TAX AS A STIMULUS FOR GROWTH AND DEVELOPMENT IN NIGERIA
TAX AS A STIMULUS FOR GROWTH AND DEVELOPMENT IN NIGERIA
Responsible governments all over the world, be it at the Federal, State or Local government level, are concerned with the provision of social goods and services for their citizens.
They are responsible for the maintenance of laws and orders within their nations and also for the protection of their territorial integrity against any external aggression.
In carrying out these social responsibilities, a huge amount of money is needed. One of the major sources of fund available to government to execute its numerous programs is imposition of taxes.
Governments at various levels enact laws to impose taxes and to enforce their payment so that enough revenue can be generated to defray their expenditure.
However, despite many stringent penalties and fines in the tax laws, it appears that a lot of individuals and corporate entities still do not see the reason why they should pay correct taxes or pay taxes at all. Hence, they try in some cases to avoid payment of taxes and in
other extreme cases, evade taxes (Bukar, 2004; Omoigui, 2004).
In the light of the above, it is necessary to examine the Nigerian Tax System vis-à-vis the use that the revenues generated from taxes in Nigeria are being put.
The paper is divided into six major parts, namely: the introduction (as given above); conceptual framework; specific uses of tax as a stimulus for growth and development; analysis of data; criticisms of government’s handling of tax revenue; summary, conclusions and recommendations
- BACKGROUND OF THE STUDY
Payment of tax is as old as man, dating back to the days of Jesus Christ were He paid his tax, advised his disciples and people at that time to see payment of tax as an obligation which they must fulfill. Right from that time still date, tax has always been one of the obligations of the workforce of any country.
Tax is a compulsory payment made by income earners, goods and services, property, etc imposed by the government to take care of the basic needs of the citizenry (Anyanwu, 1997).
Nigeria is one of the countries striving to be one of the leading economies of the world by 2020; which is why the government is trying to provide basic infrastructure in other to help the standard of living of its citizens. Provision of these basic amenities will enhance development of the country and so the government resorted to a way of raising funds to meet these demands through the compulsory payment of tax by income earners in the country; corporate organizations, on goods and services (Fagbemi et al, 2010). Chigbu (2012) asserted in one of his works that the economic history of both developed and developing countries is tied to taxation, even as it is a great source of revenue for the government, controls the production and consumption of certain goods and services. He added other reasons for which taxes are imposed to include protection of Small and medium enterprises (SMEs), positively control inflation, avoid income inequalities, control business and commerce; all these culminating in economic growth. A vibrant tax system that protects SMEs in a country is solid bedrock for creating entrepreneurs which will contribute immensely to the sustainable development of a country.
However, an assessment of Nigeria’s total revenue over the years prove that the revenue gotten from crude oil is about 75%, while the remaining 25% is from other sectors of which tax is inclusive. A clear example is revenue from crude oil in 2006 which was at 88.7% and the non-oil share of 12.4%. In 2009, 79.8% while the non-oil sector accounted for just 22.3% of the total revenue (CBN, 2010). The above data is a clear prove that Nigerians do not perform their obligation of paying their tax.
Thus, it is pertinent to highlight that a sound tax system is a yardstick for economic development of any country. It plays a lot of roles to include: increase in governments’ savings, increase in resources available, provision of infrastructure, etc (Musgrave and Musgrave, 2006).
Moreover, if tax incentives are actively monitored closely to ensure that individuals and corporate bodies remit their taxes as and when due, alongside that the taxes gotten are evenly distributed to meet the needs of the citizenry, then economy of Nigeria will be at its peak Akintoye and Tasie (2013). This invariably means that for tax to be used in the economic development of the country, both the government and the citizens have a role to play. Therefore, the government needs to map out the right plans to achieve this, as well as the citizens need to portray willingness to pay their taxes.
The priority of any economy is to ensure its GDP is increasing, rather than reducing as this shows the economic growth of a nation, therefore remitting of tax by is one way of sustaining a country’s GDP.
In addition, tax in Nigeria is divided into the following categories to increase GDP; there are: Value Added Tax (VAT), Personal Income Tax (PIT), Company Income Tax (CIT) and Petroleum Profit Tax (PPT). The Petroleum Profit Tax (PPT) is a type of tax paid by petroleum companies in Nigeria, while Personal Income Tax (PIT) is a tax paid by an individual based on his income and Company Income Tax (CIT) is tax paid by companies (in Nigeria from1996 it has been 30%).
Conclusively, Nigeria is the most populous country in Africa with probably the highest economy in Africa, yet 110 million Nigerians live in abject poverty. Year in year out, Nigerian roads are degrading badly, education facilities lacking, high rate of unemployment, unstable power supply, environmental degradation, unstable water supply, etc and the list continues. These are a few of the problems ravaging the economy of Nigeria, how can these problems be well managed or eliminated. This study is aimed at examining tax as a stimulus for growth and development from these problems.