Impact of Federal Government Tax Policies on Nigerian Economy
Chapter One
OBJECTIVES OF THE RESEARCH
In-order to achieve the purpose of this research, the following are the objectives of the research:
- To identify the challenges of Nigerian tax policies.
- To examine the influence of multiple taxation on businesses and the economy as a whole.
- To identify ways of properly addressing the challenges of Nigerian tax policies in order to favour businesses as well as encourage tax compliance.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
The socio-political and economic development of any nation depends more fundamentally on the amount of revenues generated through taxation for the provision of infrastructures for economic growth. Conceptually, tax is a compulsory levy imposed on the citizens (and their property) by the government for the purpose of providing infrastructures for economic growth development. According to Appah (2004), Anyanfo (1996), Anyanwu (1997), Appah and Oyandonghan (2011), Ogbonna and Appah (2012), tax is a compulsory levy imposed on a subject or upon his property by the government to provide security, social amenities and create conditions for the economic well-being of the society. Usually, taxes are imposed to regulate the production of certain goods and services, protect infant industries, control business, curtail inflation and reduce income inequalities amongst others. Operationally, taxes are the most essential instruments of fiscal policy used to managing the economy. As an instrument of fiscal policy, Tosin and Abizadeh (2005) outlined five possible mechanisms by which taxes can affect economic growth. Firstly, taxes can inhibit investment rate through such taxes as corporate and personal income and capital gain taxes. Secondly, taxes can slow down growth in labour supply by disposing labour – leisure choice in favour of leisure. Thirdly, tax policy can effect productivity growth through its discouraging effect on research and development expenditures. Fourthly, taxes can lead to a flow of resources to other sectors that may have lower productivitely. Fifthly, high taxes on labour supply can distort the efficient use of human capital. For taxes to play its critical role in an economy, Nzolta (2007) outlined four key issues that must be understood in taxation. Firstly, a tax is a compulsory contribution made by the citizens to the government for the common use of citizens. Secondly, a tax imposes a general obligation on the tax payers. Thirdly, there is a presumption that the contribution to public revenue made by the tax payer may not be equivalent to the benefits received. Fourthly, a tax is not imposed on a citizen by the government because it has rendered specific services to him or his family. Thus, the foregoing views on taxation imply that a good tax system plays a multiple role in the process of economic development. Such a tax system presents an opportunity for the government to collect additional revenue needed to discharge its obligations. Under such a tax system, the nation’s economic resources are efficiently mobilized towards the promotion of economic growth and development. Within the Nigerian context, the fiscal operations of government are divulged into a three – tiered tax structures between the Federal, State and Local governments, with each tier of government possessing and coordinating a separate tax jurisdiction. Unfortunately, tax systems in Nigeria is being dominated by oil revenues which accounts for at least 70 percent of total federally collected revenues for about four decades now. Consequently, the traditional tax system and tax revenue in the country has never assumed any strong role in fiscal policy management. As Ogbonna and Ebimobowei (2011) opined, instead of transforming the existing revenue base, fiscal management has merely transited from one primary product-based revenue to another, making the economy susceptible to fluctuations of the international market. sHowever, following the dwindling level of revenue generated from taxation over the years, the use of tax as an instrument of fiscal policy have been hampered by ineffectiveness of government officials. As Kiabel and Nwokah (2009) argued, the increasing cost of running government coupled with the dwindling revenue has left all tiers of government in Nigeria with formulating strategies to improve the revenue base. Given the dynamic nature of taxation, Ola (2001) argued that tax reforms are necessary to effect the required changes in the national economy.
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 investigate the impact of federal government tax policies on Nigeria economy
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.
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 AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the impact of federal government tax policies on Nigerian economy.
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 policies on the growth of Nigerian economy.
Summary
This study has been carried out with the main objective of investigating into the relationship between tax policy (reforms) and economic growth in Nigeria. Using time-series data from 1990 to 2011, the study finds statistical evidence that long-run relationship exists between economic growth and tax components. To capture this effects, a Granger – causality co integrations test in performed with the results firmly supporting the hypothesis that improvement in tax bases are necessary conditions for enhance economic growth and development in Nigeria. To ensure an efficient tax system that guarantee sustained economic growth, there should be an improved tax regime that is capable of generating funds for the Government to provide basic social services. This can be achieved through transparency and accountability in governance and in the administration of tax reforms. Secondly, efforts should be made to address all complexities involving effective tax system such as multiplicity of tax payment by individuals and organizations. Thirdly, government should discourage tax holidays to multinational corporations (MNCs) in the name of attracting foreign direct investments (FDIs). Tax holidays are serious leakages out of an income stream of the country.
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