The Role Of Taxation In An Economic Development And Planning

Project and Seminar Material for Accountancy / Accounting

The Role Of Taxation In An Economic Development And Planning


Chapter One


Introduction

1.1 Background of the Study

Taxation comes from the words “LAT TAX RE” which means “to estimate”. It is a system of compulsory contribution usually in monetary term charged by the government of any country or its agencies against the income or wealth of a co-operative body, individuals or partnership for the provision of amenities.

Taxes are the most important sources of government revenue. According to K. A. Ishola (2002) he defines tax as a compulsory levy imposed by the public authority on income, consumption and production of goods and services such levies are, for example, made on personal income (consisting of salaries, business profit, interest, income dividend, royalties). Company profit, petroleum profit, capital gain and capital transformers.

The government has certain functions to perform for the benefits of those its governs. The scope of the economic orientation of the members of a particular society of a giver point in time, their need, aspiration and their willingness or ability to pay tax. This among traditional function of the government is the provision of collective of public goods i.e. goods that cannot be divided among the separate members of the society, but which must be used for the benefit of all, such goods include the maintenance of land order, defense against external aggressiveness and regulation of trade business to ensure social economic justice. A society which deserves to accomplish more benefits through the activities of the government, citizen of a country must be willing to pay more tax to enable the government to meet those objectives and if necessary assume the self discipline needed to create the desire environment for realization of such objectives.


1.2 Statement of the Research Problem

The collection of personal income tax individuals which is the responsibility of the state government and since taxation is the easiest and flexible source of revenue for those government in an area which every government should show a lot of concern. The researcher attempts to embarks on the role of taxation in an economic development and planning (A case study of Ogbomosho North Local Government) the following are the major researcher problems;

  1. The historical background of the taxation
  2. The reason for taxation.
  3. The various methods of collecting tax
  4. The effect of taxation economic development and planning
  5. The examination of likely problems of administration and collection of tax in Ogbomosho north local government.
  6. The expatiation of the problem associate with the judicious use of public funds etc.

1.3 Objective of the Study

It is apparent that taxation forms the compulsory levy imposed by the government authority on the income of individual firms and co-operate bodies.

The objectives of the study are;

  1. To examine the historical background of taxation.
  2. To identify, constitute factors impending effectiveness and efficiency generation of revenue in Ogbomosho north local government.
  3. To determine the economic development and planning
  4. Discuss various method of collecting tax
  5. To enumerate the effect of taxation in economic development.
  6. To critically examine the likely problem of administration and collection in Ogbomosho north local government.

1.4 Research Hypothesis

  1. H0: The role of taxation helps in economic development and planning.
    Hi: The role of taxation does not help in economic development and planning.
  2. H0: Taxation is promoting economic activities of a country.
    Hi: Taxation is not promoting economic activities of a country.
  3. H0: Taxation does not play a major role in the economic development and planning.
    Hi: Taxation play a major role in the economic development and planning.

1.5 Significance of the Study

This research is carried out mainly to identify the factors impending effective and efficient generation of revenue, economic development and planning in Ogbomosho North Local Government and also the judicious use of public funds. The research will identify possible solution of taken seriously will enhance state economic and development.

The improve economic could be used as a model for other western local government who share similar problem, social, political and cultural background. This may eventually lead to an improve national economy and social, political stability in the state.


1.6 Research Question

The focus of this study by the researcher is to identify the role of taxation in an economic development and planning. Hence, in the course of the study, effort has made to find solution to the following research question;

  1. What is the historical background of taxation in Ogbomosho North Local Government?
  2. What is the impact of taxation in economic development and planning?
  3. What is the background of economic development of Ogbomosho North Local Government?
  4. What are the various methods adopted in the collection of tax in Ogbomosho North Local Government?
  5. What are the contributions of tax to the current revenue of government?
  6. What are the problems of administration and collection of tax in Ogbomosho North Local Government?
  7. What are the problems associated with the judicious use of public funds etc?

1.7 Scope of the Study

The research is an account for economic development and planning in Ogbomosho as a whole. This research endeavour to identify factors and forces militating against effective economical development and hence, economical growth in the local government. Possible solution aimed of bringing about better economic development and growth using tax generated revenue are suggested.


1.8 Limitation of the Study

The researcher intends to carry out research on the rule of taxation in economic development and planning using Ogbomosho North Local Government as a case study.

However, the research work has been constrain as to time, lack of recent and adequate materials, unwillingness of the respond and the case study to give true replies lack of co-operative of the case study. However, effort has been made to ensure that the above limitation did not hinder effective completion and quality of the research work.


1.9 Study Plan

The research work has been divided into five chapters for every presentation of the facts and figure gathered.

Chapter one will contain the background of the study, significance of the study, research question, research hypothesis, scope of the study and limitation and definition of the key term and plan of the study.

Chapter two treated past and current literature review, which include historical background of taxation, economic development planning and growth, principle and canon of a good tax system, tax classification, incidence of tax and type of tax collected by Ogbomosho North Local Government.

Chapter three highlighted research methodology and a case study effort on the topic which include brief historical of the local government, background of economic development in Ogbomosho North Local Government, general trend in tax revenue and contribution to the current revenue and contribution to the revenue of government.

Chapter four discusses the presentation and data analysis which include brief introduction of the chapter presentation and analysis of data according to research question, problem of tax administration and collection in Ogbomosho North Local Government and the problem associated with the judicious use of public funds.

Finally chapter five through light on summary, conclusion and recommendations.


1.10 Definition of Key Term.

In the course of reading the research work, the reader will come across some terms which will be explained below;

i. Tax Evasion:

This is deliberately refusal to pay tax, by tax payer and it is done by their refusal to fill income tax forms.

ii. The Avoidance:

This is an attempt to lowe the ability by tax payer.

iii. Exercise Duties:

These are tax imposed on specific goods produced and consumed in the country imposing the tax.

iv. Value Added Tax (VAT):

This is a tax levied on goods and services at each production.

v. Purchase Tax:

These are taxes levied on specific income assess on the bases of the value of the goods.

vi. Progressive Tax:

This is a situation which increase as income of the tax payers increase.

vii. Tariff:

These are taxes levied on imported goods and services.


Chapter Five


5.0 Summary, Conclusion and Recommendation

5.1 Summary

The tax structure of Ogbomosho north local government is made up of many taxes; the reserves generated from taxation in the state are essentially low bothering on negligibility in comparison to the total amount the state government budget every fiscal year.

Tax administration on Ogbomosho north local government is faced with many problems some of which are dishonesty, lack of trust and dedication to work on the part of the staff of the internal revenue department and lack of compliance, evasion and avoidance of tax on the part of tax payer.

The department is also faced with shortage of personnel and equipment not to mention the complexities of tax laws and the enforcement by our courts of laws.

The inability of individual taxpayer to present proper tax return form, of any among some of the problems faced by internal revenue department besides, the nature of our also provided 100 holes, which the payer use in other to evade and avoid paying tax liabilities since it is an objective of development to find source of finance (funds) to increase the rate of economic growth and development which will in term lead to higher income and thereby raising the standard of living. However taxation has not been able to contribute much to the total funds generated by the state government from the table, the account of collection from amount to N44, 869, 440 in 2002 and N155, 693, 403 in 2003 the account collected is used by the chairman to provide food, shelter, education adequate means of transportation and health services which are imperative to the tax growth of an economy taxation is also used by government to protect infant a industries as well help in the distribution as well help in the distributions and redistribution of wealth and it is of economic.


5.2 Conclusion

Thus, conclusively, the role played by taxation on the economic development and planning of Ogbomosho north local government is minor in terms of fund generation for taxation of development project. But, we may also conclude that there exist room for improvement in that area hence the development of the state economy.


5.3 Recommendation

Based on discoveries made in the tax system in Ogbomosho north local government, its administrative aspect and structure as well as it’s contribution to the economic development and planning of the local government idea of necessary to make certain recommendation.

Since it is the aim of any government to increase its current revenue through taxation, I recommend that the government should examine either possible ways of introducing new on properly and increase the existing tax.

The condition of service of the employee in the inland revenue department, should be reviewing, so as to match them with the prevailing economic condition of the country, while the same time providing alternative salary scales Hence, the staff employed should match these salary scales.

The established of job standard is necessary it will serves as a device for evaluation the performance and based promotion on this evaluation the salary are made altercative, it will draw qualified and interest personnel from other sector of the economy to join the internal revenues department. A close contact with the universities and school business will also include capable graduation or enter into the tax services and if possible the government should established separation schools for the training of tax officer in the principal of taxation and particle of taxation in the local government to trying and produce qualified staff.

The existing loopholes should be blocked, through the review of the existing tax’s laws in the local government. It is these loopholes that the tax payers take advance of the evade and avoid paying taxes.

This thesis suggested that the establishment of tax court to enhance speedy traits of tax defaulters and penalties be impose on them. The government should educate the tax payers through radio house, television, newspaper and other means of communication and the merit and demerits of some activities such as tax evasion and avoidance, corruption and other unpatriotic behavior as it only when the public understand the consequence of their action on the economy, themselves and their future, will they try to comply with the laws.

Further recommendation is that the authority concerned should try to publish and disseminate any changes in tax law, so that the tax payer will be aware of the law currently in force.

This Inland Revenue department should purchase modern equipment such as computer for efficient data processing and reared keeping for statistical and future reference. This will also yield speed and accuracy in the computation of the tax liabilities, taking into consideration, dedication for all allowance and keeping the information and other relevant data for the future use.

The practice of appointing politician to administrative, post in the inland revenue department should be stopped because such position require a person who has knowledge of taxation and who is well versed in all the tax laws.
The issuances of tax clearance certificate should be restricted to the few top official, possible the direction general to prevent case of forgery of certificate for who have not paid tax.

This thesis recommends that white large some of money are to be paid as tax, there should be arrangement, allowing the tax payer to pay installmentally to enhance great understanding between tax officers and tax payers and also reduce cases of tax evasion and avoidance where such large sums are required to be paid on one lump sum.
With the believe that if the above recommendations are adopted the revenue generated from taxation will increase considerably and hence economic development and growth in the local government.


The Role Of Taxation In An Economic Development And Planning


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The Role Of Taxation In An Economic Development And Planning


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