EFFECT OF CORPORATE TAX REVENUE ON ECONOMIC GROWTH AND DEVELOPMENT OF NIGERIAN MANUFACTURING SECTOR

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

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 other form of corrupt practices. These activities are considered as sabotaging the economy and are readily presented as part of the reasons for present state of underdevelopment in Nigeria. As the Nigerian economy is in the recession period, there are inconsistencies in our tax laws which had made it difficult for the tax body to administer and even for the tax payer to follow. The federal government had the intension to maintain a uniform tax system but the economic condition of each state has given room for divergence system. The most important thing one should have in mind is that taxation is supposed to be an instrument of social change which it is not answering as much as it should be doing presently in Nigeria. The impact of tax payment is not felt by payee and some do not understand some tax laws and this indeed has put them into doubt and confusion and has definitely made others to want to avoid and evade tax. Every modern state or nation requires a lot of revenue to be able to provide and maintain essential services for its citizen. One ready means of revenue for the government is through the imposition of tax.

The imposition of tax by the government is not a new phenomenon. There is hardly any government today that does not rely on taxation. However, apart from the complications that have crept into the taxation system in modern times, the reason for the imposition of tax in fact ceased to be only for the generation of revenue for the state. It has also become the avenue for the redistribution of wealth and re-adjustment of the economy (Ojo, 2008) Therefore, the tax system is one of the most powerful levies available to any government to stimulate and guide its economic and social development. The FBIR (Federal Board of Inland Revenue) which is vested with the power to administer the act and carry out all the act which may be deemed necessary and expedient for the assessment and collection of tax ,and shall for all amount so collected in a manner to be prescribed by the Federal Minister of Finance. The Board has certain reserved power which shall not be delegated to any other person to perform, e.g. power to acquire, hold and dispose properties of any company in satisfaction to tax or any judgment debt, and to specify the forms of return claim and notices. The main forms of tax collected are direct and indirect taxes. For the direct taxes, it is levied on individuals, and factors of productions e.g. Personal Income Tax (PIT), Capital Gain Tax (CGT). However, indirect taxes are levied on goods and services e.g. import and export duties. Thus, the consumers bear the ultimate burden. Having realized that taxation is one of the most important sources of revenue for the various tiers of the government and a major way of sourcing financial support to the Nigeria government at large, it is of paramount importance that tax evasion and avoidance is discouraged with every conceivable means.