The Impact Of Tax Incentives On Economic And Industrial Development

Project and Seminar Material for Economics

The Impact Of Tax Incentives On Economic And Industrial Development


Abstract


This impact of Task incentives of Economic and industrial development of Enugu state Intends to examine the extent individuals ad companies have been responding to the incentives scheme. How these incentive have been stimulating and motivating these bodies on employment opportunities. The researcher intends to examine also how these incentives have been helping existing industrials and companies in expanding their areas of operations in Enugu ad to know if the expected result of these incentives are achieved by the firms who benefit from these relives.

Some of the factors which have motivated the researcher in this study include: weakness of the firm to respond to the desired objective, lack of awareness and the aims for granting the relief in adequacy of incentives to sustain the desired development. In this work, the researcher looked into textbooks journals, articles and administered questionnaires to practicing personalities which include tables were used in analyzing the data collected, it was revolved that more than 50% of the firms and individuals studied are aware of the incentive. A good number of them did not go into production, because of the incentives and more than 50% suggested that more incentives should granted.


Proposal


This research intends to highlight tax incentives on Economics and industrial development of Enugu State. It also seeks to examine the extent to which individuals and companies have been responding to the incentive scheme. The research will also show how these incentives have been helping existing industries and companies in expanding their areas of operations in Enugu state, and to know if the expected results of these incentives are achieved by firms who benefit from these relieves.

In pursuance of this research study, the research will gather data through text books journals articles and questionnaires will be administered to practicing personalities. Data gathered will than be analyze using tables.
In the course of this research study, the researcher will face some constraints which include time constraint, financial constraint and inadequate materials.

Some recommendations will be made which if implemented by tax exparct, consultant, individuals and economic analyst will enhance a better tax incentives.


Chapter One


Introduction

1.1 Background of the Study

The mode by which economic and industries can be effectively and efficiently developed have a problem. As a result, government charges less tax in order to encourage investments and activities in those areas which helps to improve the production capabilities, active economic growth as well as allocation of resources in social desirable manner.

Tax incentive is the use of government spending and tax policies to influence the level of national income. Taxation itself is the process or mean by which communities or group are made to contribute part of their income for purpose of administration of the society.

This measure will encourages new enterprises to spring up. Thereby reducing profit task which encourages production to curb unemployment. Government should provide employment opportunities, to improve our economy.

The government infrastructure facilities such as roads, water supply, electricity hospital etc more reallocate resources to the public sector charging mix input. By borrowing rather than taxing, the federal government has a better chance of expanding investment spending which is essential to enlarge our production possibilities and attaining increase in standard of living.

In order hand, these incentive can be targeted on low income earners. This will normally increase their saving which is necessary for higher investment.

Tax incentive also create employment opportunities people which help to fight depression, inflation thereby increasing distribution of income and wealth.


1.2 Statement of the Problem

This impact of tax incentive on economic and industrial development using Enugu state as a case study although there are many advantages got were tax incentives are use for economy and industrial development most task experts, consultants individuals and economic analyst ignored or criticized tax incentives because of the following.

  1. The impact of incentives are not effective in the economy
  2. The exemption privilege not granted to all firms in an industry which place some companies at a competitive disadvantage
  3. Many management of firms, companies lack awareness of the incentive
  4. The incentive granted are not adequate to the development and growth of industry
  5. Unwillingness of some companies and individuals to claim the incentive. This is because they do not understand the role.

1.3 Purpose of the Study

Tax incentive is a strong fiscal measure or policy which can stimulate investment and savings leading to capital information. This capital acquisition can be used productively in economic and industrial development of companies and individual can use them effectively. In deciding if these incentives can stimulate the companies and individuals to invest in the economy.

One basic fact is this whether the company individual concern decided to go into business because of tax incentives offered. In this study the researcher intends or companies, have been responding intend or companies, have been responding to incentive scheme how these incentive have been stimulating and motivating these bodies to establish industries, which will create employment opportunities.

Moreover, he researcher intends to examine how these scheme has been helping existing industries and companies in expanding their areas of operation in Enugu


1.4 Research Questions

  1. Can these tax incentives attract foreign incvestors in Nigeria via – Enugu state?
  2. Are the existing tax incentive adequate for development?
  3. Are those incentives claimable by the companies?
  4. Do these incentive stimulate individuals to establish new enterprises?
  5. Do these tax incentives induce the existing industries in Enugu to pursue vigorous policy expansion.

1.5 Significance of the Study

Tax incentive scheme is an economic policy which exist among many other competing alternatives. The scheme may be an inducement towards rightful investment, securing proposal on private investors lay behind, it then follows that if the schemes is a pale shadow for pilling stock of profitable that the benefits expected from these incentives should be able to justify the cost.

  1. As a result of creating many industries and subsequent expansion of existing ones, it standard of living of the populace will increased.
  2. Tax incentives will helps in small scale industries which will subsequent expansion of existing one’s the standard of living of the populance will be increased.
  3. Tax incentive scheme leading to diversification will be also result in increasing Urban and rural development. It is the intention of the researcher to look into ways and extent the existing tax incentives are being used by entrepreneurs in setting up industries establishment in Enugu State.

1.6 Scope and Limitation of Study

The study covers the impact of tax incentives in economic and industrial development, it is limited to some tax offices in Enugu state limitation. To this work includes:

Time:

The writer was face with appropriation her time between writing this project and performing her academic function as well as meeting her social needs.

Responses:

Some people; I will met may not be ready to given an answer to the question I ask and some see me as a spy as a result of this work. Consequently, a great deal of emphasis was placed on questionnaires and oral interview that cost consideration time and money.


1.7 Definition of Terms

1. Tax Incentive:

Tax incentives are relief granted to tax payers or industries in the form of set off from total in comer or gain before tax liability is determined. In the case of industries ore companies is inform of tax holiday it is established by the legislation authority such payment of taxes.

2. Disposal Income:

Is that personal incomes available for consumer spending saving and investment consisting of all income minus taxes and other payment to the government.

3. Jurisdiction:

It is the authority of courts or tax officer to hear and determine assessment of tax payer or cases.

4. Pension Fund:

It is any society fund contact or scheme.

The assets which are held under irrevocable trust and any scheme established by law in Nigerian or other places, the main objectives of which and the provision of non-assignable and non commitable retirement pension

5. Tax Evastion:

It is the deliberate attempt to defraud tax authorities by an individual or company by giving false information of his or her revenue.

6. Dependent Relative Allowance:

The relative must be old and closely related to the tax payer or his spouse. His income must not exceed N900. This allowance of N2,000.00 is also distributable between among those who contributed in maintaining the relative.

7. Children Allowance:

The children must below 16 years but if above must be receiving full-time education or is articles or indentured in a trade or profession in that year. The child’s allowance of (N) 2,500 is distributable between two or more people who maintain a child.

8. Capital Allowance:

Capital allowance is granted to a qualifying capital expenditure incurred wholly and exclusively for the purpose of the trade or business.

9. Initial Allowance:

(Section 7 (1) of PTD 1993) is granted only one in the life A an asset the year the asset is first used. It is allowed fully on the cash value regardless of the number of month, weeks or days the assets is used in the first year.

10. Annual Allowance:

This is provided in section (1) of the decree. Annual allowance is granted each year of assessment in respect of any asset used wholly, exclusively, necessarily and reasonably till the end of the accounting year for the purpose of the trade

11. Depreciation:

The lose of usefulness or value of fixed asset of group of asset they cannot be restored by repair because of wear obsolescence or inadequacy. Some of the ways of calculating depreciation include the appraised method, unit method and working hours method.

12. Exploration Incentives:

All expenditure which exclusively, necessarily and reasonably incurred for the purpose of petroleum operations are dimmable as reflection from some of that period.

13. Investment Tax Credit:

Investment tax credit replaced the old initial allowance granted in respect of qualified capital expenditures.

14 Loss Relief:

A company under the act may elect to defer the set off or a less incurred to another accounting period.

15. Tax off-set:

Section (17) of the act provides that custom duties on essential plants, royalties on domestic sale of crude oil and investment tax credit should be deducted in full before arriving at the chargeable tax to be paid by such company.

16. Roll over relief:

Capital giant act grants a roll over relief to a disposer or an owner of an assets which is destroyed or provided that the capital sum received is applied within three years to purchase another asset in order to replace the one destroyer or lose.


Chapter Five


Summary of Findings, Conclusion and Recommendation

5.1 Summary of Findings

Finding of the research from previous chapter are discussed in this chapter. These discussions will be based on the presented and analyzed data from questionnaires and the rest of information collected.

The research work is meant to ascertain the government are adequate for development attract foreign investments, induce existing industries in Enugu to pursue vigorous policy of expansion, motivate individuals to establish new enterprises and to know whether these incentives are claimable by the companies.

This research has led the research to did out a remarkable truth on the subject matter. From the analysis data collected it was discovered that:

  • 75% of the respondents proved that the incentive granted are not adequate for development:
  • 50% agree that tax incentives granted could attract foreign investments
  • 85% of the respondent are ready to support any programme for increase in tax incentive
  • 75% of the respondents proved that these incentives can stimulate them to in corporate their companies, while 25% said no to this
  • 65% of the respondents said they do not enjoy or claim pay tax incentive because they do not pay tax, while 35% of the respondents said they enjoy tax incentives.

5.2 Conclusion

After due consideration of the analyzed data. The research was able to conclude that most of the companies and individual have been benefited on the incentive since they have invested all the funds generated by them thereby justifying the additional qualify bestrewed on them, by tax incentive but also due to some other valuable factors like provision of adequate security to the enterprise geographical of an area etc.

Few of the companies and individuals are unwilling to claim the incentives this is because they do not understand the role tax incentives on economic and industrial development.


5.3 Recommendations

The researcher discover that certain factors hinder tax incentives on economic and industrial development. However, she has discovered ways of improving these problems.

  1. Government should make sure that businessmen tradesmen elf employ individuals keep satisfactory records of financial positions of their business. Any de-finance should pay a standardized rate of tax for each year of assessment
  2. Special tax incentives should be grated to industries established in economically backward areas of the state e.g investment and special development allowance.
  3. Government should use tax incentives to encourage foreign exchange conservation i.e. tax incentives legislation should move from capital accumulation to the utilization of local input i.e. raw materials labour and locally input i.e. raw materials labour and locally fabricated machinery as against imported ones.
  4. Research industries should be encouraged by the removing of import duties and employment of expertise from advance countries
  5. Infact industries benefiting from pioneer relief/ waiver period should be required to send periodical progress report.
  6. Government should state clearly what the incentives should use for according to the recipient and closely monitor it.

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