Effect of Tax Incentive in the Development of Manufacturing Industries in Nigeria
CHAPTER ONE
OBJECTIVE OF THE STUDY
The purpose this study is as follows:
- To ascertain the extent tax incentives have redirect investment of individuals and corporate bodies towards the development of manufacturing industries.
- To establish how inefficiency in administering tax incentive scheme has made it impossible using it to attract foreign investors to manufacturing industries.
- To ascertain the extent by which most manufacturing industries are unable to apply tax incentive in a flexible manner.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
Tax reforms are meant to ensure that the three main objectives of a good tax system are met and these objectives include raising tax revenue for funding government operations without excessive government borrowing, ensuring to equitable distribution of income in a nation and encouraging or discouraging specific activities but implementing tax reforms to meet these goals of an ideal tax system have remained a challenge. There have been debates on whether and to what extent the government should use the tax system for policy goals other than raising tax revenue. Raising tax revenue is a key objective of Nigeria’s tax system and therefore, the government must strike a balance between the ever increasing competing development needs and the desire to encourage investments through low tax regimes. It is the consideration of the latter that has seen the government of Nigeria, like other countries, implement tax incentives on the assumption that taxation is an appropriate policy instrument in attracting investments (IEA, 2012) From the view of economists, a tax is a compulsory contribution of resources from the private to the public sector or government levied on a basis of predetermined criteria and without reference to any specific benefits received by the tax payer Governments levy different types of taxes at varying tax rates to distribute the tax burden among persons involved in taxable activities or to redistribute resources within the society. In addition, taxes are levied by the government to influence the macroeconomic performance of the economy through its fiscal policy – more specifically the taxation policies and to adjust patterns of consumption or employment within an economy, by making certain transactions more or less attractive (Goode, 1984). Taxation is necessary because it is neither feasible nor desirable for governments to finance their projects solely through charging for services (Goode, 1984). Taxes are justified as they fund activities that are necessary and benefit the majority of the population and social development -Taxes are the price of civilization (Holmes, 1904). Not everyone in the society agrees with the principle that governments must levy taxes. An anarchist in Russia, Emma Goldman wrote that the State itself is the greatest criminal, breaking every written and natural law, stealing in the form of taxes. This view is held by some political philosophies who view taxation as theft or extortion because payment of tax is compulsory and enforced by the legal system. The view that democracy legitimizes taxation is rejected by those people who argue that all forms of government policies or laws are oppressive and therefore, taxation is viewed as producing the same result as theft, the difference between government and thievery being mostly a matter of legality (Williams, 2008). While the morality of taxation is sometimes questioned, most arguments about taxation revolve around the degree and method of taxation and associated government spending, not taxation itself.
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 ascertain the effect of tax incentive in the development of manufacturing industries in Nigeria.
SOURCES OF DATA COLLECTION
Data were collected from two main sources namely
-Primary source and
-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 data: 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 in interested in getting information for the study effect of tax incentive in the development of manufacturing industries in Nigeria 200 staff of Dangote PLC was randomly selected 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.
DATA ANALYSIS
The data collected from the respondents were analyzed in tabular form with simple percentage for easy understanding.
A total of 133(one hundred and thirty three) questionnaires were distributed and 133 questionnaires were returned.
CHAPTER FIVE
SUMMARY CONCLUSION RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to investigate the effect of tax incentive in the development of manufacturing industries in 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 child abuse.
Summary
This study which is centred on ascertaining the effect of tax incentives on the development of manufacturing industries in Nigeria, the research questions and hypothesis played a vital role in modeling the focus of the study. With the above background, the following findings were arrived at: Tax incentives have a positive impact on the investment decision of an organization and that tax incentive coupled with political stability stimulate economic growth. That tax incentives usually lead to a reduction in government’s revenue but is compensated with economic development and successful companies. That tax incentives brings about a sustainable working capital for industries and firms. That most of the respondents proved that the incentives granted are not adequate. The incentives attract foreign investors. The incentives can stimulate individuals to incorporate their companies. That full employment could be achieved through the incentive scheme if well implemented. That with the tax incentives granted, local industries could be well equipped to compete with their foreign counterparts in technology and outputs.
Conclusion
From the results of the findings it can be concluded that Tax incentives alone do not increase GDP growth rate. It was found that there was an inverse relationship between manufacturing sector growth rate and tax incentives. Though tax incentives may encourage investments in a country, they do not drive economic growth. GDP growth rate is affected by so many other factors as it was shown from the correlation analysis that no one particular factor significantly affects economic growth rates. Therefore, though it has benefits to the business community, it is necessary for the Government to rationalize these incentives to ensure that the country is not losing out on needed resources while at the same time not reaping any benefits for the resources given up.
Recommendation
The study makes a few policy recommendations that may be effected by the key decision makers. There is need for the government to rationalize the tax incentive schemes in the county. It is important to note that this process has now begun by the government scrapping various tax remission and exemption provisions in the VAT Act, 2013 including the TREO program and it is expected that the intended review of the Income Tax Act will also comprehensively address this issue. This will ensure that the tax incentive scheme is both efficient and beneficial to the economy.
Reference
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- Dotun, S. O. & Sanni, O. E. (2009). Corporate tax incentives and economic growth in Nigeria. Ibadan: University of Ife Press Ltd.
- Ewuonnowoh, S. (2010). You and taxation business Times. P. 9
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- Federal Republic of Nigeria, (2004). Petroleum profit tax act. Abuja: Federal Government Press.
- Frank, E. (2011). Exemption of low paid workers from tax depletes the government pursue. Daily Punch, p. 23.
