on individuals. Also, in the Eastern Nigeria, the following forms of taxes were practiced during the pre­-colonial era.  Egbu-Ukwu, tax levied before harvesting palm oil, community effort, which is a levy or contribution from individuals to community purse. It is normally collected for specific purposes. According to Idown in her principles of public finance 2004, a tax can be defined as a compulsory levy imposed on individuals, corporate bodies ,goods and services by the government as a source of revenue for carrying out its responsibilities ,such as provision of good roads, constant power supply ,adequate water supply .good healthcare centers ,educational facilities etc. Taxation has been a great tool in the regulation of the economy. In is the most important source of revenue to the various tiers of government in Nigeria After the colonization of Nigeria till date, there exist various forms of taxation such as personal income tax, Companies Income Tax, Capital Gain Tax, Value Added Tax, Petroleum Profit Tax, and Education Tax. Personal Income Tax would be the basis on which this study is based, how it affects and induces economic growth, its effect and implication on the working class known as the employees.

Abiola2004) defined personal Income Tax to be the tax levied on the income of individual employees, sole traders, trustees, partners etc.lt was promulgated in 1993 by personal Income Tax Decree 104 Act 1993 which has currently been changed to personal Tax Act Cap p8 LFN (2004) and the government organ responsible for its administration is State Board of Internal Revenue of the different states in the country, with an operational a.rm of state Internal Revenue Service's (SIRS).


The history of taxation dates back to early times, it had, from times to time, assumed various scopes and dimension in accordance with purposes the imposing authorities intended it to serve.

It is in record however, that before the white men come, there were already well established forms of taxation in the conglomeration of the vast-nation­ state which later amalgamated of form what is known today as Nigeria .Northern Nigeria as it was known until very recently was ruled by very powerful Emirs, so also was ruled by Obas, Kings and Chiefs ruled the eastern Nigeria. It is also in record that the Northerners practiced a more sophisticated tax system than the Western and the Eastern Nigeria, Due to the distinguishing features or various in tax systems within the country' the federal government played a constitutional role by making a uniform: personal tax system throughout the country via the personal Income Tax Decree 104 of 1993 which has now been changed to Personal Income Tax Act 2004 LFN.


These are the research problems this study intends to solve:

1.       The incidence of personal income tax on Nigeria Economy.

ii.       What are the likely implication and effect on the employees?

iii.      Income distribution gap between the rich and poor in an economy.

iv.      The decreasing and deteriorating standard of living of the employees within the economy.

v.       Crawling growth of the nation's development in terms of industrialization by investors and infrastructure by the government.


In cognizance of the revenant importance attached to Personal Income Tax in Nigeria, the following objectives would be achieved by this study.

i.        To an individual, this study would allow an employee to ascertain his or her relief such as personal allowance, children allowance, and dependent relatives' allowance.

ii.       To enlighten an employee on the benefits of undertaking self assessment.

iii.      To create an environment for an employee to know the various tax rate at which he or she should assessed

iv.      To enlighten the employees and the populace to know the benefit that would be derived from tax collected by the government

v.       To enlighten the employee on the difference between tax' avoidance and tax evasion


The importance and role of personal Income Tax in Nigeria economy cannot be overemphasized .Below are the importance of this study:

i.        The study will enlighten us on the implication and effect of personal Income Tax on the employees and in the economy

ii.       Another importance of this study is that, this study will allow the state government to allocate resources correctly to the various sectors within the statee.eg provision of good roads, constant power supply, good healthcare centre, adequate water supply and educational facilities. e.t.c.

iii.      This study is also importance because it will show the personal Income tax collected by the government, facilitates the state government in the provision of basic infrastructural amenities

iv.     This study is importance because it will allow the government to know that good system of personal income tax will allow for increase in the standard of living of the employees

v.      Furthermore ,this study will allow the government to operate a good tax system of personal income tax collected would be properly utilized ,thereby motivating the stakeholders in investing in government parastatals .


1.      Is the personal income tax relevant to the growth of the economy?

ii.       Does the deduction of personal income tax have an adverse effect on the employees?

iii.      How far do the modern tools applied by the relevant tax authority aid in the collection of personal income tax from the employees?

iv.      What is the consequence of not complying with the laws of personal income tax?



Ho:    Personal income Tax is not relevant to the growth of the economy

Hi:     Personal income Tax is relevant to the growth of the economy


Ho:    Personal Income Tax deduction from employees' income does not have an adverse effect on the employee.

Hi:     Personal Income Tax deduction from employees' income doest has an adverse effect on the employee.


Ho:    The modern tools applied by relevant tax authority do not aid tax collection from the employees

Hi:     The modern tools applied by relevant tax authority aid tax collection from the employees.


Ho:    There is exist no consequences of not complying with the laws of·;;,;­personal income tax

Hi:     There is exist consequence of not complying with the laws of personal income tax


Methodology is defined as the systematic gathering of data from respondents for the purpose of understanding and predicting some aspects of the behaviors of the population of interest. Under this the population will cover the employees in different industries within Agege Local Government Area.

Secondary data will be sourced from journals, written articles and textbook on the topic, while primary data will be collected from Agege Local government, Lagos State.

The primary data collected, will be analyzed using the chi-square statistical technique. The chi-square (X2) test or analysis method is an important extension of hypothesis testing and it is used when it is wished to compare an actual and observed distribution or data with a hypothesis. This technique in testing the collected data is used by comparing the observed frequencies as expected frequencies and drawing a conclusion

The formula for calculation of chi-square (X2) test is given below



∑ = Summation

E= Expected Frequency

O = Observed Frequency


The study will focus on Personal income Tax Incidence in Nigeria Economy, Implication and Effect on the Employees" . The analysis of the implication and effect of personal income tax incidence would cover the employees within Agege Local Government Area (Lagos state) across different industries.

The major limitation of the study is that there was shortage of data .The data gathered was not sufficient enough for comprehensive research.

There was also financial constraint on the researcher which almost paralyzed the study, some respondents were biased for filling the questionnaire despite guarantee that information supplied would be for academic purpose and will be treated in strict confidence.

Finally, the time given for the research work was not enough for the research to carry out more survey in various Local Government Area.


EARNED INCOME: It refers to income derived from a trade, business profession vocation or employment carried on or exercised by such individual including any person derived from a previous employment Abiola (2004)

PERSONAL INCOME TAX: This is a form of tax levied on individual, partners, executors, trustees, families, communities and sole traders' .Abiola 2004)

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