CHAPTER 1: Introduction
Tax is a system of raising money from individual person or corporate body for the purposes of government developmental programmes. It is rather a compulsory contribution imposed by the government on tax payers in return to identifiable benefit of living in a relatively educated, healthy and safe society. Though tax are imposed to regulate the production of certain goods and services, protection of infant or certain key industries as well as means of
Curbing inflation and meeting up the operational costs of governance. Taxes in Nigeria are imposed to regulate certain economic activities such as to influence economic activities in the country, bridge the inequality gap between the rich and the poor, to curtail consumption of undesirable goods and services, to correct a country’s balance of payment and tax is used to attract investors. In an attempt to realize these and other tax objectives, government encompasses the different types of taxes such as “Pay As You Earn, (PAYE), Value added tax (VAT), Excise duties etc
1.1 Background of the Study
One of the major functions of any government especially developing countries such as Nigeria is the provision of infrastructural services such as electricity, pipe-borne water, hospitals, schools, good roads and as well as ensure a rise in per capita 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 to augment government financial position. To this end, government have always enacted various tax laws and reformed existing ones to stand the taste of time. They include: Income Tax Management Act (ITMA), Companies Income Tax Decree (CIID), Joint Tax Board (JIB) etc.
All these are aimed at ensuring adherence to tax payment and discouraging tax evasion and avoidance. The research seeks to investigate the impact of taxation as an aid to economic development in Bauchi.
1.2 Statement of the Problem
The main purpose of tax is to raise revenue to meet government expenditure and to redistribute wealth and management of the economy (Ola, 2001; Jhingan, 2004; Bhartia, 2009). Anyanwu (1993) pointed out that there are three basic objectives of taxation. These are to raise revenue for the government, to regulate the economy and economic activities and to control income and employment. Also, Nzotta (2007) noted that taxes generally have allocation, distributional and stabilization functions. The allocation function of taxes entails the determination of the pattern of production, the goods that should be produced, who produces them, the relationship between the private and public sectors and the point of social balance between the two sectors. The distribution function of taxes relates to the manner in which the effective demand over economic goods is divided, among individuals in the society. According to Musgrave and Musgrave (2006), the distribution function deals with the distribution of income and wealth to ensure conformity with what society considers a fair or just state of distribution. The stabilization function of taxes seeks to attain high level of employment, a reasonable level of price stability, an appropriate rate of economic growth, with allowances for effects on trade and on the balance of payments. Nwezeaku (2005) argues that the scope of these functions depends, inter alia, on the political and economic orientation of the people, their needs and aspirations as well as their willingness to pay tax. Thus the extents to which a government can perform its functions depend largely on the ability to design tax plans and administration as well as the willingness and patriotism of the governed Tax is discriminatory in the sense that it is assessed on persons or property based on profits/incomes or gain, the benefit derived by citizens from tax payment is without reference to the contribution of individual tax payers (Nightingale, 2000). In line with this, Ariwodola (2000) posits that it is accurate to say that the primary objective and purpose of taxation in most nations of the world is essentially to generate revenue for government expenditure on social welfare such as provision of defence, law and order, health services and education. Tax revenue can also be expended on capital projects otherwise called consumer expenditure, creating social and economic infrastructure which will improve the social life of the people (Angahar & Alfred, 2012). Other than facilitating the administrative function of government, taxation as the most potential source of revenue to the government of any nation, has played very crucial roles as an instrument of government‟s economic, social and fiscal policy. The problem confronting this research is to determine the impact of taxation as an aid to economic development in Bauchi.
1.3 Objective of the Study
1 To determine the nature and objective of taxation
2 To determine the nature of Economic Development
3 To determine the impact of taxation on economic Development
4 To determine the impact of taxation on the Economic Development of Buachi state.
1.4 Research Questions
2 1 What is the nature of taxation
3 2 What is the objective of taxation
4 3 What is the Problem of taxation
5 4 What is the nature of Economic Development
6 5 What is the impact of taxation on economic Development in BAUCHI
1.5 Significance of the Study
The study shall appraise the nature and objective of taxation
It shall proffer a detail appraisal of the impact of taxation on Economic Development
The study shall serve as a source of information on issues of taxation and Economic Development
1.6 Statement of Hypothesis
1 Ho Taxation is not effective in Buachi
Hi Taxation is effective in Bauchi
2 Ho Economic Development is low in Bauchi
Hi Economic Development is high in Bauchi
3 Ho The impact of Taxation on Economic Development is low in Bauchi
Hi the impact of Taxation on Economic Development is high in Bauchi
3.5 Scope of the Study
The study focuses on the appraisal of the impact of taxation as an aid to Economic Development
3.6 Definition of Terms
TAX: A compulsory levy by the government on its citizen for the provision of public goods and services.
TAX BASE: The object which is taxed for instance personal income, company profit.
TAX RATE: The rate at which tax is charged.
TAX INCIDENCE: It offers to the effect of and where the burden 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 (CITA) 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 (JTB) is established under Section 85(1) of Decree 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 asset of individual 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: These are taxes on some goods manufactured within a country.
PERSONS: It includes all taxable persons whether it be individual or corporate bodies.