The Impact Of Taxation On The Economic Growth Of Nigeria From 2000-2013

ABSTRACT

The study was aimed at finding out the impact of taxation on economic growth in Nigeria, with reference to domestic product of Nigeria (GDP). Attempt is also made in the study (through the means of secondary data) at highlighting the concept and nature of taxation, objectives of taxation, features in Nigerian tax system, taxation as a tool for wealth creation and employment, classification of taxes, Nigeria’s major taxes and other issues that relate to taxation. In achieving the objective of the study, the researcher adopted also primary sources of data to present and analyze the information for the study spanning through 2000-2013. The testing of the hypotheses of the study was done using regression analysis computed with the aid of SPSS version 17.0. The research discovered among others that, taxation has a significant contribution to revenue generation and taxation has a significant contribution on Gross Domestic Product (GDP). The research recommends among others that Well Equipped Data Base (WEDB) on all tax payers should be established by the Federal, State and Local Governments with the aim of identifying all possible sources of income of tax payers for tax purpose, the tax collection processes must be free from corruption. In addition, the Federal Government, States and Local Governments should urgently fully modernize and automate all its tax system, improve tax payers’ convenience in the assessment and payment process whilst at the same time entrenching effective and modern human resources management practice in the tax authorities.

CHAPTER ONE

INTRODUCTION

1.1     Background of Study

The serious decline in price of oil in recent years has led to a decrease in the funds available for distribution to the Federal and State Governments. The need for state and local governments to generate adequate revenue from internal sources has therefore become a matter of extreme urgency and importance. This need underscores the eagerness on the part of state and local governments and even the federal government to look for new sources of revenue or to become aggressive and innovative in the mode of collecting revenue from existing sources. Aguolu (2004), states that though taxation may not be the most important source of revenue to the government in terms of the magnitude of revenue derivable from taxation, however, taxation is the most important source of revenue to the government, from the point of view of certainty, and consistency of taxation. Aguolu (2004) further mentioned that taxation is the most important source of revenue to the government. Owing to the inherent power of the government to impose taxes, the government is assured at all times of its tax revenue no matter the circumstances.

Despite her strong fundamentals, oil rich Nigeria has been hobbled by inadequate power supply, poor education, lack of infrastructure delay in the passage of legislative reforms, an inefficient property regulation system, poor electoral processes, restrictive trade policies, militancy, insecurity, an inconsistent regulatory environment, a slow and ineffective judicial system, pervasive corruption, the poor becoming poorer as the economic diversification and strong growth have not translated into a significant decline in poverty levels of the country. (CBN Statistical Bulletin, 2014). The constant reliance on the oil revenue for political, economic, and social development for the provision of infrastructure in the country has become worrisome as the price of crude oil continues to decline below the budget benchmark. This concern prompted this study to investigate the impact of taxation another source of revenue for the economic development of Nigeria.

According to Ogbonna and Ebimobowei (2012) “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”. They further stated that a well-structured tax system would boost the generation of the income for a meaningful development of such country. This Ogbonna and Ebimobowei view are the same as the Biblical account, where Jesus paid tax to the government of Caesar the Roman Emperor. There were many taxes needed from the provinces to administrate the Roman Empire these taxes paid for a good system of good roads, law and order, security, religious freedom, a certain amount of self-government and other benefits. The provisions of these basic amenities depend on the amount of revenue being generated. Kiabel and Nwokah (2009) stated that rise in the cost of running government coupled with the incessant dwindling revenue had left all tiers of government in Nigeria with formulating strategies to improve the base of income. One of such strategies is taxation. According to PricewaterhouseCoopers, Nigeria has made some improvement to the tax system. What then is taxation? Oxford Dictionary of Accounting (1995) defined taxation as a levy on an individual or corporate body by the central or local government to finance the expenditure of that government and also as a means of implementing its fiscal policy. Thus the government can transfer resources through taxation from private consumption to public investment.

This study focuses on identifying the means taxation has been utilized to promote fiscal redistribution of income, identify problems that militate against the use of taxation as revenue generation in Imo State and in some selected states in Nigeria and to identify the use of taxation to promote economic growth and development in Nigeria and in some selected states in Nigeria.

Lastly, the study is aimed at making recommendations that will assist to increase the revenue generation through taxation in the FCT and in some selected states in Nigeria.

1.1     Statement of the Problem

Presently, according to Okonjo-Iweala, the Minister of Finance and Coordinator of Nigerian Economy, said that Nigeria faces a massive infrastructural deficit, citing infrastructure deficit as a hindrance that is holding back economic development by at least 2 percent per annum according to a recent world bank study. The minister further stated “that about US$14.2  billion per year is required to bridge the infrastructural gap, with about $10.5 billion needed for national infrastructure alone, adding that amount spending is only $5.9 Billion (The Financial Times: 2014). Some countries have influenced their economic development through revenue from the tax. For example, Canada, United States, Netherland, United Kingdom. They desire substantial income from Company Income Tax, Value Added Tax, Import Duties and had used same to create prosperity (Oluba: 2008)

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 issues mentioned above will therefore constitute the problem to be addressed by this research work.

1.2     Objective of the Study

The objective of this study is to investigate the impact of taxation on the economic growth of Nigeria. The specific objectives are stated follows;

1. To ascertain the contributions of taxation in the revenue generation of Nigeria
2. To examine the contributions of taxation in the growth of Gross Domestic Product (GDP) in Nigeria.

• To determine the ways Nigeria can revolutionize her tax system to boos revenue generation.

1.3     Research Questions

Based on this, the following three research questions are formulated to guide the study:

• What extent has taxation contributed to revenue generation in Nigeria?
• What extent has taxation contributed to the steady growth in Gross Domestic Product in Nigeria?
• In what ways can Nigeria revolutionalised her tax system in order to boost revenue generation through this source?

1.4     Hypotheses of the Study

The following hypotheses were designed for the study:

H₀₁: Taxation has not contributed significantly on revenue generation in Nigeria.

H₀₂: Taxation has not contributed significantly to the steady growth in Gross Domestic Product in Nigeria.

1.5     Scope of the Study

Tax revenue generated by the Federal Government of Nigeria and tax revenue generated 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. Federal Capital Territory was chosen to replace 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- operative 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.

Pages:  71

Category: Project

Format:  Word & PDF              

Chapters: 1-5                                 

Material contains Table of Content, Abstract and References.