THE IMPACT OF TAXATION AS AN AID TO ECONOMIC DEVELOPMENT IN THE RURAL AREAS OF ENUGU STATE. (A CASE STUDY OF THREE SELECTED LOCAL GOVERNMENT AREAS OF ENUGU STATE)

Abstract

The most essential need of any government is to generate enough revenue to take care of its citizens need. Thus taxation is by far the most significant source of revenue for the government. The information for the study was collected using primary and secondary soucres of data. For the primary data collection, questionnaires, personal observations and oral interviews were used while existing literature relevant to the topic was consulted for the secondary data. The researcher used chi-square statistical model to analyze the data. The findings of this research work includes: that the system of tax administration is deficient which has encouraged tax evasion and avoidance, this is basically because of operational hard wares, lack of honest and train revenue offices as well as the structure of government expenditure programmes. The researcher proffer the following recommendations: The competence of tax officials needs improvement through adequate training and provision of suitable working materials and facilities. Government should distribute its social welfare programs in such a way as to provide direct benefit to tax payers. This makes them believe that the portion of their hard earned money paid for purposes is being effectively utilized by the government. There should be a public enlightenment campaign by the government aimed toward emphasizing on the importance and need to pay taxes as and when due.

TABLE OF CONTENT

Title page i

Approval page ii

Dedication iii

Acknowledgement iv

Abstract v

Table of content vi

CHAPTER ONE

Introduction

1.1Background of the study 1

1.2 Statement of the problem 5

1.3 Objective of the study 6

1.4 Research question 6

1.5 Significance of the study 7

1.6 Scope of the study 7

1.7 Limitations of the study 8

CHAPTER TWO

Review of Related Literature

2.1 Taxation and Economic Growth 11

2.2 Nigeria – Percent Development in Company

Income Taxation in Nigeria 13

2.3 Impact of VAT on Economic Development

in the rural areas of Enugu state 16

2.4 Measurement of Economic and Human

Development 21

2.5 The Concept of Tax Evasion 25

2.6 Impact of Tax Reforms and Economic

Growth Nigeria 28

2.7 Structure and administration of Nigerian

Tax System 34

2.8 Appraisal of Some Tax Legislation 40

2.9 Problems of Taxation 40

CHAPTER THREE

Research Design Methodology

3.1 Research design 46

3.2 Area of the study 47

3.3 Population of the study 47

3.4 Sampling method 48

3.5 Research instrumentation 50

3.6 Validity and reliability of the instrument 51

3.7 Sources of data collection 52

3.8 Method of data analysis 54

CHAPTER FOUR

Data Analysis and Interpretation

4.1 Data presentation 55

4.2 Analysis of Result 62

CHAPTER FIVE

Findings Conclusion and Recommendation

5.1 Summary of Findings 67

5.2 Conclusion 69

5.3 Recommendations 71

Bibliography 74

Questionnaire 76

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

One major functions of the government especially in a developing countries such as Nigeria is the provision of infrastructure service such as electricity, pipe-born water, Hospitals, schools to mention a few. For these services to be adequately provided government should have enough revenue to finance them. The task of financing there enough revenue to financing there enormous responsibilities is one of the major problem facing the government, given the limited resources to them. Because of this, it is utmost relevance to inculcate into the citizens the concept of taxation through proper imposition of taxes on all taxable individuals and companies to argument government’s financial position.

According to Odoh (2004) tax is the most important sources of government revenue. The state uses the revenue collected from taxes for providing schools, hospitals etc. according to P.U. Amaechina (2009) (p.10) Tax is a very which government imposes on the income of the citizen of a states for which the government makes no direct benefits to the tax payer (i.e no quid Pro quo). I.E Okonkwo (1994) says that government at various levels drive revenue from taxes.

According to Collins English dictionary (2006) taxation is the act or principles of levying taxes or the conditions of being taxed. In this regard tax has been being taxed. In this regard tax has been defines as a monetary chares imposed by the government on persons, entities, transactions or properties to yield revenue. It can also been defined as the enforced proportional contribution by a persons and property levied by the state by virtue of the sovereignty for the support of government and for all public needs. Again, according to Anthony D.U. Okoye (1999) defined taxation as tax is a compulsory levy imposed by the government on individuals, businesses, organization, goods and services. It can be defined into direct and indirect taxes. In developing economy lack of tax structure is the major causes of weak, unresponsive government it also lead to over reliance on aids, with tax the public can hold but they can also use it to help strength their tax capacity increase their autonomy and reduce their long-term dependence on external assistance. It is significant that development and growth can not be achieved without proper installation of taxation. Following these government has enacted several tax laws and reformed the existing once in order for it to be effectives and efficient also to stand the test of time. Some of these laws in existence are: income tax management act (ITMA) 1961 petroleum profit tax (PPT) value added tax (VAT) to mention but few.

All these laws are geared payment of taxes due and discourage tax avoidance and evasion. Attitudes have to change, the attitude in question is not only the one of the tax payer but also that of the tax collectors and the government at large.

For the purpose of these studies, it tends to establish the impact of taxation as an aid to the economic development of Enugu state.

1.2 STATEMENT OF THE PROBLEM

Taxation is by far the major significant source of revenue for the government. In Nigeria, paying tax is very big problem because the populace regards tax as a means whereby government extorts. Money from citizen in an unjustified manner. It has been noticed that people endulge in tax avoidance and tax evasion. Many tax payers do not declare correctly their income for tax purposes example company income tax. Government inability to utilize the revenue from tax in most appropriate manner like building of road providing of electricity pipe-borne water and other social amenities in other to develop the state, has made the citizens to pay taxes grugenly.

1.8 OBJECTIVE OF THE STUDY

The objectives of this study specifically is to assess the contribution of taxe towards the growth and development of Enugu state and Nigeria as a whole. Other objectives include determine why people feel cheated when it comes to pay tax. To determine the extent to which revenue generated. From taxes affect other sources of revenue in Enugu state. To find out the extent to which government has utilized the revenue generated from taxes in the development of the state.

1.9 RESEARCH QUESTION

Does revenue generated from tax affect other source of revenue?

To what extent do people react toward the payment of tax?

What is the rate of tax evasion and tax avoidance?

1.10 SIGNIFICANCE OF THE STUDY

This work will enables the citizens to understand that government uses the revenue generated form taxes in providing infrastructure like hospitals etc. it will enable the students especially those in other disciplines to understand the concept of taxation and its principles.

The work enable the government to know that taxation can be used as an instrument of fiscal policy. It will also enable the government to know how to handle tax evasion and tax avoidance.

It will be a reference material for any student who will want to research on a related topic.

1.11 SCOPE OF THE STUDY

The study is on the impact taxation as an aid to economic development in the rural areas of Enugu state. The researcher will restrict her work to selected three local government area of Enugu state. Any other reference to materials, place, items, activities, periods is just for purpose of clarify and vivid understanding of the topic and not within he scope.

1.12 LIMITATIONS OF THE STUDY

The researcher in carrying out this study encountered numerous problems, which include:

i) Fund.

Time.

Lack of research materials

Responds of the respondents

FUND – This include lack of enough fund to move around and visit the various areas in the state, and also lack of money to buy enough research material which constitutes an impediment to the researchers, high cost of transportation in the city due to long distance also imposed its own limitation on the researcher.

TIME – Time is also another constraints to the researcher. This is because the researcher is combining school activities an that the same time this made her unable to cover a lot of interesting areas but limited her research work only at Enugu metropolis.

LACK OF RESEARCH MATERIALS: lack of research materials was also one of the problems faces by the researcher in the cause of this research work. The researcher made use of questionnaire while obtaining information from respondent.

RESPONDS OF THE RESPONDENTS: Another constraint to the researcher is that some of the respondents found it difficult to express their problem as regards the subject matter.

From the above points the researcher tried her best to bring out in details study on the impact of taxation as an aid to economic development in the rural areas of Enugu state (a case study of selected three local government areas of Enugu state) but the above constraints have limited the researcher to carry out her research work effectively.