The Role Of Revenue Mobilization In Economic Growth And Development

The Role Of Revenue Mobilization In Economic Growth And Development

Abstract

This study was carried out to examine the role of revenue mobilization on economic growth and development using Akwa Ibom State Board of Internal Revenue, Uyo as a case study. Specifically, the study was aimed at ascertaining if there is different between revenue mobilization and the development of the state, if Revenue mobilization can be used in budget realization, and if there are problems facing revenue mobilization in the state. The study employed the survey descriptive research design. A total of 50 responses were validated from the survey. From the responses obtained and analysed, the findings revealed that there is no different between revenue mobilization and the development of the state. The findings also revealed that revenue mobilization can be used in budget realization. The findings further revealed that corruption, poor accounting system and poor management of finance were among the problems facing revenue mobilization in the state. The study recommend government to put measures in place to tackle the problems facing revenue mobilization in the state since it has been proven to facilitate economic growth and development.

Chapter One

Introduction

1.1 Background of the Study

Government revenue or National revenue is money received by a government from taxes and non-tax sources to enable it to undertake government expenditures. Government revenue as well as government spending are components of the government budget and important tools of the government’s fiscal policy. The two ways government generate money is through tax revenue and non-tax revenue.

The Nigerian Tax System has undergone significant changes in recent times. The Tax Laws are being reviewed with the aim of repelling obsolete provisions and simplifying the main ones.

Under current Nigerian law, tax revenue is enforced by the 3 tiers of Government, which are Federal, State, and Local Governments with each having its sphere clearly spelt out in the Taxes and Levies Act, 1998. The whole essence of tax revenue is to generate revenue to advance the welfare of the people of a nation with focus on promoting economic growth and development of a country through the provision of basic amenities for improved public services via proper administrative system, and structures. Tax revenue plays a crucial role in promoting economic activities, growth and development. Through tax revenue, government ensures that resources are channeled towards important projects in the society, while giving succor to the weak. The role of tax revenue in promoting economic activity and growth may not be felt if poorly administered. This calls for a need for proper examination of the relationship between revenue generated from taxes and the economy, to enable proper policy formulation and strategy towards its efficiency. According to Olashore, (1999), the Nigerian economy has remained in a deep slumber with macroeconomic indicators reflecting an economy in serious need of rejuvenation, revival and indeed radical reform. Also in the view of Oni, (1998), tax administration needs to be revamped and refunds of taxes as well as duty drawbacks administration are inefficient. In his discussion of the relationship between tax structure and economic development, Vincent, (2001) divided the period of economic development into two, the early period when an economy is relatively underdeveloped and the later period when the economy is developed. During the early period, there is limited scope for the use of direct taxes because the majority of the populace resides in the rural areas and is engaged in subsistence agriculture. Because their incomes are difficult to estimate, tax assessment at this stage is based on presumptions prone to wide margins of error. A critical challenge before tax administration in the 21st century Nigeria is to advance the frontiers of professionalism, accountability and awareness of the general public on the imperatives and benefits of tax revenue in our personal and business lives which include: promoting economic activity; facilitating savings and investment; and generating strategic competitive advantage. If tax administration does not for any reason meet the above challenges, then there is a desperate need for reform in the area of the tax regime, and in the administration of taxes. Tax revenue mobilization as a source for financing development activities in Nigeria has been a difficult issue primarily because of various forms of resistance, such as evasion, avoidance and corrupt practices attending to it. These activities are considered as sabotaging the economy and are readily presented as reasons for the underdevelopment of the country. Adegbie, (2010). Government exists in order to effectively collect taxes from available economicresources and make use of same to create economic prosperity such that available and willing human and other resources are gainfully employed, infrastructures provided, and essential public services (such as the maintenance of law and order) are put in place etc. Tax resistance only makes the development process unattainable. Onairobi, (1998). It could be deduced that changing or fine-tuning; tax rates are used to influence or achieve macroeconomic stability.

Some of the most recently cited examples are the governments of Canada, United States, Netherland, United Kingdom, who derive substantial revenue from Company Income tax, Value Added Tax, Import Duties and have used same to create prosperity Adegbie, (2010). Thus it can be said that the economic development of a country depends on various reasons one of which is the presence of an effective and efficient tax revenue policy. In Nigeria the contribution of tax revenue has not met the expectations of Government. Government has equally expressed this disappointment and has accordingly vowed to expand the non-oil tax revenue. Eguaghide, (2007). It is in the light of the foregoing that this study examines the extent to which the tax system has contributed to economic growth of Nigeria.

1.2 Statement of Problems

The problems are as follows:

1. Social disinterest: In contribution of the up-keeping of the government. It is said to find top functionaries of government and well placed people in the society circumvent, payment of taxes, fees, licenses etc.
2. Economic development: This state of economic development of the society also affects revenue collection provision of enhanced infrastructures enhance ability to pay as this, gets as impetus.
3. Within the revenue agencies, there are poor facilities for work: There is evidence of dissatisfaction with poor conditions of services as well as working environment. There is lack of motivation as opportunities rarely exist for revenue collectors to reach the private of the state administrations.

1.3 Objective of the Study

The objective of the research study are thus:

1. To examine the roles or revenue mobilization in the economic growth and development in Akwa Ibom State.
2. To find out how revenue mobilization is used in budgeting realization.
3. To find out the sources of revenue mobilization to the federal, state and local government.
4. To find out how revenue collection could be used in the mobilization as an item aimed to budget realization.
5. To find out the problems confronting revenue mobilization and how to improve it.

1.4 Research Questions

1. Does revenue mobilization influence economic growth in the state?
2. Can revenue mobilization be used in budget realization?
3. Can revenue allocation be used in budget realization?
4. Are there problems facing revenue mobilization in the state?

1.5 Research Hypotheses

1. Ho1: There is no significant different between revenue mobilization and the development of the state.
   Ha1: There is different between revenue mobilization and the development of the state.
2. Ho2: Revenue mobilization cannot be used in budget realization.
   Ha2: Revenue mobilization can be used in budget realization.
3. Ho3: There are problems facing revenue mobilization in the state.
   Ha3: There are no problems facing revenue mobilization in the state.

1.6 Significance of the Study

This refers to the importance, relevance and benefits accruable to this research work at it’s completion. However, this research topic “Revenue mobilization as a means of budget realization” is central in every economy including Nigeria in which Akwa Ibom State is not an exception, as a result of these: this section will deal with the expected positive outcome of this research work in relation to Akwa Ibom State revenue mobilization as it affect the budget realization.

This research study will help the management of Akwa Ibom State Board of Internal Revenue (BIR) to identify its problems in revenue mobilization. Budget realization is not possible without an efficient and effective revenue collection and mobilization.

However, inefficient and ineffective budget realization is as a result of poor revenue mobilization which also has a tricking-down or multiplier effect on the economy at large, this is because when the budget is not realized, economic growth and development are virtually impossible, as a result of these, the researcher believes in identifying the root problems of the problems of growth and development. Moreover, these root problems are all embedded in the problems of revenue and mobilization.

Again, this study or this research work will make available information and reference material for further study. On this topic, it is however expected that in the course of this study, the researcher will source for relevant pieces of information and materials for the purpose of the study. This nevertheless will assist in the completion of this research work and with further questions that will mutably arouse other researchers into further research. This indeed, will be of immense immeasurable benefit to the government of Akwa Ibom State in solving the problem of revenue mobilization.

Finally, is also expected that the research work will benefit all the stakeholders in the state which may include the government ministries and departments, the private sector organizations and the entire public and citizens of Akwa Ibom State. This is achievable through mass mobilization and sensitization in respect of revenue generation in the state. However, this sensitization can come under the following headings:

The need for revenue mobilization, the importance of revenue mobilization, the uses of government revenue, the benefit of revenue mobilization to entire public and the need for individual and organization to contribute their quotas in the revenue generation of the state. This in turn will help in budget realization and economic development of the state.

1.6 Delimitation and Scope of the Study

The scope of this work is based on revenue mobilization as a means of budget realization (A case study of Akwa Ibom State Board of Internal Revenue – Uyo).

This study is limited to the Board of Internal Revenue – Uyo which revenue mobilization helps in budget realization is relevant.

1.7 Limitation of the Study

In this research work, the researcher encountered some problems which stand as a constraints to the smooth operation of the research. However, some of the constraints are stated below:

1. Unfavourable respondent’s reactions.
2. The problem of accessing respondent in remote locations
3. Problem of bad access roads.
4. Difficulties in gathering information from some revenue officers
5. Non- availability of text books on revenue mobilization and research.

1.7 Definition of Terms

Taxation:

This is a process whereby charges are imposed on the incomes of individual and organizations by the government and her agencies to raise funds for public purposes.

Revenue Mobilization:

This is a tool for receiving money from members of the public by the government to finance its projects and to render essential services like roads, electricity, and bridges in return to the taxpayers (citizens)

Tax System:

This is a legal system for assessing and receiving tax from individuals, and cooperate organizations of a country.

Tax Evasion:

Tax evasion is an illegal practice where a person, organization or cooperation intentionally avoids paying his/her/ true tax liability to the government.

Tax Avoidance:

Tax avoidance is the use of legal methods and platforms to modify an individual’s financial situation in order to lower the amount of income tax owed.

Economic Growth:

It is described as a measure of increase in the value of outputs (goods and services) in terms of Gross Domestic Product (GDP)

Economic Development:

This is a measure of improvement in the general welfare and standard of living due to more equitable distribution of incomes, goods and services

Tax Authorities:

These are the bodies scheduled with the administration an implementation of tax laws and principles in relation to specific jurisdictions.

Value Added Tax:

This is described as a type of indirect tax levied on goods and services purchased by individuals and organizations.

Chapter Five

Conclusion and Recommendation

5.1 Conclusion

In this study, our focus was to examine the role of revenue mobilization on economic growth and development using Akwa Ibom State Board of Internal Revenue, Uyo as a case study. The study specifically was aimed at ascertaining if there is different between revenue mobilization and the development of the state, if Revenue mobilization can be used in budget realization, and if there are problems facing revenue mobilization in the state.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 50 responses were validated from the enrolled participants where all respondent are active workers in Akwa Ibom State Board of Internal Revenue, Uyo.

The findings revealed that there is no different between revenue mobilization and the development of the state. The findings also revealed that revenue mobilization can be used in budget realization. The findings further revealed that corruption, poor accounting system and poor management of finance were among the problems facing revenue mobilization in the state.

5.2 Recommendation

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

1. The introduction of the Tax Identification Number (TIN) which is a registration and storage of tax payers‘ data in Nigeria is a welcomed idea but for it to be successful it should be structured in such a way that will make all potential tax payers liable. Citizens and companies should be able to operate bank accounts only if they have TIN numbers. Government parastatals, multinationals, conglomerates and companies in the country should not engage any vendor who does not have a TIN number. This will go a long way in reducing Tax evasion.
2. The tribunal recommended by the Tax Act 1993 should be established to reduce cases of tax evasion and remittance of tax collections especially. Only professionals and trustworthy hands should be responsible for tax administration.
3. All taxes should be remitted via an e-payment system or via direct payment to the various tax authorities‘accounts. This will enhance and support the cashless economy system introduced recently.
4. Tax Clearance Certificates and other tax documents used in government transactions should be referred back to the relevant revenue authority for authentication.
5. The government should ensure that taxes are accounted for to the public via print and electronic media. The intent of government with such tax should be communicated to the general public. In so doing, a separate body should be set up to inspect and ensure that the funds generated by government through tax at each level of government is properly used and any level of government that fails to utilize such taxes as communicated to the public should be charged to court.

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