Tax as a Source of Revenue to the Federal Government of Nigeria
Chapter One
Objective of the study
The objectives of the study are;
- To determine the extent taxation has contributed to revenue generation in Nigeria
- To examine the extent taxation has contributed to the steady growth in Gross Domestic Product in Nigeria
- To examine how Nigeria can revolutionalise her tax system in order to boost revenue generation through this source.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Concept and Nature of Taxation
Taxation is seen as a burden which every citizen must bear to sustain his or her government because the government has certain functions to perform for the benefits of those it governs. A précised definition of taxation by Farayola (1987) is that taxation is one of the sources of income for government, such income as used to finance or run public utilities and perform other social responsibilities. Ochiogu (1994) defines tax as a levy imposed by the government against the income, profit or wealth of the individuals and corporate organizations. According to Adams (2001) taxation is the most important source of revenue for modern governments, typically accounting for ninety percent or more of their income. Taxation is seen by Aguolu (2004), as a compulsory levy by the government through its agencies on the income, consumption and capital of its subjects. These levies are made on personal income, such as salaries, business profits, interests, dividends, discounts and royalties. It is also levied against company’s profits petroleum profits, capital gains and capital transfer. Whereas, Ojo (2008) stresses that, taxation is a concept and the science of imposing tax on citizens. According to him, tax is itself a compulsory levy which is required to be paid by every citizen. It is generally considered as a civic duty. The imposition of taxation is expected to yield income which should be utilized in the provision of amenities, both social and security and creates conditions for the economic well being of the society. Okon (1997) states that income tax can be regarded as a tool of fiscal policy used by government all over the world to influence positively or negatively particular type of economic activities in order to achieve desired objectives. The primary economic goals of developing countries are to increase the rate of economic growth and hence per capita income, which leads to a higher standard of living. Progressive tax rate can be employed to achieve equitable distribution of resources. Government can also increase or decrease the rates of tax, increase or decrease the rate of capital allowances (given in lieu of depreciation) to encourage or discourage certain industries (e.g. in the area of agriculture, manufacturing or construction) or may give tax holidays to pioneer companies. Income tax therefore can be used as an agent of social change if employed as a creative force in economic planning and development.
Theoretical Framework
Taxation is a product of theorists. The contributions of some of the theorists are as follows:- The first theory that this study looks at is Prof. Arthur Laffer theory on taxation, popularly known as the “Laffer Curve.” It is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. This theory is demonstrated with a curve (i.e Laffer Curve which is constructed by through experiment).
It considered the amount of tax revenue raised at the extreme tax rates of 0% and 100%. The theory concludes that a 100% tax rate raises no revenue in the same way that a 0% tax rate raises no revenue. This is because at 100% rate, there is no longer incentive for a rational tax payer to earn any income, thus, the revenue raised will be 100% of nothing. It therefore follows that there must exist at least one rate in between where tax revenue would be a maximum. Laffer attributes the concept to Ibn Khaldun and Keynes J.M. One potential result of this theory is that increasing tax rate beyond a certain point will become counter productive for raising further tax revenue because of diminishing returns (Laffer, 2004). The second theory that helps to shape taxation is Ibn Khaldrun theory on taxation. This theory was explained in term of two different effects that is the arithmetic effect and the economic effect which the tax rates have on revenues. The two effects have opposite results on revenue in case the rates are increased or decreased.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to tax as a source of revenue to the federal government of Nigeria
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information tax as a source of revenue to the federal government of Nigeria. 200 staff of federal inland revenue, Abuja was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was on the tax as a source of revenue to the federal government of Nigeria. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of tax as a source of revenue to the federal government of Nigeria
Summary
This study was on tax a source of revenue to the federal government of Nigeria. Three objectives were raised which included: To determine the extent taxation has contributed to revenue generation in Nigeria, to examine the extent taxation has contributed to the steady growth in Gross Domestic Product in Nigeria and to examine how Nigeria can revolutionalise her tax system in order to boost revenue generation through this source. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of federal inland revenue service. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up tax officers ii, tax officers i, senior staff and junior staff was used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
In this study, effort has been made to analyze taxation as a source of revenue generation in Nigeria. In this study, issues relating to taxation as a tool for wealth creation and employments, the role of taxation in wealth creation and employment, the role of taxation on economic and social development sustainability and government revenue generation were considered. This study also considered the two major categories of tax which are direct and indirect taxes, and the study focused on the various types of taxes collected by the Federal, state and Local Governments. Furthermore, the study considered other problems militating against effective tax administration in Nigeria such as identification of the person to be assessed, identifying income for tax purpose, personnel problem and low image of tax officials in the eyes of the public, attitudinal problem and cumbersome process of payment.
Recommendation
There is an urgent need for all state governments to clearly state the basic objectives of its tax system and the relationship between these objectives. This will assist to give the tax administrators a sense of direction and make the tax payer see clearly the reasons he/she should pay his/her tax as at when due.
The tax collection mechanism used by tax officials must be free from corruption and embezzlement. If this is not done the revenue collected many not reach the desired point.
The Federal Government, state governments and local governments should urgently fully modernize and automate all its tax system, improve tax payer convenience in the assessment and payment process whilst at the same time entrenching effective and modern human resource management practices in the tax authorities
References
- Adams, C. (2001) For Good and Evil; The impact of Taxes on the Course of Civilization, U. S. A; Madison Publishers.
- Adams, S. (1910) The Wealth of Nations; London; Everyman’s Library Ltd.
- Adefila, J.J. (2008) Research Methodology in Behavioural Sciences, Kaduna, Nigeria; Apani Publications.
- Aguolu,O. (2004) Taxation and Tax Management in Nigeria, 3rd Edition, Enugu; Meridan Associates.
- Babalola, J.B (1999) Statistics with Applications (In Behavioural Sciences, Business and Engineering) (Revised Edition), Ilorin, Evidence (Nig) Ventures Publisher.
- Balls,O. (1965) The Problems of Tax Administration. In Latin America, Baltimore; John Hopkins Press.
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- Farayola, G.O. (1987) Guide to Nigerian Taxation, Ikeja, All Group Nigeria Limited Publishers.
- Keynes, J.M (1936) The General Theory of Employment, Interest and Money; New York, Harcourt, Brace.
