ABSTRACT
The aim of this study was to investigate the Impact of taxation on Ogun State Development. One of the objectives carried out by the researcher was to examine peoples perception on taxation.
Taxation is seen as a tool aimed at improving the performance of the national economy by such means as altering the balance between current consumption and capital investment.
I looked at the work of other authors in order to make the exercise richer. Their different views were seen in different books and other materials (journal) which made this study much better than similar works in this area.
In carrying out this study, the researcher used both primary and secondary data. Questionnaries and interviews were used in generating the primary data while the secondarry data were obtained through library research and other sources.
The purposive sample of 50 respondents were randomly selected for the study to avoid numerous errors in the calculation. From the data collected and analysed, it was evident that tax collection plays a great role in the development of the Nigeria economy.
Conclusively, discussion, summary, conclusion, and recommendations were made to achieve the purpose of this work.
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TABLE OF CONTENTS
PAGES
Title page……………………………………………. i
Certification………………………………………… ii
Dedication…………………………………………… iii
Acknowledgement………………………………… iv
Abstract……………………………………………….. v
Table of content……………………………………. vi
CHAPTER ONE:
- Introduction 1
- Background to the Study 1-3
- Statement of the Problem 3-4
- Significant of the study 4
- Objectives of the Study 5
- Scope of the Study 5
- Research Questions 5-6
- Research Hypotheses 6
- Limitation of the study 6
- Operational Definition of terms 6-7
vi
- Historical Background of the case study 8
CHAPTER TWO:
2.0 Introduction 9
- Theoretical Framework 13
- Empirical Review 16
- Demand Taxes and Investments 19
- The Principles of Taxation 22
- Taxation as tool foe wealth creation and employment 25
CHAPTER THREE:
- Research methodology 26
- Research design 26
- Population 26
- Sample and Sampling Techniques 27
- Method of Data Collection 27
- Reliability and Validity Tests 28
- Method of Data Analysis 28-30
CHAPTER FOUR:
- Data presentation and analysis 31
- Data presentation and analysis 31-36
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- Test of hypothesis 37-43
CHAPTER FIVE:
- Summary of findings, conclusion and Recommendation 44
- Findings 44-45
- Conclusion 45
- Recommendation 46-47
References 48
Questionnaire 49-50
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND
The political economic and social development of any country depends on the amount of revenue generated for the provision of infrastructure in that given country. However, one means of generating the amount of revenue for providing the needed infrastructure is through a well structure tax system.
Azubike{2009} is of the view that tax is a major player in every society. The tax system is an opportunity for government to collect additional revenue needed in discharging its pressing obligations. A tax system offers itself as one of the most effective means of mobilizing a nation’s internal resources and if lends itself to creating an environment conducive to the promotion of economic growth. nzontta{2007} on the other hand, argues that taxes constitute key sources of revenue to the federation account shared by the federal, state and local governments.
Appah, et al {2004}. Tax is a compulsory levy imposed on a subject or upon his property by the government to provide security social amenities and create conditions for the economic well-being of the society also anyanwu{1996} and ayanfo{1997} stated that tax are imposed to regulate the production of certain goods and services, protection of infant industries, control business and curb inflation, reduce income inequalities etc.
On the other hand, tosuu and abizadeh{2 005} acknowledge that taxes are used as proxy for fiscal policy. They outlined five possible mechanisms by which taxes can affect economic growth. first taxes can inhabit investment rate through such taxes as corporate and personal income, capital gain taxes, second ,taxes can slow down growth in labour supply by disposing labour leisure choice in favour of leisure . Third ,tax policy can affect on research and development expenditure . fourth, taxes can lead to a flow of resources to other sector that may have low productivity. Finally, high tax on labour supply can distort the efficient use of human capital high tax burdens even though they have high social productivity.
Revenue has be defined by various scholars at different time . it lacks universal accepted definition . according to Webster new international dictionary (Third edition) revenue could be defined as the annual or periodically yield to taxes , exercise as the other sources of income that the nation state or public sector collect or receives into their treasury for public use ; this means that it is a public income of whatever kind. Dixon (2000) sees amount revenue as the total amount obtained from the sale of a merchandise services to customers. According to prater (2005) this revenue is an income. fayemi (2001) sees it as all tolls, taxes, impress, rates, fees, duties, fine, penalties, fortunes and all other receipt of government from whatever source arising over a period either one year or six months.
Flesher and flesher (2007) define revenues as an increase in owners’ equity resulting from the performance of the service or sale of something’s this definition is an chore on the concept of equity which may increase due to sale of goods or provision of services in other words there are two sides revenue; something received and given. Taxes are fees charged or levied by the government on a product, income, or activities. If it is levied directly on personal or corporate income, it is called a direct tax, if it is levied on the price of goods and services, than it is call indirect taxes. The main reason for taxation is to finance government expenditure and to redistribute wealth (Worlu and Emake 2012).It has observed over the years that income tax revenue has generally been grossly understated due to improper tax administration arising from under assessment and inefficient machinery for collection (Okafor, 2012).He further stated that, income tax is levied on income such as salaries, business profit, interest, dividend commission, royalties and rent. It may also be charged on capital gains and petroleum profits. Taxation yields very substantial revenue to government.
Therefore it has a bearing on the Gross Domestic Product (GDP) which is the standard indicator for measuring economic well being of a nation. The nature and level of taxes vary according to the economic policies adopted by the various tax authorities .Intense advocacy for better tax incentive in many countries is a clear indication of growing concern for economic growth and sustainable development .these tax holiday, capital allowance, tax payer right of election, re- investment allowances, investment tax credit, interest subsidy, and export processing zone (PE2) incentives. They are expected attract more investment which would ultimately translate to higher future production in the economy. Much as the impact of tax incentives on productivity, employment, and economic growth has been examined extensively; evolution of the impact of tax incentives on corporate financial performance is still relatively limited in the literature Ohaka and Agundu (2012) .
The increase cost of running government coupled with dwindling revenue has led various state governments in Nigeria with formulating strategies to improve the revenue base. More so, the near collapse of the National economy has created serious financing stress for all tiers of government. Despite the numerous sources of revenue available to the various tiers of government as specified in the Nigeria 1999 constitution since the 1970s till now , over 80% of the annual revenue of the three tiers of government come from the petroleum. However, the serious decline in the in the price of oil in recent years has led to a decrease in the fund available for distribution to the states. The need for state and local government to generate adequate revenue from internal sources has therefore become a matter of extreme agency and importance. This need underscores the eagerness on the part of the state and local government and even the federal government to look for new source of revenue or to become aggressive and innovative in the mode of collecting revenue from existing sources.
Development is a sine qua non for modern civilization. In order to carry out development at all nooks and crannies of the society, it is the responsibility of the ogun state government to provide direct development to people to a certain level. Development is associated with funds and much revenue is needed to plan, execute and maintain infrastructures at the state level. The needed revenue generated for such development projects, like construction of accessible roads, building of public schools health care centres, construction of bridge are generated from taxes, royalties, haulages, fines and grants from the states, national and international governments. These funds could either be obtained internally or externally. Thus, the ogun state government cannot embark, execute and possibly carryout the maintenance of these projects without adequate revenues generation.
1.2 STATEMENT OF THE PROBLEM
Over the years, revenue derived from taxes has been very low and no physical development actually took place, hence the impact on the poor is not being felt. Inadequate tax personnel, fraudulent activities of tax collectors and lack of understanding of the importance to pay tax by tax payers are some of the problems of this study. The issue mentioned above will therefore constitute the problem to be addressed by this research work.
Base on this, the following three research question are formulated to guide the study.
- What extent taxation has contributed to the to revenue generation in ogun state?
- What extent taxation has contributed to the steady growth in Gross Domestic Product in Negeria?
iii In what ways can Nigeria revolutionaries her tax system in order to boost revenue generation through this source?
In developing countries, the government has to play an active role in promoting economic growth and development because private initiative and capital are limited. Fiscal policy or budget has become an important instrument in promoting growth and development in such economies. Taxes do not only provide sustainable revenue for government to carry out its activities and provide development to its citizens in the role of stakeholders who are directly contributing to national development, in reciprocation therefore, the Nigerian tax system should be utilised by government as a sustainable plat form for ensuring growth in the Nigeria economy. In this way, wealth and employment opportunities can be created for those who are currently outside the tax net, due to low or no income so that, they in turn also earn income on which taxes are paid and the circle of growth and development in the economy is sustained in this manner (Aimurie, 2012) it is base on the above premise that the study sought to examine the effect of government taxes on Nigeria unemployment using time series data.
1.3 SIGNIFICANCE / JUSTIFICATION OF THE STUDY
The importance of any research study lies in its ability to make significant contribution toward solving identified problems furthermore, it has press for the impact of taxation on ogun state development, implementation of the existing laws and enforcement of the laws as difference to tax avasion.
This study is significant to chief executives of various ministries as well as parastatals, and also, it will be relavant to private sectors and investors because they are subject to tax and tax administration for government officials. It will provides various agencies and individuals especially the ogun state board of internal revenue with the awareness needed for the generation of revenue through the use of taxes. It will also provide ideas and solutions that will attract the attention of governmentin controlling, as well as minimising the deficiencies in the areas of tax collections and payment.
1.4 OBJECTIVES OF STUDY
This study generally seeks to ‘identify the extent to which effective tax policies brought about economic growth and development in ogun state. The specific objective of this study were as follows:
- To examine the impact of taxation on ogun state development.
- To know the basic principles and techniques necessary for revenue generation in ogun state.
- To know corruption practice in ogun state government hinders revenue generation.
- To determine whether the extent of cross sectional allocation of resources through tax revenue will have impact in the level of ogun state development.
- To look at the extent of relationship that exists between the government taxes and unemployment crises in Nigeria.
1.5 SCOPE OF THE STUDY
Tax revenue generated by the federal government of Nigeria and tax revenue generate by some selected states were obtained in order to assess the impact of taxation on revenue generation by the federal government of Nigeria and by some selected states in Nigeria from 2002-2011. It is worthy to note that in this study one state was selected from each of the six geo-political zones in the country north central zone, south southern zone, south western zone, north western zone, south eastern zone, and federal capital territory was chosen to replace one state one state from north eastern zone because the required data which was to be obtained from Taraba state could not be obtained due to the unco-operation attitude of the chairman, board of internal revenue, Jalingo ,Taraba state.
Gross domestic product of Nigeria covering the period 2002-2011 was obtained to evaluate the extent that taxation has contributed to the steady growth in gross domestic product in Nigeria.
1.6 RESEARCH QUESTIONS:
- What are the problems that hinder revenue generation from tax in the state government parastatals performance ?
- What are the basic principles and techniques necessary for revenue gen eration in the state government establishment ?
- What are various taxes from which revenue can be generated ?
- Does corruption practice in state government hinders revenue generation ?
- Is there any significant relationship between tax revenue and economic growth?
1.7 RESEARCH HYPOTHESES
Ho: there is no significant relationship relationship between revenue generation and government parastatals performance
Hi: there is significant relationship between revenue generation and government parastatals performance.
Ho: corruption practice in state government does not hinder revenue generation.
Hi: corruption practice in state government hinder revenue generation.
Ho: there is no significant relationship between tax revenue and economic growth.
Hi: there is significant relationship between tax revenue and economic growth.
1.8 LIMITATIONS TO THE STUDY
No matter how much effect is put into the implementation of this methodology, some imperfections still occurred such as:
- The limited knowledge of the researcher about revenue allocation, more could have been achieved if the practical knowledge was available
- The inherent nature of the questionnaire and the inability of the respondents to understand some variables in the questions.
- The knowledge of the respondents which varies from individual to individual.
1.9 OPERATIONAL DEFINITION
During the course of this research work some terms will be use they are:
- Tax: this a a compulsory contribution to the support of government levied on persons.
- Taxation: may be defined as the imposition of an obligatory by a recipient public authority.
- Equity: this a treatment of similar situated tax payers or that people or that people should pay tax according to their abilities to pay (uremadu 2000; Harvey 1982, Musgrave and Musgrave 1987)
- Certainty: this is a stipulates that the time of payment, the manner of payment and the amount to be paid should be clear to the tax payer as well as to the taxing authorities (Harvey 1982: uremadu 2000). There exist two aspects of certainity in this perspective, that is
- Certainty in amount to pay.
- Certainty in collection (uremadu,2006). In both counts most Nigerian governments at (federal, state and local) fail.
- Convenience: this relates to mode of payment and the timing. This principle stipulates that the time and manner of payments should be convenience to the taxpayer. As a matter of fact, a tax system should be simple, easily assessed, and understood and be collected at minimal costs (uremadu 2000). PAYE tax system is one which is deducted at source, guarantees most of these requirements (Harvey 1982)
- Economy: according to Harvey (1982), the total costs of collection should be small when compared with the tax yield or amount realized from tax. Economical in this respect is seen in terms of costs or cost implicationof the tax system adopted by the taxing body, authority or government in question. Hence, the compliance costs to the government negatively affect national outputof taxes collected (uremadu, 2000)
- Simplicity: this is usually a good tax system should be very simple and not be complex. It should as well be easily administered. Ndulue (2005) is of the view that: “Nigerian tax system does not satisfy this requirement. the Nigerian tax system is very complex, it is not simple and easily understood by both the tax payers and tax tax administrators .The ‘tax’ laws are complex and are not easily understood by tax payers. The tax administration is also complex despite the introduction of the self assessment scheme and the new payment system”
- Development: this is associated with funds and much revenue is needed to plan, executes and maintain infrastructures at the state level. It is also the gradual growth of something so that it becomes more advanced, stronger.
- Revenue: the money that a government receives from taxes or that an organisation receives from its business.
1.10 CASE STUDY/HISTORICAL BACKGROUND.
The ogun state internal revenue service is a state revenue agency that derives its existence from the personal income tax act law of federation 2004 ,which stipulates the establishment of the THE BOARD OF INTERNAL REVENUE by all the states of the federation. The ogun state edict of 1996 established the board to carry out the functions of assessing collecting and accounting for taxes, levies and fees with the additional responsibility of tax policy formation for the state.
In April 2004, the governor of the state gave the board the authority to implement the said edict of 1996, in its entirety. That mandate led to the restructuring of the board in terms of organisational structure and improved revenue generation.
OUR FOCUS
- Efficient service delivery
- Good public image
- Accountability and transparency
- Best tax practice
- Effective taxpayers education/public enlightenment
- Friendly tax environment for voluntary tax compliance
- Adequate checks and balance to block all revenue leakages
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