Taxation as a Functional Method of Revenue Collection by the Government for Development Enhancement in Nigeria

ABSTRACT

          The study was carried out to examined taxation as a functional method of revenue collection by the government for development and enhancement in Nigeria. Three (3) research questions guided the study. A review of related literature was done based on the research questions raised and variables in the study. The population of the study comprised of 149,603 tax pares in Asaba, Delta State. The sample of the study was one hundred (100) tax payers in Asaba, Delta State drawn through simple random sampling technique to serve as the representative of the entire population. The instrument used for data collection is a structured questionnaire, titled: “Taxation as a Functional Method of Revenue Collection by the Government for Development Enhancement in Nigeria.” To ensure the validity of the instrument, copies of the instrument was sent to experts in Business Education and Educational Measurement and Evaluation Departments of Federal College of Education (T) Asaba for face and content validation. The corrections and suggestions made by the experts reflected on the final copies of the instrument. The validated questionnaire was subjected to reliability test. Ten copies of the validated questionnaire were administered on ten (10) Onitsha North Local Government Area of Anambra State using split-half method. Data collected were analyze using Pearson Moment Correlation Coefficient to ascertain the level of correlation which yielded a correlation coefficient of 0.67, indicating that the instrument is reliable. One hundred (100) copies of the validated instrument were administered to the tax payers by the researcher with the help of 2 research assistants and 93 were retrieved and analyzed. The method used in analyzing the data collected is mean statistics. The bench mark was fixed at 2.50; therefore, items with mean value of 2.50 and above were considered as agreed while items with mean value less than 2.50 were considered as disagreed. Findings of the study revealed that taxation has to a low extent contributed to revenue generation for development enhancement, revenues generated through taxation used for development and enhancement and there is low level of tax compliance among tax payers for development enhancement in Nigeria. It was recommended among others that government should come up with different taxation strategies to improve revenue generation for development and enhancement in Nigeria.

CHAPTER ONE

INTRODUCTION

Background to the Study

The survival of any nation depends on the amount of resources that are available for the provision of security, basic infrastructure and to meet her recurrent and capital expenditure.

Taxation seems to be a key to national development because it provides the funding for government expenditure on programmes aimed at aiding growth and development across all sectors This is why Taha (2020), stated that regardless of a country’s size, tax has become a dominant factor in a country’s endogenous growth, either from direct or indirect sources. Taxation is a powerful tool that helps to enhance socio-economic development of any nation, be it developed or developing. (Ibadin et al., 2017).  Abiola et al (2021), maintained that the function of any reasonable government is to stabilize economy, reallocate income and provide services for the good of the people. For government to meet up with the ever-increasing developmental programmes, it needs to be aggressive in revenue collection. Revenue, if well collected has a lot of benefits for both government and it’s citizens.

Allan (2019), opined that an effective revenue collection operation comes through various sources such as improved flow of revenue, improved management of cash, predicting cash capacity, robust interest earnings, non-preferential treatment on taxpayers, efficient budgetary control mechanism, project implementation and completion, among others. Allan (2019) further maintained that there is complexity of revenue collection function due to tax assessment procedures, revenue collection processes and litigation arising from delayed revenues. In order for the government revenue to meet up with its expenditure, its revenue may be collected from various sources such as federal exercise taxes, corporate income tax, individual income tax, borrowing, interest earnings, custom duties, fees and charges. However, it is one thing to collect revenue, it is another to be able to manage and administer it very well.

There appears to be a consensus that Nigerian economy is overly dependent on revenue from petroleum and petroleum products, with oil accounting for over seventy percent of the total federally collected revenue. Premised on the above assertion, and in the face of the dwindling global price of crude oil, it becomes necessary for the Nigerian government to seek and maintain an alternative and reliable source of revenue. To this end, tax revenue has become a vital alternative source of government revenue. According to Eiya (2019), tax is a compulsory levy imposed on income, profit and capital gains of the individual, companies or other legal entities by the government to raise revenue. Tax is a compulsory transfer or payment from private individuals, institutions or groups to the government (Anyanwu, 2021). The main purpose of tax is to raise revenue to meet government expenditures, to redistribute wealth and the management of a nation’s economy (Bhartia, 2019 & Ola, 2021). When a taxpayer pays tax with the consciousness of paying tax, it is referred to as direct tax. The primary motive for taxation is to finance government expenditure and to redistribute effectively income and wealth which in turn translates into economic growth and development of a country (Bhartia, 2019 & Worlu & Emeet al, 2018). In the opinion of Romer and Romer (2010), tax policies are implemented to finance a deficit budget, promote long-run growth rate, pay for incurred government expenditures and finally counter other influences in the economy. Whether this revenue is enough to finance the developmental priorities of the State will depend on the needs of the State and how well these resources are efficiently utilised. Under the current Nigerian laws, taxes are collected by the three tiers of government: the Federal, State and Local government with each having its jurisdiction clearly spelt out in the Taxes and Levies (Approved list for collection) Act No 2, 2015. Tax provides a stable flow of revenue to finance economic growth and development priorities, such as strengthening the infrastructures and other numerous policy areas.

Taxation can be defined as the system of imposing a  compulsory levy on all income, goods, services and properties of individuals, partnership, trustees, executorships and companies by the government (Yunusa, 2020). Income tax is one of the major sources of revenue to all government. In Nigeria, it is a factor to be reckoned within the Federal Government’s budget the taxes so collected come back to the taxpayer in form of services. This has over the years encouraged or discouraged some activities in the private sector; though, this depends on whether the policy of the government is towards discouraging or encouraging such companies (Ola, 2021). Taxation is recognized as a very important tool for national development and growth in most societies. It is viewed as a major vehicle for long term development of infrastructures of the state. This is why Taha (2018), stated that regardless of a country’s size, tax has become a dominant factor in country’s endogenous growth, either from direct or indirect sources. Taxation is a powerful tool that helps to enhance socio-economic development of any nation be it developed or developing. (Ibadin & Oladipupo, 2017).

Abiola and Asiweh (2021), maintained that the function of any reasonable government is to stabilize economy, reallocate income and provide services for the good of the people. For government to meet up with the ever-increasing developmental programmes, it needs to be aggressive in revenue collection. Revenue, if well collected has a lot of benefits for both government and its citizens.

Conversely, tax revenue is the money collected by government from various sources which includes levies, pay as you earn, rents, property transfer, social security contributions. However, no matter how huge revenues are collected from various sources, without effective and efficient tax administration, the whole system may become a mirage. When revenues are collected as well as effectively administered, there may be good performance.

In the realization of government responsibility to her citizenry, funds are seen to be inadequate, that is why Odusola (2018), stated that huge amount of revenue accruable from taxes appeared not sufficient compared to its expenditure over the years. Odusola further stated that the Nigeria economy is largely dependent on revenue from oil over the years. The revenue generated from this source is subjected to demand and supply from international communities from market fluctuations, which has made developments impossible. Appah (2018), opined that the socio-economic development of a nation depends on quantum of money she has to execute its numerous infrastructural projects. In the same vein Enahoro and Olabisi (2019), maintained that success of government in its developmental drive is dependent on its revenues derivable from efficient and effective tax collection.  The responsibility of every government is to avoid a collapse of its economy by providing a conducive atmosphere where all micro and macroeconomic variables thrive and this responsibility can only be achieved with a strong revenue base, and a requisite human capital (Wole, 2018).

A decline in price of oil in recent years has led to a decrease in the funds available for distribution to the Federal Government and to the 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 (Aimurie, 2017). Aguolu (2019), 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.

Hence there is a need to examine taxation as a functional method of revenue collection by the government for development and enhancement in Nigeria.

Statement of the Problem

Taxation has been a veritable factor in the enhancement of development in Nigeria. Its role as a means of revenue collection for developmental projects and provision of social amenities cannot be overemphasized. This is because the taxes collected by Federal, state or Local Government are meant to be used in providing dividends of democracy for the people.

There is no gain saying that revenue generated from oil has been falling and uncertain in recent time due to fluctuations in the global oil price. The urgent need therefore arises to focus on tax revenue since it constitutes the largest component of non-oil government earnings. To finance the ever-increasing infrastructural deficit of the country government needs to generate enough revenue from tax, in addition to the revenue from other sources. Hence, in an attempt to boost tax revenue, the government has embarked on some reforms in the past, which includes: the introduction of the Value Added Tax (VAT) and the registering of corporation and entrepreneurs under the Federal Inland Revenue Service (FIRS) among others. These efforts have in the past yielded little or no improvement in the tax revenue that accrues to government. Consequently, the tax revenue generated over the years has remained grossly insufficient for meeting the increasing infrastructural deficit of the economy and for enhancing the growth potentials.

The Federal government recently improved on the tax policy and administration in Nigeria to increase actual tax revenue when it adopted the electronic tax system which led to the introduction of Taxpayers Identification Number (TIN) to put a check on both the tax payers and the officials. Focus was also shifted to generating more revenue from indirect tax by charging VAT on some transactions that were VAT free and increasing the VAT charged on others. With these efforts, recent tax statistics by FIRS (2019) show that the actual revenue generated from tax has increased above the targeted annually from year 2000 till date. However, the main question is whether the state of infrastructure and economic growth can justify such increase.

Despite the increase in tax revenue reported in recent times and the government expenditure on infrastructure reported yearly, the physical state of Nigeria’s infrastructure has been very pathetic and this has continued to pose a great concern to all stakeholders in the country. For instance, power supply has been epileptic, roads are bad and have continued to worsen, the structure of public schools and hospitals are very discouraging and there is poor drainage system across the country to mention a few. This condition discourages economic growth and consequently makes the development objectives of the country far from a reality. Hence, the main concern is whether the increase in tax revenue has really translated to infrastructural development and facilitated economic growth.

Given this background, it has become imperative to examine taxation as a functional method of revenue collection by the government for development enhancement in Nigeria.

Purpose of the Study

The main purpose of this study is to examine taxation as a functional method of revenue collection by the government for development and enhancement in Nigeria. Specifically, the study seeks to:

1. Examine the extent to which taxation has contributed to revenue generation for development and enhancement in Nigeria.
2. Investigate the extent to which revenues generated through taxation are used for development and enhancement in Nigeria.
3. Determine the extent of tax compliance among tax payers for development and enhancement in Nigeria.

Research Questions

The following research questions guided the study:

1. To what extent has taxation contributed to revenue generation for development and enhancement in Nigeria?
2. To what extent has revenues generated through taxation used for development and enhancement in Nigeria?
3. What is the extent of tax compliance among tax payers for development enhancement in Nigeria?

Significance of the Study

The study would be of benefit to students, tax authorities, government, researcher and the field of Business Education.

For students, the study would help them identify the different kind of tax collected as revenue for development enhancement in Nigeria. This would prepare their minds towards payment of tax as they graduate and gain employment of start their own businesses.

For tax authorities, the findings of the study would enable them identify the factors that inhibit effective taxation as a functional revenue collection for development and enhancement in Nigeria. This would motivate them to take necessary measures in ensuring that taxes are well collected for developmental projects and any tax violator is brought to book.

For government, the study would be a wake-up call because it will identify the lapses recorded in tax collection and the challenges faced by tax collectors in the country. This would enable them to come up with better tax collection methods to enhance the performance of tax authorities for effective tax collection. When that is done, the taxes collected as revenue would be effectively utilized for development enhancement in the country.

Finally, for researchers, the study would be a reference to those who may wish to carry out a related study. The study would also add to the literature in the field of Business Education.

Limitations of the Study

This study was limited to the taxation as a functional method of revenue collection by the government for development enhancement in Nigeria. In the course of carrying out this study the researcher was faced with challenges such as that of finance and transportation to administer the questionnaire. The time frame to complete the research work was not enough to get all the required information from the respondents.

Scope of the Study

This study focused on taxation as a functional method of revenue collection by the government for development and enhancement in Nigeria. With contribution to revenue generation, effective utilization for development and enhancement and level of compliance as variables of interest. The respondents of the study are tax authorities in Asaba, Delta State.

Pages:  55

Category: Project

Format:  Word & PDF               

Chapters: 1-5                                          

Source: Imsuinfo                            

Material contains Table of Content, Abstract and References.