After the economic depression of the 1930’s the concept of economy.
Many nations began to implement policy measures aimed at both raising
revenue for the government and encouraging investment via investment tax
In Nigeria, the concept of taxation, especially as it relates to tax
incentive had been an important topic for discussion both in the
government circle and in the private sector. A review of the annual
budgets of the federal Government reveal that the government usually
give tax concessions and incentives to firms/ corporations in the
following lines of business: manufacturing, agriculture and the mining
sector. Over the years, successive administrations in the country had
continued to reduce rate of effective taxes. In 1996 for instance, the
highest rate of income tax was further reduced to 25% from 30% because
increasing revenue from consumption taxation would compensate the
military regime them felt that the loss in revenue as a result of the
income tax cut. Would be compensated by increasing revenue from
The purpose of this project/ research, therefore is to ascertain the
effects of tax incentives to the development of manufacturing industries
in Nigeria by using Emenite (NIG) Limited as a case study. The project/
research consists of five chapters.
While chapter one served as the introductory part of the project/
research, chapter two dealt with the literature review where the various
forms of tax incentives in Nigeria and the school of thoughts on the
subject matter were discussed. Chapter three discussions the methodology
for the research and chapter four dealt with data analysis. Finally in
chapter five, the researchers discussed the findings of the research,
summary, conclusion and recommendations.
- BACKGROUND OF THE STUDY:
The concept of taxation sharp momentum after the great would of
economic depression of 1930’s. After the depression aimed at raising
enough capital to provide for social overhead expenses and at the same
time embarking on several ways to lift the standard of living of their
In Nigeria, there are many forms of taxations in practice dating back
to the days of our great grand fathers, that is before the coming of
our colonial masters, whereby communities tax themselves through labour
to execute community projects or to help the community suppress external
attack or aggression. Therefore, taxation can be referred to as
machinery by which communities or groups are made to contribute part of
their incomes in some agreed amount and method for the purpose of
administering the society. This accounts for the reasons why taxation is
often referred as civic responsibility.
The present tax laws in Nigeria was borne out of the Raisman’s fiscal
commission of inquiry of 1957. Before them, we only had what was called
the income tax colonies with similar providing section 70, subsection 1
of the Nigeria constitution, order in council of 1960 which conferred
an exchange power upon parliament to make laws for the whole Nigeria or
any part of the country with respect to personal income tax. In the
exercise of these powers the federal government enacted the income tax
management act of 1961 (ITMA) and because Lagos territory was being
administrated as a region it enacted the personal income tax (Logos).
On April 1961, the income tax management act came into operation and
all the existing laws at the regional level had to be amended to bring
them into conformity with what the Raisman fiscal commission recommend
in 1958, the introduction of uniform basic principle of taxing income of
persons other than limited liability companies throughout the country.
Oliver Wendell Homlmes, United States Supreme Court judge said, “Taxes
are the price we pay for a civilized society”.
Nigeria and been an encouragement by the government to attract
individuals and corporate bodies to invest in the country. The idea of
the research was to assess how the incentives had helped industries grow
and how companies had availed themselves of these opportunities.
- STATEMENT OF PROBLEMS
The study entitled effects of tax incentive in the development of
manufacturing industries attempt to determine the way by which some
organization or firm especially Emenite Ltd. Emene has utilized huge
amounts of money. Nigerian government sacrifice every year by way of tax
incentive towards the development of manufacturing industries.
Some of the problems, which they encounter, are as follows.
- Liability of the tax incentives scheme to redirect the
investment patterns of individuals and corporate bodies towards the
development of manufacturing industries.
- The level in efficiency in administering tax incentives scheme has
made it impossible using it to attract foreign investors to the
- Liability to use tax incentives in generating employment in manufacturing industries.
- Most manufacturing industries are unable to apply tax incentives in a flexible manner.
- PURPOSE / OBJECTIVE OF THE STUDY
The purpose this study is as follows:
- To ascertain the extent tax incentives have redirect investment
of individuals and corporate bodies towards the development of
- To establish how inefficiency in administering tax incentive scheme
has made it impossible using it to attract foreign investors to
- To ascertain the extent by which most manufacturing industries are unable to apply tax incentive in a flexible manner.
- RESEARCH QUESTIONS
The research questions of this study are as follows:
- To what extent does tax incentives redirects the investment
pattern of individuals and corporate bodies towards the development of
- To what extent does inefficiency in administering tax incentive scheme distorts foreign investors to manufacturing industries?
- To what extents does tax incentive help in employment generation?
- To what extent does most manufacturing industries were unable apply the tax incentives in a flexible manner.
- SIGNIFICANCE OF THE STUDY.
This work will be very useful to the government. It will enable the
government to know the extent manufacturing industries have been
responding to the available tax incentives.
Government, through this research could evaluate the
profitability of the tax incentives that is whether the revenue in other
words, it will enable government to know whether tax investment
patterns of individuals and corporate bodies towards the development of
This study will also enable government to compare the identify those that are profitable to the Nigerian economy at large.
This study will go a long way to sensitize companies and individuals
on the existing tax incentives available to the manufacturing industry
and their companies to make qualitative investment and tax decision
modeled to elevate the organization’s growth patterns.
- SCOPE / DELIMITATION OF THE STUDY
For the scope if this study, the researcher will restrict himself to
the corporation tax incentive available to the manufacturing company in
Nigeria. With particular reference to Emenite (NIG) Ltd. As a case
- DEFINITION OF TERMS
Incentive: - According to advanced learner’s Dictionary, the word incentive is “that which incites or rouses a person action”
Therefore, tax incentive, encompasses all the measures adopted by the
government to motivate tax payer or manufacturing companies to respond
to their tax obligations. This may includes adjustments to tax policy
aimed at lessening the effects on an industry.
The taxation of consumption rather than income may, for instance be
considered as an incentive by people who believe that tax payers find it
more difficult to bear their income tax burden or direct taxes exert a
harsher incidence on the tax base. An incentive is created when the
government deliberately manipulates the tax system to the advantage of a
potential investor or corporate body by adopting favorable tax
Manufacture: According to the award illustrated dictionary (COZA),
manufacture is defined as making of articles by physical labour or
machinery especially on large scale; branch of such an industry.
Industry: the same dictionary defined “industry” as a branch of trade
or manufacture, especially one employing much labour and capital
infect, manufacturing in general.