TAXATION AND ECONOMIC DEVELOPMENT: A CASE STUDY OF EDO STATE ABSTRACT This work takes a look at taxation and economic development and how taxation could aid economic development. Since revenue from taxation is one of the major sources of income to the government, so taxation need to be given special attention. The study looks at taxation and economic development using Edo State as a case study. Interview and questionnaire were used to give a precise account of what the public, both tax payers and tax officials thinks about taxation and economic development. A research hypotheses were tested using chi-square statistical techniques and percentage analysis was carried out to enable the researcher draw conclusion and recommendations findings from the studies reveal that taxpayers knows taxation help to improve the standard of living of citizens and also taxpayers understood the meanings of taxation and economic development. TABLE OF CONTENTS CHAPTER ONE Background of the Study Statement of Research Problem Objective of the Study Scope of the Study Significance of the Study Research Hypothesis Research Methodology Limitation of the Study Definition of Terms References CHAPTER TWO: LITERATURE REVIEW Taxation Tax Administration Model of Collection of Taxes The Significance of Taxation Role of Tax in Economic Development of a Country Economic Development Characteristic of Economic Development Problems of Economic Development References CHAPTER THREE: RESEARCH METHODOLOGY Introduction Research Design Sampling Procedures Sources of Data Collection Data Analysis Techniques References CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS Introduction Analysis of Questionnaires Analysis of Hypothesis References CHAPTER FIVE: SUMMARY OF THE FINDING, CONCLUSION AND RECOMMENDATIONS Summary Conclusion Recommendations Bibliography Appendix CHAPTER ONE BACKGROUND OF THE STUDY Taxation can be defined as the process or system of raising income through the levying of various types of tax. It is a compulsory levies on private individual, firm, and organizations made by government to raise revenue to finance expenditure on public goods and services and control the volume of private expenditure in the economy .It is also defined as a compulsory levy imposed by a public authority on the income, profit, or wealth of an individual, family, community, corporate or incorporate body e.t.c for the public purpose. It also can be refers to the system through which government of various countries used in collecting money from their citizen. It is a means by which governments finance their expenditure by imposing charges on citizens and corporate entities. Government uses taxation to encourage or discourage certain economic decisions for example, reduction in taxable personal (or household) income by amount paid as interest on home mortgage loan result in greater construction activity and greater more jobs. Taxation can be defined as a system through which government derive its revenue from the public through authorized authorities instituted by the government. Taxation can be used as a veritable instrument for shaping and directing nations socio-political, economical and financial activities depend on the flexibility, reliability and effectiveness of the various types of taxes introduced and the society response or reaction to their imposition. A well balanced and structured tax system should therefore meet with certain universally accepted criteria. If conscientious manipulated taxation could be used as a fiscal weapon to enhance a nation’s development process and its economic activities, thereby improving the overall level of prosperity and economic well-being of the entire citizenry. Taxation is universal, therefore it is mandatory that every citizens of a given country pay their tax as at when due. These taxes collected from individuals either direct or indirect are channel to the development of infrastructural facilities (hospitals, road and schools, etc) which will bring about economy development in the country. The relevant tax authorities have always been assign to ascertain the income of the taxpayer ,this consequently result to accurate assessment for instance, the income of traders ,workers, professionals, and manufactures can be determine with precision. However taxation is one of the source in which government derives its revenue. Government of various country especially Nigeria have introduced different tax system such as pay as you earn(paye), tax clearance certificate and tightening of the tax law to track down tax invaders. It is hoped that this research work will throw more light into the problem of nonpayment of tax and the effect on the economy development. This has been a controversial issue, some hold the view that without the payment of tax a country can still generate enough revenue from other source to finance its activities, for instance, in Nigeria (fine, sales of crude oil and other natural resources, etc) and it leaves the citizens with some income that will enable them to meet their basic needs. others argued that when tax is removed it increase the purchasing power of the citizens in a given country which will lead to high patronage of goods and services from the consumers, and this will however encourage further production of goods and services and help citizens to discover their entrepreneurship abilities which in return will reduce the level of unemployment in the country. In conclusion taxation, apart from generating revenue for the government, it also helps to checkmate excessive spending of some individuals’ especially discouraging consumption of armful goods. This is achieved by imposing high tariffs on certain goods like cigarette and other produces considered to be harmful and inimical to the health and life of the citizens. However it can be used to check inflation that is brought about by aggregate demand exceeding aggregate supply. This can be done by increasing taxes levied on the income of individuals and company profits; this will result to a drop in aggregate demand. STATEMENT OF RESEARCH PROBLEM This research is specifically designed to provide answers to the following questions below Does taxation have positive impact on economy development? Does internally generated revenue from taxation aid economy development? Do tax burden equitably felt by all tax payers, both rich and poor? Do private businessmen bear full burden of tax income? Do the liabilities of tax clear and unambiguous to the tax payer? How does citizens feel whenever they pay their tax and what is their reactions? Do government use the revenue generated from tax on economy development? OBJECTIVE OF THE STUDY Taxation has been one of the major sources of revenue to the government. It is therefore necessary that tax should be effectively, and efficiently collected and administered in other to enhance economy development. The objective of the research study include To determine if taxation has Positive impact on economy development To investigate whether internally revenue from taxation aid economy development To ascertain whether private businessmen bear full burden of income tax To ascertain recent economy development as a result of previous tax being paid To investigate if tax burden is equitably felt by all its payer both the rich and poor. To find out whether government used the revenue generated from taxation for the purpose it is meant for. SCOPE OF THE STUDY The project work is carried out on taxation and economy development. The scope of the research project covers economy development as a result of payment of tax with reference to Edo state of Nigeria. since Nigeria is very wide for the researcher to go round for the purpose of collecting the necessary data’s, the research work as limited to Edo State. SIGNIFICANCE OF THE STUDY The research project was carried out in other to bring to light how taxation could aid economy development if properly utilized. It is believed that this research work would not only be useful to Edo state board of internal revenue and other similar boards, but also to other students studying accountancy. It would serve as a reference point to those wishing to undertake a similar study on taxation and economy development. RESEARCH HYPOTHESIS A search hypothesis is a preposition put forward and tested statistically for its validity. When the hypothesis is validated, it becomes a fallacy. The following research hypotheses are stated in null form. Taxation has no positive impact on economic development. Internally generated revenue from taxation do not aid economy development in full capacity. That private businessman do not bear full burden of income tax. Citizens are not excited whenever they are paying their tax. Taxation burden is not equitably felt by all tax payer both the rich and the poor. The liability of tax is not clear and unambiguous to the tax payer. Government is not using revenue generated from tax for the purpose it is meant for. RESEARCH METHODOLOGY Research methodology describe various process involve in obtaining, analyzing and interpreting the relevant theoretical and empiric data which will yield the required information to satisfy the researcher. The data and information collected are classified according to their important to the research study. The sources of data collected are both primary and secondary source. Primary sources of data are first hand information which is gotten specifically for the study. They are primary source of information because they have not been worked on before by other researcher. While the secondary sources of data used include books, papers, journals, seminars, workshop papers. They served as useful input to aid explanations that follow practical analysis carried out. LIMITATION OF THE STUDY Taxation has being one of the tools that government of various countries uses to aid economy development. But it is difficult to ascertain with precision information about the income of tax payer that is assessed for tax. The revenue authorities refrained to some extend from divulging some useful but confidential information as taxation generally is a sensitive issue. The researcher also encountered financial problems s regards the execution of the research work. DEFINITION OF TERMS Taxation: is defined as a process or system of raising income through the levying of various taxes which are direct or indirect. Taxes are prizes paid for public provided services. Examples, road, school, hospital. Economic development: is an entire transformation of an economy from a less desirable one, that transformation, bringing in its wake an overall improvement in the wellbeing of the entire citizenry. Tax liability; this is the total tax of a tax payer, less tax credit and withholding tax on unearned income to arrive at tax due. Direct tax: this are tax levies on income or capital generated by factors of production such as, land, labor, capital and entrepreneurship. These types of tax are thus usually imposed directly on individuals and companies. Their burden is not usually shiftable e.g. personal income tax, petroleum profit tax etc. Indirect tax: these are taxes levied on goods and services, they are usually imposed at some point on the goods and services. But the burden may be shifted to whomever it is intented should be the final consumer. Thus the ultimate incidence of this type of tax does not occur at the original point of contact. E.g. excise duties mineral royalty e.t.c. Chargeable income this refers to the total assessable income of a taxpayer less tax reliefs, such reliefs includes personal allowance, dependant relative allowance, wife allowance, child allowance and life assurance. Assessable income: this is the sum total of all the income of a taxpayer from all his sources of income for each year of assessment. Year of assessment: the year of assessment is government year during which a taxpayer is assessed to tax. It is also known as the financial year or the fiscal year. REFERENCES Iyoha, M. A., Oyefusi S. A., Oriakhi D. E. (1998), An Introduction to Modern Economic, Mareh Publisher, BDPA Benin City. Anyaduba (1999), Personal Income Taxation in Nigeria, United City Press Edo State Nigeria. Paul Kofi Tawiah Basic Economics for West Africa 4th edition Yomere G. O. and Agbonifoh B. A. (1999), Research Methodology in Social Science and Education, centerpiece consultant Nigeria Ltd.
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