EVALUATION OF USE OF TAX AS A FISCAL POLICY OF GOVERNMENT TOWARDS THE REGULATION OF NIGERIAN ECONOMY


Content

ABSTRACT

This project is aimed at evaluation of use of tax as a fiscal policy of government towards the regulation of Nigerian economy. In the course of this work, various data were collected and relevant literatures to the subject matter extensively and exhaustively reviewed. The study used both primary and secondary sources of data, statistical tools as tables, frequency distribution, percentages and chi-square (X2) were used in the analysis of data and testing of hypotheses. The following findings were on the tested hypotheses that; Fiscal Policy as an instrument is not useful in determining policy objectives in sector, businesses and individuals in an economy, dwindling   economic trends (e.g. inflation) do not guarantee true valuation of  goods and services for tax purposes in an economy, fiscal policy has negative effect on organizational growth the following recommendations were made based on the research finding, that stiff tax policy (especially fiscal) by government and her agencies that are contrary to aspirations (or achievement of goals) by sector, business and individuals should be adjusted in the form of flexible policies that will encourage growth of all in an economy, periodical review of taxation plans and programmes that make for successful application of fiscal policies in Nigerian economy should be adopted and applied, taxation as a tool for fiscal that may not be effective instrument for control in an economy should be regulated to making it effective and efficient, etc.

                          

 

                           TABLE OF CONTENTS

                                                                                               

Title page                                                                                          i

Certification                                                                                     ii

Dedication                                                                                        iii

Acknowledgement                                                                           iv

Abstract                                                                                           v

Table of contents                                                                    vi

 

CHAPTER ONE: INTRODUCTION                                                        

1.1 Background to the Study                                                         1

1.2 Statement of the Problem                                                         3

1.3 Objective of the study                                                               4

1.4 Research Questions                                                                  5

1.5 Research Hypotheses                                                               6

1.6 Significance of the Study                                                 6

1.7 Scope of the Study                                                                    7

1.8 Limitation of the Study                                                             8

1.9 Definitions of Terms                                                                  10

  References

CHAPTER TWO:  LITERATURES REVIEW    

2.1 Introduction                                                                              11

2.2 Historical Background on Taxation in Nigeria                        13

2.3 Definition of Tax and Its Purpose                                            23

2.3.1 Purpose of Taxation                                                               23

2.4 What is Fiscal Policy                                                                 24

2.4.1 How Is Tax a Tool of Fiscal Policy                                         25

2.4.2 The Following Are Instrument of Fiscal Policy                     26

2.5 Fiscal Policy-How It work in an Economy                               30

2.5.1 Implementation of the Fiscal Policy in Nigeria           31

2.6 Classification of Taxes                                                              26

2.7 Types of Tax System                                                                  34

2.8 Aims and Objectives in Tax Administration                            38

2.9 Administrative Organization                                                    39

2.9.1 The Duties of the Board Includes                                         40

2.10 Principles and Legislation of taxation                                    41

2.10.1 Legislation on Taxation                                                       43

2.11 Problems Associated With the Internal Revenue                  47

      Collection

2.12 Fiscal Policy, Growth and Poverty Alleviation in Nigeria      51

      References                                                                                  56

 

CHAPTER THREE: RESEARCH METHODOLOGY                                        

3.0 Introduction                                                                              59

3.1 Research Design                                                                       59

3.2 Population of the Study                                                            59

3.3 Procedure For Sample Selection/Size                                     60

3.4 Stratified Sampling Technique                                        60

3.5 random Sampling Technique                                                   61    

3.6 Instrumentation                                                                        61

3.7 Pilot or Pre-Test of Instrument                                       61

3.7.1 Reliability and Validity of Results                                         62

3.8 Administration of the Instrument                                            63

3.9 Method of Data Analysis                                                           64

     References 

 

CHAPTER FOUR:  DATA PRESENTATION AND RESULT

4.1 Introduction                                                                              65

4.2 Analysis of Data                                                                        69

4.3 Test of Hypotheses                                                                    81

 

CHAPTER FIVE: SUMAMRY, CONCLUSION

                         AND RECOMMENDATION

5.1 Summary of Findings                                                               90

5.2 Conclusion                                                                                90

5.3 Recommendations                                                                    91

5.4 Suggestion for Further Studies                                                92

     Bibliography

     Questionnaire

 

 

 

CHAPTER ONE

                                  INTRODUCTION

1.1. BACKGROUND INFORMATION

Taxation as a tool of fiscal policy refers to action of institutions (e.g. government and her agency) to sourcing revenue or compulsory levy imposed and collected on individuals and business firms. To Azubike (2009:36) is a special kind of payment in that it is compulsory and benefits for payment do not necessarily correspond (in magnitude) to the amount of tax paid. In determining taxation as a tool to fiscal policy in Nigeria, two elements are considered; the base and the rate. Here the tax base is the object which is taxed (e.g. income, profits, property etc) while the tax rate is the amount of the tax base paid in tax (usually in form of a flat percentage). Similarly the nature of fiscal policy as a monitoring tool in taxation to Alii (2007) concerns shaping the structure, determining the volume of tax revenue and government expenditure for attaining objectives as; full employment or economic growth. thus the instrument to him, are various type of taxes and the various methods of government expenditure, as well as
tailoring consumption, savings domestic and foreign investment pattern. Inspecific terms Tomety (2007) agreed that objectives in fiscal policy of taxation include; economic growth, stability in production and employment, Some implications of taxation as a tool of fiscal policy in Nigeria is the improvement of the standard of living of the populace and achieving real growth in economic activities. The reduction of import duty rates on major
raw materials for example is capable of boosting production and varieties in goods and services available to an economy. On the other hand, it affects organizations; it for example excise duty could be abolished as prices of goods would go down. However the reverse could be the case in some instances with price going higher than the excise duty. To this effect, manufacturers are likely to shift such burden of costs (unless regulated) to the consumers. This study want to encourage that organizations should pay tax as this is inevitable to stabilizing external sectors in an economy and curbs importation as well as tackle balance of payment dis-equilibrium. Similarly this study will seek to identify the revenue potentials of tax structure and administration as a fiscal policy of government in the regulation of organizations and industries in Nigeria. It will also appreciate the contributions of taxation towards consumptions and public debts as economic indicators that need controls for the growth of Nigerian economy.

1.2. STATEMENT OF THE PROBLEM

Tax as a fiscal policy in Nigerian economy is an attempt to check and control sectors of the economy through imposition of taxes, collection of revenue and expenditures that benefits all. In other words, when tax as a process or regulator is properly applied, sectors, business and individuals will effectively perform roles and responsibilities for growth and development. These and other laudable achievement of tax as a fiscal policy of government in regulating Nigerian economy is hampered by the following
factors;

1.   Stiff tax policies (especially fiscal) by government and her agencies that are contrary to aspirations (or achievement of goals) by sector, businesses and individuals.

2.   Tax evasion by individuals that does not allow full realization of taxation as a tool of control.

3.   The regressive nature of tax that discriminate against the low income earners, hence unbalance control among persons or companies in an economy.

4.   The dwindling economic trends (e.g. inflation) that does not guarantee true valuation of goods and services for tax purposes.

5.   Inadequate resources (human and non- human) in the adoption and application of any given tax structure and administration.

1.3. OBJECTIVE OF THE STUDY

The main theme of this study is to appraise the use of tax as tool of fiscal policy in the regulation of Nigerian economy. In other words, this study will provide information on taxation for fiscal policy to two main parties, viz; government and the tax payers.

Other specific objectives are;

     i.        Examining the extent to which tax has influenced or implied on investment in Nigerian economy.

   ii.        Examining the structure in the administration of tax with a view to determining its usefulness to organizations in Nigeria.

  iii.        Determining the effectiveness of canons or principles of taxation through fiscal policy in Nigerian economy.

  iv.        Determining the effect of stiff tax policies (especially fiscal) by
government and her agencies on the aspirations (or achievement of goals) by sector, businesses and individuals.

    v.        Examining Tax evasion by individuals that does not allow full realization of taxation as a tool of control.

  vi.        Determining if the regressive nature of tax that discriminate against the low income earners creates unbalance control among persons or compames III an economy.

vii.        Determining the effect of dwindling economic trends (e.g. inflation) on true valuation of goods and services for tax purposes

1.4 RESEARCH QUESTIONS

The following research questions will serve as guide in this study;

       i.        To what extent has tax influenced or implied on investment In Nigerian economy?

     ii.        Is the structure in the administration of tax usefulness to organizations in Nigeria?

    iii.        Is the canon or principles of taxation through fiscal policy effective in Nigerian economy?

    iv.        Does stiff tax policies (especially fiscal) by government and her agencies promote its aspirations (or achievement of goals )on sector, businesses and individuals?

      v.        Does tax evasion by individuals that allow full realization of taxation as a tool of control in Nigerian economy?

    vi.        Does the regressive nature of tax that discriminate against the low income earners creates unbalance control among persons or companies in an economy?

  vii.        Does the dwindling global economic trends (e.g. inflation) affect true  valuation of goods and services for tax purposes in an economy?            

1.5 RESEARCH HYPOTHESES.

The following research hypotheses were formed to guide this study;

HYPOTHESIS I

(Ho): Fiscal policy as an instrument is not useful in determining policy
objectives in sector, businesses and individuals in an economy.

(HI): Fiscal policy as an instrument is useful in determining policy
       objectives in sector, businesses and individuals in an economy.

 

HYPOTHESIS II

(Ho): Dwindling economic trends (e.g. inflation) do not guarantee true valuation of goods and services for tax purposes in an economy.

(HI): Dwindling economic trends (e.g. inflation) guarantees true  valuation of goods and services for tax purposes in an economy.

HYPOTHESIS III

(Ho): Fiscal policy has negative effect on organizational growth

(HI): Fiscal policy has positive effect on organizational growth.

 1.6 SIGNIFICANCE OF STUDY

This study becomes significant to the extent that it will be able to highlight previous studies and finding of scholars in this subject area.

Besides, the study becomes significant as long as current findings from field and study are able to complement previous findings such that both findings (current and previous) provide the bases for policy formulation and corporate decision making.

Other beneficiaries are the government and academia. To the government, this study will be significant to her in managing and controlling goods and services as well as assets and liabilities in the economy. It will also assist government in planning and assessing organizations and industries for tax purposes. It is specifically useful in harnessing resources available to the
government for even development and growth of sectors of the economy.

To the academia, this study will be added to the existing materials for reference purposes and further research.

 

1.7 SCOPE OF THE STUDY

This study will cover the activities of all tax institutions and payers (within Lagos metropolis) on tax as a fiscal policy of government in the regulation of Nigerian economy. Since it will be difficult to cover all the tax institutions and payers in Nigeria, Federal Office of Statistics, Centre Bank of Nigeria and Federal Inland Revenue Service as well as selected tax payers will be taken as focal point. In doing this, different departments and personnel of the institutions will be covered as well as selected tax payers.

 

1.8   LIMITATION OF THE STUDY

The conduct of this research may be limited by the following factors; Time, which may not be enough for the enormous facts and ideas the research study may require. Added to this is the content of the topic of study. Infact the study may require much time for more coverage. Research information or materials may not easily be available from respondents. Finance may be another area where the research may encounter some set backs. Most materials needed for the research work may be quite expensive and not within the reach of the researcher. This short/comings not
withstanding, adequate data will be collected and analyzed.

 

1.9. DEFINITIONS OF TERMS

In the course of study some technical words shall be used. Therefore the  following technical words are hereby defined briefly.

Taxation:- This can be defined as a compulsory levy on income imposed by a  public authority, irrespective of the exact tax payer in return.

Tax Incentive:- This refers to the benefit provided by government e.g. public utility services, hospitals, schools, good read, water; from the revenue collected from taxes. Tariff:- This can be referred to as the rate paid on goods and services either
imported or exported.

Fiscal policy: Fiscal policy refers to the management of government  expenditure and taxes and the handling of public debts in such a way as to accomplished certain objectives.

Quid pro Quo: - This means that the payer (organizations) cannot claim something equivalent to tax paid.

 

 

 

 

 

 

 

 

 

 

REFERENCES

Alli, B.D. (2007) Managing the tax reforms process in Nigeria," The  Institute of Chartered Accountants of Nigeria MCPE; Lagos, pp. 130.

 Tomety, E.K. (2007) Increasing Shareholders' Values Through Effective  Tax Planning, the institute of chartered accountants of Nigeria MCPE:  Lagos; pp. 7-29.

 

Azubike J.U.B (2009) "Challenges of tax authorities, tax payers in the management of tax reform processes", the institute of chartered accountants of Nigeria, Lagos; p. 36.

 

 

 

 

 

 

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