THE IMPACT OF TAXATION ON NIGERIA ECONOMY GROWTH
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THE IMPACT
OF TAXATION ON NIGERIA ECONOMY GROWTH
ABSTRACT
This
research work was carried out in order to find out if actually there is any
impact which taxation has on Nigerian economy and the survey for this study is
based on Enugu state. This research work also became necessary in order to
bring to the proper understanding of the enquirer the best way to solve such
problems connected with tax especially: what is taxable, which system of tax is
acceptable, the rate of tax evasion and tax avoidance, the assessment of
Nigeria tax system and which of the impacts of taxation is the most essential.
The primary function of every government is to make provision of this enormous
work cannot be carried out adequately by the government due to its limited
resources therefore, there is imposition of tax on all citizens, companies to
augment government financial position. Government have always enacted various
tax laws and reformed to stand the taste of time.
TABLE OF
CONTENTS
CHAPTER ONE
Introduction
1.1 Background of Study
1.2 Statement of the problem
1.3 Objective of the study
1.4 Research Questions
1.5 Significance of the Study
1.6 Scope of the study
1.7 Limitations of the study
1.8 Assumptions of the study
1.9 Formulation of Hypothesis
1.10 Definition of Terms
References
CHAPTER
TWO
Review of
Related Literature
2.1 Introduction
2.2 Definition of Taxation
2.3 Incidence of Taxation
2.4 Principles of Taxation
2.5 Elements of Taxation
2.6 The Importance of Taxation
2.7 Structure and administration of Nigeria tax
system
2.8 The problems of taxation and its function
Reference
CHAPTER THREE
3.0 Design and Methodology
3.1 Primary Sources of Data
3.2 Secondary sources of Data
3.3 Population and Sample size Determination
3.4 Method of Data Collection
3.6 Method of Data Analysis
CHAPTER FOUR
Data Presentation and Analysis
4.1 Presentation and Analysis
4.2 Summary of Findings/Results
4.3 Testing of Hypothesis
4.3 Regression Analysis
CHAPTER FIVE
DISCUSSION,
RECOMMENDATION AND CONCLUSION
5.1 Findings
5.3 Conclusion
5.3 Recommendations
5.4 Suggestion for further findings
Bibliography
Appendix
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
One of the
major functions of the government especially developing countries such as
Nigeria is the provision of infrastructural services such as electricity,
schools, hospitals, pipe-borne water, good roads and as well as ensure a rise
in per-capital income, poverty alleviation to mention a few.
For these services to be adequately
provided, government should have enough revenue to finance them. The task of
financing these enormous responsibilities is one of the major problems facing
the government. Based on the limited resources of government, there is need to
carry the citizens (governed) along hence the imposition of tax on all taxable
individuals and companies/organizations to augment government financial
position is essential.
To this end,
government have always enacted various tax laws and reformed existing ones to
stand the taste of time. These laws include: Income Tax Management Act (ITMA),
Companies Income Tax Decree (CITD) etc.
All these
are aimed at ensuring adherence to tax payment and discouraging tax evasion and
avoidance. For the purpose of this study, the researchers would be concerned
with the impact of taxation on Nigeria economy.
1.2 STATEMENT OF THE PROBLEM
The first
need of any modern government is to generate enough revenue which is indeed
“the breath of its nostrils”. Thus, taxation is by far one the most significant
source of revenue for the government. Nigerians regard payment of tax as a
means through which government raises revenue on herself at the expense of
their sweat.
It is good
to note that no taxation succeeds without the tax payers’ co-operation. Here,
we can ask some thought – provoking questions such as:
- What makes taxation such a difficult
issue?
- Why do people feel cheated when it comes
to tax?
- Is government making judicious use of
taxpayers’ money?
In view of
the above questions, this study is going to be carried out to offer solutions
to them.
We shall
also look at the following issues and offer recommendations:
Problems affecting the successful operation
of tax system in Nigeria.
How to determine the assessable income.
Process of tax administration in Nigeria.
1.3 OBJECTIVES OF THE STUDY
The general objective of the study is to
assess the effect that taxation has towards the development/growth of Nigerian
economy.
However, the
specific objective of the study includes:
To examine the extent government has been
using revenue generated by tax.
To determine the reaction of people towards
tax payment.
To find out if tax revenue is the most
effective source of government revenue.
To examine how tax rate affects the rate of
inflation, unemployment and Gross National Product (GNP).
To find out the most significant effect of
taxation.
Generally,
this work is done to find out if tax constitutes the bulk of government revenue
and to erase the erroneous that it is an exploitation by government for their
selfish interest.
1.4 RESEARCH QUESTION
i.
To what extent has government been using tax generated revenue?
ii.
How do people react towards tax payment?
iii.
Is tax the most effective source of revenue to the government?
iv.
Does tax revenue have any significant impact on GDP, inflation and
unemployment?
v.
Which of the effects of taxation is the most significant?
1.5 SIGNIFICANCE OF THE STUDY
One of the most frequently discussed
issues in Nigeria is how to solve the economic hardship in the country and how
to create an industrial base that can guarantee self sustaining economic
development. Also one wonders why a country which is richly endowed with the
necessary human and material resources and which the people pay tax has been
turned a heavily indebted country.
The study will afford us the opportunity
to:
Know the roles taxation play in the
Nigerian economy.
Ascertain how government has been using tax
generated revenue.
The study will also reveal if there are
other better sources of government funding.
1.6 SCOPE OF THE STUDY
The scope of this study covers critical
examinations on the impact of taxation on Nigerian economy. It will also
analyze other related issues such as structure and administrative machinery of
tax in Nigeria and their associated problems. The essence of this digression is
to possibly find out the obstacles if any, that hinder the effective collection
and administration of tax in the country.
The reference period for this study is
2000 – 2011. Inability of the researcher to procure current data forced the
researcher to utilize only available ones. Data for this study were collected
from Board of Internal Revenue and National Bureau of Statistics, Enugu.
B. LIMITATIONS OF THE STUDY
It is obvious that a research work like
this cannot be carried out without some hindrances. There are constraints that
limit the work of the researchers amongst which are:
Inadequate time: The time available is
very limited, as a result of this, the researchers are restricted to some
places for interviews and questioning during the collection of data.
Insufficient fund: The fund available to
the researchers to carry out this work is not sufficient. As a result of high
economic hardship as well as high cost of transportation.
There were also scarcity of current
textbooks on taxation because tax laws are constantly changed and so many
textbooks were obsolete for the study.
The inability of some government
officials to disclose certain reliable information which they considered
confidential also constitute a limitation to this study.
Finally, the academic workload on the campus
is one of the limiting factors on this research work. Despite all these
constraints, the researchers were able to carry out a fair and effective study
on this topic.
1.7 ASSUMPTIONS OF THE STUDY
The researchers in carrying out this
study, will make the following assumptions:
That the data that will be used are true
and fair figures actually collected by the Federal Government each year of
assessment.
That the data will be authentic and can
be relied on for further research work
on the topic.
That the data is going to form the basis
of the research work.
1.8 FORMULATION OF HYPOTHESIS
To enable the researcher test if there
is any impact taxation has on the Nigeria Economy; some statistical model will
be used based on the responses from oral interview carried out and the
questionnaires distributed and also statistical data generated from the
appropriate sources. The data generated from all these will be used to test the
following hypothetical statements:
Hypothesis
1:
The null
hypothesis (Ho): Revenue generated from tax does not make any positive impact
on the economic development of the nation.
The
alternative hypothesis (H1): Revenue generated from tax has a positive impact
on the economic development of the nation.
Hypothesis
2:
The null
hypothesis (Ho): Taxation has no significant impact on GDP, Inflation and
Unemployment.
The
alternative hypothesis (Ho): Taxation has a significant impact on GDP,
Inflation and Unemployment.
Hypothesis
3:
The null
hypothesis (Ho): That revenue generated from tax is so meager compared to
revenue from other sources as such, government can do without tax.
The
alternative hypothesis (H1): That is a major source of government revenue and
as such government cannot do without tax.
1.9 DEFINITION OF TERMS
Tax: A compulsory levy by the
government on its citizens for the provision of public goods and services.
Tax
Base: The object which is taxed for
instance personal income, company profit.
Tax
incidence: This is the effect and where the burden of
taxation is
finally rested.
FBIRS: (Federal Board of Inland Revenue
Services): It is an operational arm of Federal Board of Inland Revenue which is
responsible for the Federal Tax Matters.
CITA: (Company Income Tax Act) It is a
Federal Law operated by the FIRS, which deals with the taxation of all limited
liability companies in Nigeria with the exception of those engaged in petroleum
operations.
JTB: (Joint Tax Board) Is established
under section 85 (2) of Decree of 104 of 1993 to arbitrate on tax disputes
between one state tax authority and another.
VAT: (Value Added Tax) is a multistage
tax levied and collected on transactions at all stages of sales and
distribution.
CGTA: (Capital Gain Tax Act) is an act
that stipulates that all capital gains arising on disposal of assets of
individuals, partnership and limited companies should be taxed.
PPTA: (Petroleum Profit Tax Act) is an
act that regulates the petroleum profit tax and also specifies how profit from
petroleum will be taxed.
Withholding
Tax: This is tax charged on investment income namely: rents, interest,
royalties and dividends. Presently it is charged as the tax offset.
Progressive
Tax: This is a tax incidence that increases as the size of income increases.
Regressive
Tax: A tax is regressive when its tax rate decreases as the income increases.
Excise
Duties: They are taxes levied on some goods manufactured within a country.
Persons: It includes all taxable persons be it
individual or corporate bodies.
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