TABLE OF CONTENT
CONTENT
Title page……………………………………………………… ……. ii
Certification……………………………………………………………
iii
Dedication……………………………………………………………. iv
Acknowledgement………………………………………………….. v
Table of
content…………………………………………………….. vi
Abstract………………………………………………………………
xii
CHAPTER
ONE
INTRODUCTION
1.1
Background
of the study………………………………….. 1
1.2
Statement
of research problem.…………………………. 3
1.3
Objective
of the study………………………………………. 3
1.4
Statement
of hypothesis……………………………………. 4
1.5
Significance
of the study ………………………………… .. 4
1.6
Scope
of the study …………………………………………. 5
1.7
Limitation
of the study……………………………………. 5
1.8
Historical
background of Union Bank of Nigeria Plc… 6
1.9
Definition
of terms……………………………………………. 7
References
CHAPTER
TWO
LITERATURE
REVIEW
2.1
Introduction……………………………………………………9
2.2
Sectoral
emphasis on risk …………………………………11
2.3
Nature
of Nigerian sectoral risk……………………………12
2.4 Risk consolidation ……………………………………………39
2.5 Instituting a comprehensive
liquidity………………………45
2.6 Relative importance of
capital………………………………..47
2.7 Making consistent risk for
management ………………….48
2.8 Bank supervision………………………………………………..54
Reference………………………………………………………………55
CHAPTER
THREE
RESEARCH
METHODOLOGY
3.1 Introduction……………………………………………………57
3.2
Research
design……………………………………………….57
3.3 Population of the study ……………………………………….57
3.4 Research sample and sampling technique………………..57
3.5 Method data collection …………………….………………….58
3.6 Research instrument ………………………………………….59
3.7 Data collection analysis……………………………………….59
3.8 Decision rule……………………………………………………60
Reference………………………………………………………………61
CHAPTER
FOUR
DATA
PRESENTATION AND ANALYSIS
4.1
Questionnaires
analysis………………………………………62
4.2 Analysis of demography
characteristics of respondents…………………………………………………….63
4.3
Analysis
of research questions……………………..……...65
4.4
Test
of hypothesis ……………………………………………76
CHAPTER
FIVE
SUMMARY
OF FINDINGS RECOMMENDATION AND CONCLUSION
5.1
Summary
of Findings………………………………………82
5.2
Recommendation……………………………………………82
5.3
Conclusion……………………………………………………84
Bibliography………………………………………………………..85
Appendix……………………………………………………………..88
Abstract
Taxation
and its product, Tax have been very important vehicles for economic policies of
many countries of the world. For a very long time, tax has been a major source
of revenue for various levels of governments. For instance, in Nigeria, the
laws of the land stipulate the categories of taxes that are collectable by each
of the three tiers of government. This is with a view to enhancing basic
economic growth and development at all levels of government. However, the
manner in which taxes are administered on corporations in Nigeria is a major
concern to the majority of Nigerians. Traditional schools
of thought advocated
the theory of
low income tax
rates’ influencing economic development, whereas modern schools
of thought propagated
the theory of
higher income tax
rates producing greater economic growth, especially for developed
nations. In order to justify these thoughts, an attempt was made taking Nigeria
as a case study to pin point the effect of low and high income tax rates on
economic growth of developing nations. Secondary data sources were utilized in
this study. In this study various parameters were taken into account including
income tax rates,
income tax revenue,
total revenue and GDP of
the country in the
nominal and real value of the money. It was located that
high income tax rates negatively affect the economic growth of Nigeria. The
study found that government’s policies on income tax affect the revenue of
corporations in the country. It was concluded that tax regulation is very
relevant in order for government to be able to act justly on the various
sectors of the economy.
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
According
to Black Law Dictionary, tax is a rateable portion of the produce of the
property and labor of the individual citizens, taken by the nation, in the
exercise of its sovereign rights, for the support of government, for the
administration of the laws, and as the means for continuing in operation the various
legitimate functions of the state. The Institute of Chartered Accountants of
Nigeria (2006) and the Chartered Institute of Taxation of Nigeria (2002) view
tax as an enforced contribution of money, enacted pursuant to legislative
authority. If there is no valid statute by which it is imposed; a charge is not
tax. Tax is assessed in accordance with some reasonable rule of apportionment
on persons or property within tax jurisdiction. Sanni (2007:5) advocated tax an
instrument of social engineering which can be used to stimulate general or
special economic growth.
The
Company Income Tax amongst countries of the world varies, especially in the
developing countries. Gordon and Wei Li (2008) notes that to some extent, these
differences may simply reflect differences in social preferences for public vs.
private goods. Countries differ
substantially, for example, in the amount spent on the military, on
infrastructure investments, on publicly provided education, or on social
insurance. Higher spending levels require
higher revenue, leading to higher tax rates.
To
some extent, these differences may also reflect differences in the political
support for redistribution. More
redistribution naturally requires higher tax rates on the rich in order to
finance lower tax rates or transfers to the poor. Governments with a stronger preference for
redistribution would rely more on progressive personal income taxes, whereas
other governments may choose less progressive personal taxes and make more use
of proportional taxes such as a value-added tax or a payroll tax.
Other
differences, though, are more puzzling based on conventional models of optimal
tax structure. Regardless of a country’s
tastes for public vs. private goods or for more or less redistribution, Diamond
and Mirrlees [2001] forecast that the optimal tax structure will preserve
production efficiency under plausible assumptions. (Coelho, Isaias, and Graham, 2001). This rule out tariffs in any country that
lacks market power in international markets.
It rules out differential taxes on goods produced domestically in one
industry vs. another. Atkinson and
Stiglitz (1996) go further and argue that as long as a country can flexibly
choose the rate structure under the personal income tax, then it has no reason
to choose differential tax rates on the consumption of different goods. Not
only does this rule out differential excise tax rates by good but it also rules
out taxes on income from savings, which implicitly impose higher tax rates on
goods consumed further into the future.
Regarding
possible revenue from seignorage, Friedman (1999) argued that a country would
optimally choose a deflation rate sufficient to generate a nominal interest
rate close to zero, so as to avoid any real costs of liquidity. While these
forecasts of no tariffs, no taxes on capital income, uniform taxes on
consumption, and deflation, are not consistent with any existing tax
structures, they are not sharply inconsistent with observed tax policies among
the most developed countries. With GATT
and now the WTO, tariffs are indeed very low among developed countries.
At
this point, nominal interest rates are very low among most developed countries,
even if deflation is rare. While capital
income is still subject to tax in various ways, Gordon, Kalambokidis, and
Slemrod [2004] report evidence that the U.S. collects little or no net revenue
from taxes on capital income, and imposes relatively low distortions on
investment and savings. While even the
richest countries maintain some important excise taxes, e.g. on gasoline,
cigarettes, and liquor, an argument can easily be made that these specific
taxes help internalize various consumption externalities.
Tax
policies in developing countries are much more puzzling, however, in light of these
forecasts from the optimal tax models.
These differences are laid out in more detail in section I. The
corporate income tax is a much more important source of tax revenue among
developing vs. developed countries, as are tariffs and seignorage. Poorer countries collect much less revenue
from personal income taxes, yet it seems puzzling that distributional
preferences should systematically be so much weaker among poorer countries
(Bird, 1999). On net, poorer countries collect on average only two-thirds or
less of the amount of tax revenue that richer countries do, as a fraction of
GDP. Yet, given the severe needs for
investments in say infrastructure and education in these countries, is it
plausible that the lack of revenue simply represents differing tastes for
public vs. private goods in poor vs. rich countries?
One
natural response to these differences between forecasted policies and those
observed in developing countries is to conclude that the policies in developing
countries should be changed. Newbery and
Stern [1987], for example, set out the standard forecasts from optimal tax
models as an ideal tax structure that developing countries should emulate. This is also the basis for recommendations,
e.g. from the World Bank and IMF, that developing countries should reduce their
tariff and inflation rates, and rely more on value-added taxes with a uniform
rate across industries, rather than on excise taxes or corporate income taxes
(Campillo, Marta and Jeffrey, 1997).
In
this study, we explore whether the inconsistency between the forecasts from
optimal tax models and the data reflects instead a problem with the
models. The starting point for our
approach is the observation of greater tax enforcement problems in poorer
countries. According to the estimates
reported in Schneider and Enste [2002], for example, the informal economy on
average is only about 15% of GDP among OECD countries, and thus small enough
that it should not be a driving factor in the choice of tax structure. However, among developing countries, the
median size of the informal economy they report is 37% of GDP, ranging from 13%
in Hong Kong and Singapore to 71% in Thailand and 76% in Nigeria.
With
such a large informal sector, any effects of the tax structure or of government
policies more generally, on the size of the informal sector can be of
first-order importance in the choice of these policies. Yet at this point, we know relatively little
about how policies affect the size of the informal sector, or why the informal
sector is so much larger in developing than in developed economies (Diamond,
Peter and James Mirrlees, 2001). It is in this respect that this present study
shall examine the impact of company income tax revenue on developing economies
using Nigeria as a reference point.