1.1       Background to the Study

            The increasing cost of operating government combined with dwindling revenue has led different State governments in Nigeria with formulating techniques to boost the revenue base, the near break down of the National Economy has brought about severe financial tension for all levels of government. In spite of the various sources of revenue available to the different levels of government as stipulated in the Nigeria 1999 constitution, since the 1970s till now, over 80% of the annual income of the three tiers of government originate from oil. Nevertheless, the major decrease in the price of oil recently has resulted in a reduction in the funds available for distribution to the states. The need for state and local government to generate sufficient revenue from internal sources has consequently come to be an issue of extreme urgency and relevance. This need highlights the eagerness on the part of state and local governments as well as the federal government to search for new sources of revenue or to become hostile and innovative in the manner of collection of revenue from available sources.

            Development is a sine qua non for modern-day civilization. In an attempt to carryout development in all nooks and crannies of the society, it is the obligation of the Akwa Ibom State Government to give direct development to people to a certain degree. Development is connected with funds and a lot of revenue is required to plan, implement and maintain infrastructures at the state level. The needed revenue generated for such developmental projects, like construction of accessible roads, building of public schools, healthcare centres, building and construction of bridges are generated from taxes, royalties, haulages, fines, duties and grants from the states, national and international governments. These funds might either be acquired internally or externally. Therefore, the Akwa Ibom State Government cannot embark, implement and potentially carryout the maintenance of these projects without sufficient revenue generation.

            Internally generated revenue is the power needed to enhance the elbow of our modern societies; it is the tool that speeds up the rate of social advancement. This is principally due to the fact that, as illustrated by Oti and Odey (2017), internally generated revenues are those sources of government finance accrued majorly by the local, state and federal governments, which aid in intensifying and broadening the general non-oil revenue framework of the state. Internally generated revenue in the opinion of Abiola & Ehigiamusoe (2014) is the revenue that the local, state and federal governments get in their respective jurisdictions. According to Asimiyu and Kizito (2014), economic development and sustainability of states in Nigeria hinge on the ability of such states to generate revenue internally to complement the revenue allocation from federation account. Akwa Ibom State is not left of these states as the state government, aside from being among the highest receivers of federal allocation, delights in the internal generation of revenue.

            The internal generation of revenue for developmental functions in Akwa Ibom State is no mean task; yet revenue must be generated. There is the need to take care of a number of infrastructural demands. The primary and school buildings have to be renovated and well equipped; sporting centres and other recreational facilities have to be properly funded; the roads have to be tarred and new ones have to be created; power (light) generation and water system have to be improved upon; flood drains in Uyo and other water-logged areas in Akwa Ibom State have to be properly attended to periodically, health facilities have to be addressed and hosts of other needs. All these do not come with little funds to accomplish and for that reason, the government of Akwa Ibom State needs to put more effort in its revenue generation in order to achieve desired infrastructural development that will put the state in the world map.

            More so, a great infrastructure can promote and enhance business deals within an economy. For example, the availability of adequate power supply, excellent road network and efficient communication system to name a few can enhance the ease of doing business and foster production of goods and services, which eventually results in economic development. On the other hand, the increase in economic growth guarantees the availability of funds to government for expenditure on infrastructures and to tax payer for the payment of taxes, showing a correlation between tax revenue, infrastructure development and economic growth. Hence, the reason for this study on the infrastructure development on tax revenue a case study of Uyo Local Government Area.

1.2       Statement of the Problem

            There is no gain stating that revenue generated from oil has been dropping and uncertain in recent time as a result of fluctuations in the international oil price. The urgent need therefore arises to concentrate on tax revenue since it makes up the biggest element of non-oil government earnings. To finance the ever-increasing infrastructural deficiency of the nation government needs to generate sufficient revenue from tax, along with the revenue from other sources. Thus, in an effort to increase tax revenue, the government started some reforms in the past, that includes: the introduction of the Value Added Tax (VAT) in 1994 and the registering of company and entrepreneurs under the Federal Inland Revenue Service (FIRS) to name a few. These initiatives have in the previous produced bit or no improvement in the tax revenue that accrues to government. A significant factor advanced for this failure is that until more recently, tax management in Nigeria is seriously identified by a high degree of ineffectiveness and inefficiency, as a result of noncompliance with tax legislations and policies by tax payers due to weak control, poor tax administration, poor tax education, inconsistent government policies, absence of sufficient statistical data and corruption amongst tax officials (Azubuike, 2009). As a result, the tax revenue generated throughout the years has continued to be grossly insufficient for meeting the increasing infrastructural deficiency of the economy and for improving the development potentials.    

1.3       Objectives of the Study

            This study has both main and specific objectives. The main objective is to examine the infrastructure development on tax revenue by using Uyo Local Government Area as a case study. However, the specific objectives are:

i)                    To examine the impact of tax revenue on the transportation system in Uyo Local Government Area

ii)                  To understand the impacts of poor revenue generation on the development of Uyo Local Government Area

iii)                To determine the effectiveness of the various policy tools used in generating revenue in Uyo Local Government Area

1.4       Research Questions

            This study is aimed at providing answers to the following research questions:

i)                    What is the impact of tax revenue on the transportation system in Uyo Local Government Area?

ii)                  What are the impacts of poor revenue generation on the development of Uyo Local Government Area?

iii)                What is the effectiveness of the various policy tools used in generating revenue in Uyo Local Government Area?

1.5       Research Hypotheses

To determine whether internal revenue is being generated effectively in Nigeria, the following hypothesis would be tested:

i)                    There is a significant relationship between tax revenue and the transportation system in Uyo Local Government Area

ii)                  There is no significant relationship between poor revenue generation and the development of Uyo Local Government Area

1.6       Significance of the Study

            Tax revenue is one of the sources of government revenue which is used to achieve balance of payment equilibrium, redistribution of income, provision of welfare services, addressing issues of poverty and promoting socioeconomic development by battling elements of depression, inflation or deflation.

            This study will assist the federal government to develop an effective policy framework which would assure quality tax administration and foster development in the country.

            This study will also assist the government to know how to generate income from taxes and not rely on income from just the oil sector.

Policy makers at national level will find this study important as they design policies aimed at enhancing economic growth and infrastructural development through a better tax revenue system.

            This study will enlighten and serve as a guide to individuals, organizations, students, and other scholars who wish to do a further study or research on taxation.

1.7       Scope of the Study

            The scope of this study covers the infrastructure development on tax revenue by using Uyo Local Government Area over a period of 10 years (2012-2022). The trend of petroleum profit tax, company income tax, value added tax, custom and excise duties are examined for the period to determine their correlation with infrastructural development in Nigeria.

1.8       Definition of Terms

The following terms were used in the course of carrying out this study:

Tax: Nightingale (1997) describes tax as a compulsory contribution imposed by the government and concludes that even though tax payers may receive nothing identifiable in return for their contributions, they nevertheless have the benefit of living in a relatively educated, healthy and safe society

Taxation: is defined as the process of levying and collection of tax from taxable persons.

Nigeria Tax Authorities: this refers to the revenue collection, agencies of the federal government represented by the Federal Inland Revenue service (FIRS), State Inland Revenue Service (SIRS) and Local Government Revenue Committee.

Infrastructural Development: one of the major roles of any government particularly in developing countries such as Nigeria is the provision of infrastructural services like effective roads, power supply, telecommunication, good education, health services, pipe-borne water as well as to ensure an increase in per capita income, reduction in poverty rate.