Tax Revenue and Economic Diversification: a Case Study of Lagos State
CHAPTER ONE
Aim and Objectives of the Study
The aim of this study is to reveal the impact of taxation on economic diversification for individuals in the society. The objectives of the paper seek to:
- To evaluate the economic diversification of tax revenue in Lagos state;
- To ascertain the effectiveness of taxation on the revenue generated in Lagos State;
CHAPTER TWO
LITERATURE REVIEW
CONCEPTUAL FRAME WORK
CONCEPT OF TAXATION AND TAX ADMINISTRATION IN NIGERIA
According to the (black law dictionary, 1999), tax is a ratable portion of the produce of the property and labor of the individual citizens, taken by the nation, in the exercise of its sovereign rights, for the support of government, for the administration of the laws, and as the means for continuing in operation the various legitimate functions of the state. The Institute of Chartered Accountants of Nigeria, (2006) and the Chartered Institute of Tax Revenue of Nigeria, (2002) view tax as an enforced contribution of money, enacted pursuant to legislative authority. If there is no valid statute by which it is imposed, a charge is not tax. Tax is assessed in accordance with some reasonable rule of apportionment on persons or property within tax jurisdiction.
Anyanwu, (1997) defined tax revenue as the compulsory transfer or payment from private individuals, institutions or groups to the government. Sanni, (2007) advocated tax as an instrument of social engineering which can be used to stimulate, general or special economic growth. From Onairobi, (1994), taxes are generally either of two types: Direct and Indirect taxes. A direct tax is levied on income or profit while an indirect tax is levied on goods and services. Good examples of Direct Tax include Personal Income Tax, Capital Gain Tax, Profit Tax and Wealth Tax. Examples of Indirect Tax include Excise Taxes, Export Taxes, Import Duties, Expenditure Tax, Sales Tax and Value Added Tax.
Jarkir, (2011) stated that tax is a contribution exacted by the state; it is a non-penal but compulsory and unrequited transfer of resources from the private to the public sector, levied on the basis of predetermined criteria. The classical economists were of the view that the only objective of tax revenue was to raise government revenue. But with the changes in circumstances and ideologies, the aim of taxes has also been changed. These days apart from the objective of generating. revenue, taxes is levied to affect consumption, production and distribution with a view to ensuring the social welfare through the economic development of a country.
According to Nzotta, (2007), four key issues must be understood for tax revenue to play its functions in the society. First, a tax is a compulsory contribution made by the citizens to the government and this contribution is for general common use. Secondly, tax imposes a general obligation on the tax payer. Thirdly, there is a presumption that the contribution to the public revenue made by the tax payer may not be equivalent to the benefits received. Finally, a tax is not imposed on a citizen by the government because it has rendered specific services to him or his family. Thus, it is evident that a good tax structure plays a multiple role in the process of economic development of any nation which Nigeria is not an exception Appah, (2010).
In the words of Enegbu, (2011), the Nigerian tax system has undergone several reforms geared at enhancing tax administration with minimal enforcement cost. The recent reforms include the introduction of TIN, (Taxpayer Identification Number), which became effective since February 2008, automated tax system that facilities tracking of tax positions and issues by individual tax payer, E-payment system which enhances smooth payment procedure and reduces the incidence of tax touts, Enforcement scheme which engages special tax officers in collaboration with other security agencies to ensure strict compliance in payment of taxes
Section 8 of FIRS Establishment Act 2007 has led to an improvement in the tax administration in the country, thus, the integrated tax offices and authorities now have autonomy to assess, collect and record tax. Despite this improvement, there are still a number of contentious issues that require urgent attention and among them are appropriate tax authority to administer several taxes, the issue of multiple taxes severally administered by all the three tiers of government which sometimes imposes welfare cost and the issue of the paucity of data base, which contributes to tax avoidance in the country. Tanzi, (1995)
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
INTRODUCTION
Due to the complex nature of this research, it is therefore of paramount necessity that I take time to spell out the sources of data used (upon which the justification of the outcome of the study will be based) the pattern of the responses, sample design and method of data analysis. Based on the foregoing, the under listed design and methodology were used in this study.
RESEARCH DESIGN
Survey research design was adopted through the use of questionnaire, oral interview and personal observation.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
DATA PRESENTATION
In this chapter, we are concerned with analysis of the answers to the questions in the questionnaires administered to the respondents. The use of table will be used or adopted to clearly show the responses obtained in each question of the questionnaires and the research hypothesis from chapter one will be use to test hypothesis guiding the study through the use of percentages and chi-square (X2) techniques.
CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
Taxation is a revenue generating tool, this is based on its importance, stabilization policy and a unique instrument for enhancing economic growth and development. Furthermore, multiple tax practices in Nigeria are affected through poor tax administration as well as corruption, greed on the part of tax officials and unfavorable revenue allocation method among the three tiers of government (Odusola, 2006). It is concluded that government commitment and time is required for effective tax administration as designed to enhance revenue generation in Lagos. It’s however not a process to be rushed into and as such, caution is needed especially in respect of getting the right balance of policies and laws to guide tax administration. Furthermore, this study compel and recommended that the Lagos state government should raise more public awareness and enlightment that will liberate most taxpayers to understand the usefulness and reason for the payment of tax. Also adequate working materials should be available to enhance the effective work of the Lagos state government and Nigeria at large.
The result shows that petroleum profit tax, company income tax, custom and excise duties, and value added tax are significant variables in explaining the economic growth in Nigeria. The implication of the findings is majorly for policy makers, especially the Federal Board of Inland Revenue as most of the variables shows a positively significant relationship with economic growth, meaning that there should be no area in tax collection that should be taken lightly as they have all proven to be major variables in connection to the growth of the economy. Also, for researchers, the study will re-introduce them to a different direction of ways in which tax revenue can contribute to the economic growth in Nigeria and add to the existing literatures on this subject matter and also ensure that the regulatory body implement policies that will reduce the loop holes in tax laws which tax payers capitalize on to evade tax.
One of the main purposes of tax revenue is to raise revenue that the government can use to provide adequate amenities and infrastructure for its citizens as well as enhance growth and development but the case seems to be different in Nigeria as the physical evidences does not show that funds generated from tax revenue are used for this purpose.
All taxes should be remitted via an e-payment system or via direct payment to the various tax authorities‘ accounts. This will enhance and support the cashless economy system introduced recently.
Tax Clearance Certificates and other tax documents used in government transactions should be referred back to the relevant revenue authority for authentication.
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