Accounting

Taxation as the Significant Tool for Economic Development

ABSTRACT

This research work examines as a significant tool for economic development. It concludes that a tax has played an important role in the economic development of a state. Tax policy has not been effective in enhancing social development in terms of distributing social income or encouraging socially desirable activities. The relationship between taxation and economic development is perhaps not as obvious. A case can be made that tax policy has had a positive impact on the development of the state. Data for this study were collected through a questionnaire on 45 respondents drawn from internal revenue service, Uyo, Akwa Ibom State. The researcher questions were raised and the hypothesis was tested through the use of correlation analysis. The result of the research study shows that taxation has a significant contribution to the economic development of a state and citizens are liable to taxes because there is nothing free.

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Taxation is an important tool to meet the needs of the people of resource-producing states. It is a major national issue in most countries and is often problematic in its imposition, administration, and usages. Its nature contrast with its obvious benefits to society.

The introduction of taxation could be traced back to ancient days when kings levied their subjects to provide for the benefit of the people.

In Nigeria, the imposition of tax is traced right from the colonial government when Lord Fredrick Lugard introduced a tax to people to generate revenue to run his administration. It is reported that his policy of taxation was not accepted by the citizens and this subsequently led to riots in 1929.

The government, through its agent, has come to play a larger role in controlling our national economy. She has to

Consider the aspect in which taxes helps in achieving her economic goals.

Taxation has been introduced to enable the government to generate revenue to implement a certain function for the citizens of the country. These functions of taxation in Nigeria include wealth redistribution, economic growth, employment generation, price stability, etc.

Taxation in the ancient period and in the present time has been used to bring improvement in finance of the country. The tax collected has been used as revenue to the government.

Also, taxation has helped to discourage the consumption of certain goods and services. It helped to bring government planning into implementation because it generates revenue, allows for investment in certain areas, like foreign goods, and encourages agriculture and industries. Consequently, for some infant industries, there is a period of tax holiday which could last for five years to enable such industries or company nature

HISTORICAL BACKGROUND OF THE STUDY

Historically, internal revenue service was a department of the Ministry of Finance before the civil war in 1960. It was called the” Revenue Department”, after the civil war in 1970, the name was changed to South Eastern State Board of Internal Revenue Service, according to South Eastern State Edict No.8 of 1969. The South Eastern State was changed to Cross River state Law Cap. 45. This gave birth to the state Board of Internal Revenue Services, the legal backing to administer personal income tax.

But on the creation of Akwa Ibom State but in 1987, the State established its Board of Internal Revenue Service from the Cross River State Cap 45 as applicable herein. this law prevailed until the promulgation of personal income tax decree 104 of 1993 (Now Act 104, 1993). The functions were a collection of pay As you Earn Tax (PAYA).

Direct Assessment Tax, collection of Tax example: pool betting, fines, registration and renewal of motor vehicle licenses, driver’s licenses, sales of badges and plate numbers, collection of other taxes and revenue that belongs to the State.

However, the internal Revenue Service is the engine room, generating money for the Government of Akwa Ibom State. Its directorate work to make sure that all taxpayers defaulters are prosecuted. Gives and stamp duties are general for the state.

In the area of manpower, as of the year 2008, the total staff strength was 850, which was not still enough, with recent developments in the generation of funds for the state government.

Funds are needed because data collection, compilation, and regression methods of statistical analysis need more funds to go and obtain for accurate and regular publication in which a standby vehicle is necessary to meet the current demands of taxation.

STATEMENT OF THE PROBLEM

The problem that prompt this research is that some of the taxpayers do not know that taxation is a significant tool for economic development, and as such the taxpayers tend to evade and avoid taxes.

And so, this research intends to disclose the significance of paying taxes to answer the question of evasion which will allow for economic development.

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OBJECTIVES OF THE STUDY

The objective of this study includes the following:

To determine the significance of taxation in an economy.

To assess the contribution of taxes towards the state economic growth and development.

To identify the problems (if any) associated with tax implementation and

To make recommendations based on research findings.

RESEARCH QUESTIONS

The following constitute the research questions for this study:

Do taxations play any significant role in economic development?

To what extent does the Government utilize revenue derived for the development of the economy?

What are the problems associated with tax collection in the country?

What steps has the Government taken to arrest the problems of tax evasion in the country?

STATEMENT OF THE HYPOTHESIS

Hi -taxation has a significant contribution to the economic development of a State.

Ho -taxation does not have any significant contribution to the economic development of a State.

SIGNIFICANCE OF THE STUDY

This study would be of value in the following ways:

It will be a source of reverence materials to a subsequent researcher in this field.

It will enlighten the taxpayers about the importance of paying.

It will broaden the researcher’s scope of the theory of taxation.

The result of this research will help the aggrieved taxpayer to know how his/her quota is being used.

The findings and recommendations of this study will assist the Board of Internal Revenue (BIR) in developing and improving upon their tax machinery and policies.

LIMITATION OF THE STUDY

In the course of carrying out this research work, there were a lot of factors that acted in opposite directions towards the completion of this research work.

The following setbacks were encountered by the researcher:

Inaccessibility of relevant materials in the school library and another library.

Difficult in collecting Data.

Insufficient time for the research work as the result of a short academic calendar.

Lack of sufficient funds in conducting the research process.

SCOPE OF THE STUDY

The scope of the study refers to the whole country because of logistics and financial constraint, the researcher, therefore, restrict her scope to

Internal Revenue Service, Uyo, and despite other tools for economic development, for this research the scope of this study is restricted to ”TAXATION”.

DEFINITION OF TERMS

There were many terms used in this write-up that need to be defined to avoid doubt in the mind of the readers. the following terms are defined as they reflect their application in this study.

TAX: it is a levy imposed by the Government against the income, profits, or wealth of individuals, partnerships, and corporate ‘organizations. (Tabansi, 2001).

TAXATION: is the process or machinery by which committees, groups of persons, or individuals are made to contribute part of their income at some agreed rate and methods for purpose of administration and development of the society. (Okorle Onovo, 2007).

ECONOMIC DEVELOPMENT: According to Agu (2000), is the process whereby the level of national production (that is national income) or per capita income increase over some time.

INCOME TAX: According to Okerie Onovo (2007), it is a tax levied on the income of an individual.

TAX EVASION: this is a deliberate act of a taxpayer to escape tax either by running away from collectors or under-declaring his/her income, omission, or misstatement of items from returns. this act is illegal and is punishable if discovered (Tabansi, 2001).

TAX AVOIDANCE: this is generally considered as a way of identifying the loop-hole in the tax law and then taking advantage of such a loop-hole to reduce the tax payable. (Tabansi, 2001).

TAXPAYER: it refers to employer or labor, Government Ministry and department, parastatals, statutory bodies, institutions, and other established organizations approved for the operation.

BOARD: this refers to the bodies which are authorized and empowered by law for the responsibility of the collection of taxes, they are sub-head quarter offices located at all the Local Government Areas in the country. (Wikipedia, 2007).

TAX ADMINISTRATION: Cater (2000) defines it as the management of human and material resources to bring about efficient, fair, and effective tax assessment, collection, and accountability to achieve other economic socio-political objectives of the Government.

REFERENCES

Agu. G. A (2001): New system economic, African press publisher Ltd, Onisha, Nigeria.

Agyel, A. K. (2000): principle of personal income tax in Nigeria, Lagos, Academy press Ltd.

Buehana, E. (2000): taxation policy; oxford university press Ltd, London.

Doc. F. J. (2006): taxation and economic development in tropical African Cambridge, Massachus setters publishers.

Dora. Nancock. (2006): taxation policy and practice, the baseness school leed metropolitan universities, United Kingdom.



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