This research work was carried out in order to find out if actually
there is any impact which taxation has on Nigerian economy and the survey for
this study is based on Enugu state. This research work also became necessary in
order to bring to the proper understanding of the enquirer the best way to
solve such problems connected with tax especially: what is taxable, which
system of tax is acceptable, the rate of tax evasion and tax avoidance, the
assessment of Nigeria tax system and which of the impacts of taxation is the
most essential. The primary function of every government is to make provision
of this enormous work cannot be carried out adequately by the government due to
its limited resources therefore, there is imposition of tax on all citizens,
companies to augment government financial position. Government have always
enacted various tax laws and reformed to stand the taste of time.
TABLE OF CONTENTS
of the problem
of the study
of the Study
of the study
Limitations of the study
of the study
1.10 Definition of Terms
Review of Related Literature
Importance of Taxation
and administration of Nigeria tax system
problems of taxation and its function
Sources of Data
sources of Data
and Sample size Determination
3.4 Method of
3.6 Method of
Presentation and Analysis
for further findings
1.1 BACKGROUND OF THE STUDY
of the major functions of the government especially developing countries such
as Nigeria is the provision of infrastructural services such as electricity,
schools, hospitals, pipe-borne water, good roads and as well as ensure a rise
in per-capital income, poverty alleviation to mention a few.
For these services to be adequately
provided, government should have enough revenue to finance them. The task of
financing these enormous responsibilities is one of the major problems facing
the government. Based on the limited resources of government, there is need to
carry the citizens (governed) along hence the imposition of tax on all taxable
individuals and companies/organizations to augment government financial
position is essential.
this end, government have always enacted various tax laws and reformed existing
ones to stand the taste of time. These laws include: Income Tax Management Act
(ITMA), Companies Income Tax Decree (CITD) etc.
these are aimed at ensuring adherence to tax payment and discouraging tax
evasion and avoidance. For the purpose of this study, the researchers would be
concerned with the impact of taxation on Nigeria economy.
OF THE PROBLEM
first need of any modern government is to generate enough revenue which is
indeed “the breath of its nostrils”. Thus, taxation is by far one the most
significant source of revenue for the government. Nigerians regard payment of
tax as a means through which government raises revenue on herself at the
expense of their sweat.
It is good to note
that no taxation succeeds without the tax payers’ co-operation. Here, we can
ask some thought – provoking questions such as:
makes taxation such a difficult issue?
do people feel cheated when it comes to tax?
government making judicious use of taxpayers’ money?
In view of the
above questions, this study is going to be carried out to offer solutions to
We shall also look
at the following issues and offer recommendations:
Problems affecting the
successful operation of tax system in Nigeria.
How to determine the
Process of tax
administration in Nigeria.
1.3 OBJECTIVES OF
The general objective of the study is to
assess the effect that taxation has towards the development/growth of Nigerian
the specific objective of the study includes:
To examine the extent
government has been using revenue generated by tax.
To determine the reaction
of people towards tax payment.
To find out if tax revenue
is the most effective source of government revenue.
To examine how tax rate
affects the rate of inflation, unemployment and Gross National Product (GNP).
To find out the most
significant effect of taxation.
work is done to find out if tax constitutes the bulk of government revenue and
to erase the erroneous that it is an exploitation by government for their
To what extent has
government been using tax generated revenue?
How do people react
towards tax payment?
Is tax the most effective
source of revenue to the government?
Does tax revenue have any
significant impact on GDP, inflation and unemployment?
Which of the effects of
taxation is the most significant?
OF THE STUDY
One of the most frequently discussed
issues in Nigeria is how to solve the economic hardship in the country and how
to create an industrial base that can guarantee self sustaining economic
development. Also one wonders why a country which is richly endowed with the
necessary human and material resources and which the people pay tax has been
turned a heavily indebted country.
The study will afford us the opportunity
Know the roles taxation
play in the Nigerian economy.
Ascertain how government
has been using tax generated revenue.
The study will also reveal
if there are other better sources of government funding.
1.6 SCOPE OF THE
scope of this study covers critical examinations on the impact of taxation on
Nigerian economy. It will also analyze other related issues such as structure
and administrative machinery of tax in Nigeria and their associated problems.
The essence of this digression is to possibly find out the obstacles if any,
that hinder the effective collection and administration of tax in the country.
The reference period for this study is
2000 – 2011. Inability of the researcher to procure current data forced the
researcher to utilize only available ones. Data for this study were collected
from Board of Internal Revenue and National Bureau of Statistics, Enugu.
OF THE STUDY
It is obvious that a research work like
this cannot be carried out without some hindrances. There are constraints that
limit the work of the researchers amongst which are:
Inadequate time: The time available is very limited, as a result
of this, the researchers are restricted to some places for interviews and
questioning during the collection of data.
Insufficient fund: The fund available to the researchers to carry
out this work is not sufficient. As a result of high economic hardship as well
as high cost of transportation.
There were also scarcity of current textbooks on taxation because
tax laws are constantly changed and so many textbooks were obsolete for the
The inability of some government officials to disclose certain
reliable information which they considered confidential also constitute a
limitation to this study.
Finally, the academic workload on the campus
is one of the limiting factors on this research work. Despite all these
constraints, the researchers were able to carry out a fair and effective study
on this topic.
OF THE STUDY
The researchers in carrying out this
study, will make the following assumptions:
That the data that will be used are true and fair figures actually
collected by the Federal Government each year of assessment.
That the data will be authentic and can be relied on for further research work on the topic.
That the data is going to form the basis of the research work.
To enable the researcher test if there is
any impact taxation has on the Nigeria Economy; some statistical model will be
used based on the responses from oral interview carried out and the
questionnaires distributed and also statistical data generated from the
appropriate sources. The data generated from all these will be used to test the
following hypothetical statements:
The null hypothesis
(Ho): Revenue generated from tax does not make any positive impact on the
economic development of the nation.
hypothesis (H1): Revenue generated from tax has a positive impact on
the economic development of the nation.
The null hypothesis
(Ho): Taxation has no significant impact on GDP, Inflation and Unemployment.
hypothesis (Ho): Taxation has a significant impact on GDP, Inflation and
The null hypothesis
(Ho): That revenue generated from tax is so meager compared to revenue from
other sources as such, government can do without tax.
hypothesis (H1): That is a major source of government revenue and as
such government cannot do without tax.
1.9 DEFINITION OF
compulsory levy by the government on its citizens for the provision of public
goods and services.
The object which is taxed for instance personal income, company profit.
incidence: This is the effect and where the burden of
is finally rested.
Board of Inland Revenue Services): It is an operational arm of Federal Board of
Inland Revenue which is responsible for the Federal Tax Matters.
Income Tax Act) It is a Federal Law operated by the FIRS, which deals with the
taxation of all limited liability companies in Nigeria with the exception of
those engaged in petroleum operations.
Tax Board) Is established under section 85 (2) of Decree of 104 of 1993 to
arbitrate on tax disputes between one state tax authority and another.
Added Tax) is a multistage tax levied and collected on transactions at all
stages of sales and distribution.
Gain Tax Act) is an act that stipulates that all capital gains arising on
disposal of assets of individuals, partnership and limited companies should be
PPTA: (Petroleum Profit Tax Act) is an act that
regulates the petroleum profit tax and also specifies how profit from petroleum
will be taxed.
Withholding Tax: This is tax charged on investment
income namely: rents, interest, royalties and dividends. Presently it is
charged as the tax offset.
Progressive Tax: This is a tax incidence that increases
as the size of income increases.
Regressive Tax: A tax is regressive when its tax rate
decreases as the income increases.
Excise Duties: They
are taxes levied on some goods manufactured within a country.
includes all taxable persons be it individual or corporate bodies.