TAXATION AND DEVELOPMENT ADMINISTRATION IN THE NIGERIA LOCAL GOVERNMENT (A CASE STUDY OF EKET LOCAL GOVERNMENT AREA, AKWA IBOM STATE)

CHAPTER ONE

INTRODUCTION

1.1      Background Of the study

Ademolekun (2005) observed that a recurring challenge in the progress of local government development in Nigeria is the continuous decline in revenue generation, resulting in yearly budget shortfalls and insufficient funds for substantial growth and the execution of viable projects. This indicates that local governments have ineffective taxation policies, significantly impacting their revenue sources, leading them to heavily rely on funds from the federal statutory account. This context leads us to the investigation of the relationship between taxation and local government development in Nigeria.

The concept of tax has been defined in various ways by different authorities and professionals. According to Webster's dictionary of the English language, tax is defined as a charge imposed by government authorities on property, individuals, or transactions, with the purpose of raising funds for public use. Black's Law Dictionary describes tax as a proportional share of an individual citizen's property and labor taken by a nation. Tax is essentially a mandatory levy imposed by the government on its citizens to obtain the necessary revenue for financing its activities (Adesola, 2008).

Considering the diverse definitions of taxation, it becomes evident that taxation plays a crucial role in the economic development of any government. In this context, the study is particularly concerned with development at the grassroots level, which is the primary objective of local government administration. To accomplish comprehensive development across all sectors of society, the local government, being the government tier closest to the people, bears the responsibility of directly advancing the well-being of its citizens.

Development is closely intertwined with financial resources, as a substantial amount of revenue is required to plan, implement, and sustain infrastructure and facilities at the local government level (Okoli, 2000). The revenue necessary for such development projects, including the construction of roads, public centers, bridges, and more, primarily comes from state, national, and international governments. Consequently, without adequate taxation, the local government cannot initiate, execute, or maintain these projects and fulfill other responsibilities. This is the fundamental reason why development remains limited in several local government councils in Nigeria. The issue of inadequate taxation is not unique to specific local governments but has a particularly detrimental impact on development within these councils. In this project, we aim to investigate the extent to which poor taxation can influence development, particularly in Eket local government.

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1.2   Statement of the problem

The local government council plays a direct role in addressing the needs of the rural population, particularly those residing in underdeveloped rural areas, as highlighted by Udeh (2008). These communities often lack fundamental amenities and the conditions associated with modern civilization. They face challenges such as the absence of clean drinking water, electricity, accessible roads, inadequate educational infrastructure, and facilities, among other deficiencies.

This situation contributes significantly to the phenomenon of rural-urban migration, where individuals from these rural areas move to cities in search of better living conditions. Consequently, this influx of people into urban areas has led to overcrowding and an increase in criminal activities. In light of the above observations, it becomes evident that the consequences of poor taxation on rural area development are a substantial concern. It is plausible that inadequate taxation may be a contributing factor to this issue.

If Nigeria aims to realize its objectives outlined in Vision 2020 and potentially achieve the targets set in the Millennium Development Goals (MDGs), addressing the taxation issue is imperative. Consequently, the researcher is deeply concerned with understanding the impact of taxation on the lives of rural residents and how it has influenced overall development, particularly in government activities within the Eket local government area.

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1.2      Objectives of the Study

The broad objective of the research is to evaluate the impact created by taxation on the development of Eket in Akwa Ibom State.

The other objective of this study includes:

  1. To determine the impact of taxation on the development of Eket  local government area.
  2. To find out the major revenue sources of Eket local government area.
  3. To examine the methods adopted for prompt collection of tax in Eket local government.
  4. To ascertain if there are problems of taxation in Eket.

5.   To examine the lineup of problems to taxation in Eket local government area.

1.3      Research Questions

  • What are the impacts of taxation on the development of Eket?
  • What are the sources of revenue in Eket local government area?
  • Are there methods adopted for prompt collection of data in Eket local government area?
  • Are there problems of taxation in Eket local government area?
  • What are the problems of taxation in Eket local government area?

1.4      Significance of the Study

The significance of any human endeavour is measured by its relevance to solving human problems. The findings of this study would help Eket local government to identify the problems associated with taxation and its consequences on development.

1.5      Scope of the Study

The study is focused on taxation and local government development. The study also looks at the various tax administrations and especially on how revenue generated from taxes are managed for developmental purpose of Eket local government, in Ikot Udoma.

The study will cover a period of five (5) years (i.e between 2015 and 2020).

1.6      Limitation of the Study

        The study is focused on the impact of poor taxation and how it affects development of the local government areas. It will also involve the analysis of problems associated with taxation and its impact on the development of Eket local government.

1.8 Definition of Terms

Some concepts require proper explanation to enhance our understanding of the theme, where necessary, opinion of scholars will be cited to explain the terms. The researcher will also give some fundamental definition of terms used in the study. 

  1. 1.          Local Government: According to Lawal (2000) local government as a political subdivision of a nation in federal system which is constituted by law and has substantial control of local affairs which include the power to impose taxes or exact labour for prescribed purpose.

Williams (2006) defines local government as involving the conception of territorial, non-sovereign community possessing the legal right and the necessary organization to regulate its own affairs.

  1. 2.          Revenue: Public revenue could be defined as the funds generated by the government to finance its activities. In other words, revenue is the total fund generated by government, (Federal, State and local government) to meet their expenditure for a fiscal year. This refers to the grand total of money of income received from the source of which expenses are incurred. Revenue could be internal or external revenue.
  2. 3.           Revenue Generation: This is the process of sourcing revenue for local government in carrying out their aims and objectives (Udeh, 2008). 
  3. 4.          Expenditure: Public expenditure refers to the expenses which the government incurs for its own maintenance, in the interest of the society and the economy in order to help other countries.
  4. 5.          Tax: Tax can be defined as a compulsory levy by government on goods, services and wealth. It provides definite source of revenue for government expenditure (Udeh, 2008). It is a way by which government obtain extra money from income of individual and companies. Tax can be direct and indirect. A tax is a payment made by the tax payers and used by the government for the benefit of all citizens.
  5. 6.          Tax evasion: Tax evasion means illegal reduction in one’s tax liabilities, thereby paying less than the appropriate amount and not paying at all.
  6. 7.          Tax avoidance: Tax avoidance is the act of streamlining one’s financial affairs within the law so as to minimize the tax liabilities.
    1. 8.          Development: According to Ake (2001) development is the process by which people create and recreate themselves and their lives circumstances to realize higher levels of civilization in accordance with their own choice and values. It is also a type of social change in which new ideas are introduced into a social order to produce higher per capita income and levels of living through more modern production methods and improved social organization.