Effect Of Taxation On The Economic Development Of Edo State (A Case Study Ikpoba Okha Local Government Area Of Edo State)

Project and Seminar Material for Economics

Effect Of Taxation On The Economic Development Of Edo State (A Case Study Ikpoba Okha Local Government Area Of Edo State)


Abstract


The study investigated the effect of taxation in Ikpoba-Okha Local Government Area of Edo State. The objectives of the study are: To identify the various types of tax,  To analyze the revenue generated by the government from taxation 2002-2005  in Ikpoba-Okha Local Government Area of Edo State, To evaluate the effect of taxes on the economic development of state from 2002-2005. To offer suggestion for overcoming some of the problems attributed to collection of taxes. To highlight the benefits that will be derived from the revenue generated from taxation. The population used for this study was questionnaire to elicit information from the respondents. The findings of the study are: effect on demand, effect on price level, effect on employment. As a result of the findings derived for the following recommendations.


Table of Content


  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of Content
  • List of Tables
  • Abstract

Chapter One:

Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Objective of the Study
  • 1.4 Research Questions
  • 1.5 Research Hypothesis
  • 1.6 Significance of the Study
  • 1.7 Scope of the Study
  • 1.8 Limitation of the Study
  • 1.9 Definition of Terms
  • 1.10 Organisations of the Study

Chapter Two:

Review of Literature

  • 2.1 Conceptual Framework
  • 2.2 Theoretical Framework
  • 2.3 Empirical Review

Chapter Three:

Research Methodology

  • 3.1 Research Design
  • 3.2 Population of the Study
  • 3.3 Sample Size Determination
  • 3.4 Sample Size Selection Technique and Procedure
  • 3.5 Research Instrument and Administration
  • 3.6 Method of Data Collection
  • 3.7 Method of Data Analysis
  • 3.8 Validity of the Study
  • 3.9 Reliability of the Study
  • 3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Analysis of Data
  • 4.3 Answering Research Questions
  • 4.4 Test of Hypotheses

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • APPENDIX
  • QUESTIONNAIRE

Chapter One


Introduction

1.1 Background to the Study

Taxation can be defined as the money composed by the government on her citizen in order to generate fund so as to meet its expenditure. Taxes are levied so as to accomplish some of nation economic objective of the society. Tax can be a major subject of political controversy throughout history even though they constitute a sizeable share of national income. Introduction of taxation in Nigeria was dictated by the financial need of its colonial administration. Custom duties are against direct taxes were first introduced in southern Nigeria, the northern territory was a convenient place to experiment the system of direct taxation because, the people of the area were used to payment of taxes under the Fulani administration direct taxation was introduced in Ikpoba-Okha Local Government Area of Edo state introduced in the north in 1904.

After the amalgamation of northern and southern Nigeria in the year 1914, taxation was also introduced in the western part of Nigeria. The Yoruba and the Binis who are predominant in the area already had well established tax system of taxation. Tax differs from other sources or forms of revenue in that they are compulsory levies and unrequired that is, they are not paid in exchange for some specific things such as sales of public property or the issues of public debt while taxes are presumable collected for the sake of the welfare of tax payer in independent on any benefit received. They are important exception to this characterization. Payroll taxes are commonly levied on labour income in order to finance retirement benefits, medical payment and other social l security programme.

Taxation includes custom duties, excess duties, purchase tax, income tax, cooperation and proportional tax and fiscal policy. This is to generate revenue to the government pursuit. No nation can do well without funds, tax is one of the main source of income for the government, when the national income of a country is high, the per capital income or income per head will also be high. Consequently such a country individual or citizen will enjoy better standard of living. This can lead to economic growth and development. The direct and immediate effect of direct taxation is reduction in income of the person on whom it is levied. This is to say that the higher the personal or company tax, the lower will be the retained income consequently, the lower the possibility of saving. Uniamakogbe (2006).

Taxation is very important for the economic development of Edo state and Nigeria in general. In the area of social infrastructure like, building of schools, provision of electricity, construction of roads e.t.c. The effect of taxation on the economic development of Edo state and Nigeria in general cannot be ignored because taxation reduces the purchasing power of the tax payer, it also lead to monopoly, finally it narrows the choice of goods in the economy.


1.2 Statement of Problem

Taxation has been a very important tool for economic development of Nigeria. Tax revenue is one of the most productive sources of revenue, hence most government depend solely on it as the main source of revenue accumulation. Thus, there are various tax policies instituted by several governments of Nigeria to enable appropriate applicability of taxes thereby enhancing economic development and stabilization.
The Federal Inland Revenue Service (FIRS) report shows that, receipts from petroleum profit tax (PPT) and royalties increased by 104.5 percent to N3, 976.3 billion. The Central Bank of Nigeria’s annual report of 2011 also shows that, total Federally-tax collected revenue rose by 52.2 percent to N11, 116.9 billion in 2011 and constituted 31.4 percent of GDP, (CBN, 2011)

It has been observed that the word declaration of income is very rampant among self employed citizens. There has been general ignorance of tax and therefore, the essentiality of tax payment is not clear to most of the citizen and government in ikpoba-okha local government area of Edo state.

There are divergent views on the roles of tax payment as it affects economic development. This study is an attempt to investigate and its effect on development.


1.3 Objective of the Study

The objective is aimed at studying the effect of taxation on economic development of ikpoba-okha local government area of Edo state.

To achieve these, five specific objectives are set out as follows:

  1. To identify the various type of tax
  2. To analyze the revenue generated by the government from taxation 2002-2005 in Ikpoba- Okha Local Government Area of Edo State.
  3. To evaluate the effect of taxes on economic development of the state from 2002-2005.
  4. To offer suggestion for overcoming some of the problems attributed to collection of taxes.
  5. To highlight the benefits that will be derived from the revenue generated from taxation.

1.4 Research Questions

  1. Does taxation have effect on economic development in Ikpoba- Okha Local     Government Area of Edo State?
  2. Does taxation make people to declare wrong information about their salaries and wages in Ikpoba-Okha Local Government Area of Edo State?
  3. Does taxation help government in the provision of social amenities in Ikpoba-Okha Local Government Area of Edo State?

1.5 Research Hypothesis

  • Ho: There is no significant relationship between taxation and the economic development of Ikpoba-Okha Local Government Area of Edo State
  • Ha: There is a significant relationship between taxation and the economic development of Ikpoba-Okha Local Government Area of Edo State.

1.6 Significance of the Study

The study is to provide information on how money generated from taxation is being used for social amenities and road maintenance. In addition, relevance to government institution, stakeholders, revenue bodies and research centres.

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 be 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 Nigeria economy such roles includes:

  1. Taxation is a major source of revenue to the government.
  2. Revenue generated from tax enables government performs its functions effectively.
  3. Taxation acts as an instrument of fiscal policy.
  4. The impact of tax on small business in the state.
  5. The study will in addition reveal if there are other better sources of government funding.

1.7 Scope of the Study

The study will identify the various type of tax. The study will also analyze the revenue generated by the government from taxation 2002-2005 in Ikpoba- Okha Local Government Area of Edo State. The study will further  evaluate the effect of taxes on economic development of the state from 2002-2005. in addition, the study will offer suggestion for overcoming some of the problems attributed to collection of taxes. Finally, the study will highlight the benefits that will be derived from the revenue generated from taxation. Hence, the study is delimited to Ikpoba-Okha Local Government Area of Edo State.


1.8 Limitations of the Study

There has not been any serious and meaningful academic endeavor without some militating factors or constraints. To that extent, lack of financial resources, and time constraint constituted the most serious limitations of this work. Again, the relative disclosure of information by the staff and management (respondents) of the organization understudy was also a constraint.


1.9 Definition of Terms

Direct Tax:

These are taxes levied directly on the income of an individual and business firm.

Indirect Tax:

These are taxes levied on goods and services.

Custom Taxes:

These are taxes imposed on goods sold to other countries.

Fiscal Policy:

It is the use of government tax and expenditure policies to influence the level of economic activity.

Progressive Tax:

It is a compulsory tax country imposed on an individual according to his ability. Example is P.A.Y.E. (pay as you earn).


1.10 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows.

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

This chapter summarizes the findings on the effect of taxation on economic development in Nigeria using Ikpoba-Okha Local Government Area of Edo State. The chapter consists of summary of the study, conclusions, and recommendations.


5.2 Summary

In this study, our focus was on the effect of taxation on economic development in Nigeria using Ikpoba-Okha Local Government Area of Edo State. The study specifically was aimed at highlighting identify the various type of tax, analyze the revenue generated by the government from taxation 2002-2005 in Ikpoba- Okha Local Government Area of Edo State, evaluate the effect of taxes on economic development of the state from 2002-2005, offer suggestion for overcoming some of the problems attributed to collection of taxes and highlight the benefits that will be derived from the revenue generated from taxation.. A total of 141 responses were validated from the enrolled participants where all respondent are drawn from residents and business owners.


5.3 Conclusion

Based on the finding of this study, the following conclusions were made:

  1. Taxation have effect on economic development in Ikpoba- Okha Local     Government Area of Edo State.
  2. Taxation make people to declare wrong information about their salaries and wages in Ikpoba-Okha Local Government Area of Edo State.
  3. Taxation help government in the provision of social amenities in Ikpoba-Okha Local Government Area of Edo State.

5.4 Recommendation

Based on the responses obtained, the researcher proffers the following recommendations:

  1. The tax collection mechanism used by tax officials must be free from corruption and embezzlement. If this is not done the revenue collected many not reach the desired point.
  2. The Federal Government, state governments and local governments should urgently modernize and automate all its tax system, improve tax payer convenience in the assessment and payment process whilst at the same time entrenching effective and modern human resource management practices in the tax authorities.
  3. Judicious use of tax payer’s money should be made and be seen to have been properly utilized. This will encourage tax payers to continue to pay taxes.
  4. Effort should be made by the federal state and local government to diversify the main revenue source from oil to other sectors of the economy such as agriculture, extractive industries in order to attract direct and indirect taxes.
  5. The Federal, State and Local Governments should ensure that all collected revenue from either Pay As You Earn, withholding taxes, value added tax etc are paid promptly into designated bank accounts and failure to do so within the stipulated period of time should attract strict penalties to the tax official.

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