Taxation as a Major Source of Government Funds and the Impact on Management Decision Making
Chapter One
OBJECTIVE OF THE STUDY
This research work titled “ Taxation as a major source of government funds and the impact on management decision making” with particular reference to Enugu state board of internal revenue, is aimed at:
- Examining the impact of taxation on management decision making.
- To evaluate the role of taxation in the development of Nigeria, Enugu state in particular.
- Determining the various problems associated taxation in Enugu state.
- And also proffer possible solutions to the problems identified.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Concept of Taxation
Tax is a compulsory levy imposed by government on individuals, companies, for the various legitimate functions of the state. All levels of governments in Nigeria do no longer perform the responsibilities simply because of financial crisis experienced form internally generating revenue. This bad financial situation is further aggravated by the prevailing inflationary situation in this country which erodes the value of funds available to render essential social service to the people. Okafor (2012) advocated the use of tax as an instrument of social engineering, to stimulate general and/or sectorial economic and the government. Taxation is not a new word in Nigeria or the world as a whole. In Nigeria, taxation has been in existence even before the coming of colonial men or the British. Taxation can be defined as the system of imposing a compulsory levy on all income, goods, services and properties of individuals, partnership, trustees, executorship and companies by the government (Samuel & Simon, 2011). Income tax is one of the major sources of revenue to all government in Nigeria, it is a factor to be reckoned with in Federal government’s budget and the taxes so collected come back to tax payer in form of services. In Nigeria, tax revenue has accounted for a small proportion of total government revenue over the years because the bulk of revenue needed for development purposes is derived from oil. The main aim of any developing nation like Nigeria is to increase the rate of economic growth and per capital income which otherwise increases the standard of living thus taxation can be used as a stimulus to accelerate such growth. Azubuike (2009) posits that tax is a major player in every society of the world. It is an opportunity for government to generate additional revenue to discharge its pressing Obligations. Also, it is one of the effective means of mobilizing a country’s internal resources so as to promote economic growth. Taxation is a way of raising revenue for the day to day running of government activities. Government activities involve generating funds and using same to provide security, social amenities, infrastructural facilities, etc, for the inhabitant of the country. Base on this, it is worthy of note that the objective of taxation is in tandem with the functions of government (Akhor, 2014). However, over the years, it has been observed that the Nigerian tax system has inherent problems in its structure. Odusola (2006) opined that the Nigerian tax system is concentrated on Petroleum Profit Tax (PPT) and Company Income Tax (CIT) while broad-based indirect taxes like the Value-Added Tax (VAT) and Custom and Excise Duty (CEXD) are neglected. Thus, the tax system lacks the potential of diversifying the revenue portfolio for the country to safeguard against the volatility of crude oil prices and to promote fiscal sustainability and economic viability at lower tiers of government (Azaiki & Shagari, 2007). Government collects taxes in order to provide an efficient and steadily expanding non-revenue yielding services, such as infrastructure, education, health, communications system, employment opportunities and essential public services like the maintenance of laws and order, irrespective of the prevailing ideology or the political system of a particular nation. The very act of taxation has profoundly beneficial effects in fostering better and more accountable government (Tax Justice Network [TJN], (2012). Taxation in Nigeria following the extant laws is enforced by the 3 tiers of government, that is, federal, state, and local governments with each having its sphere clearly spelt out in the Taxes and Levies (approved list for collection) Decree, 1998. However, Nigeria runs a largely centralized revenue collection system, with the federal government collecting the major revenue (petroleum revenue – profit taxes, royalties, crude oil sales; company income tax, value added tax, customs and excise duties) on behalf of the constituent governments (Emmanuel,
Principles of Taxation 2010). Revenue from taxes remains the most significant contributor to nation’s fiscal and economic development (IMF, 2007 as cited by Fasina, 2014). The relevance of revenue from taxation is a core motive for increased suggestion that emerging economies such as Nigeria must increase resources from within for sustained economic growth and fiscal deficit reduction through effective tax policy (Wawive, 2006). The main consequence of the persistent volatility in the world market price of crude oil which remains as the main source of revenue into Nigeria federation account result in persistent decline collectable revenue, hence, the need to empirically investigate the government revenue profile (Fasina, 2014).
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description.
This study was carried to examine taxation as a major source of government funds and the impact on management decision making. Enugu state government form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain taxation as a major source of government funds and the impact on management decision making. 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 taxation as a major source of government funds and the impact on management decision making
Summary
This study was on taxation as a major source of government funds and the impact on management decision making. Four objectives were raised which included; Examining the impact of taxation on management decision making, to evaluate the role of taxation in the development of Nigeria, Enugu state in particular, determining the various problems associated taxation in Enugu state and and also proffer possible solutions to the problems identified.. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from Enugu state government. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
Assessment is the real wellspring of income for the legislature, the headway of any country’s economy by and large depends upon the obligation structure it has gotten. A Taxation Structure which supports straightforward of cooperating and having no chance to get for charge evasion passes on progress to a country’s economy. On the other hand charge appraisal structure which has courses of action for assess shirking and the one which does not support effortlessness of cooperating backs off the advancement of country’s economy. In this way as assessment accumulation structure accept a basic part in country’s progression. Nigeria has an overall made force structure. The capacity to force costs and commitments is scattered among the three levels of Government, according to the game plans of the Indian Constitution. Nigerian duty gathering structure has encountered various changes and still it is uncommonly far ahead from being an immaculate expense evaluation structure. Various issues like Tax Evasion, Reliance on circumlocutory appraisals, Black money, nearness of parallel economy show that Nigerian expense evaluation structure requires some genuine changes later on ahead to address this issues
Recommendation
With some percentage of every Naira as tax in almost every kind of business decision, the management of the company should recognize tax planning and management as a very important business function. The essence is to enable tax saving opportunities to be identified when it arises. All controllable transactions should be planned in the light of their tax consequences, because a company could do something about the tax effect before a transaction occurs, but can legally do nothing except to follow the tax law after transaction has already taken place
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