CHAPTER ONE

INTRODUCTION

BACKGROUND TO THE STUDY

Taxation can be defined as the money composed by the government on her citizen in order to generate fund so as to meet its expenditure. Taxes are levied so as to accomplish some of nation economic objective of the society. Tax can be a major subject of political controversy throughout history even though they constitute a sizeable share of national income. Introduction of taxation in Nigeria was dictated by the financial need of its colonial administration. Custom duties are against direct taxes were first introduced in southern Nigeria, the northern territory was a convenient place to experiment the system of direct taxation because, the people of the area were used to payment of taxes under the Fulani administration direct taxation was introduced in Ikpoba-Okha Local Government Area of Edo state introduced in the north in 1904.

After the amalgamation of northern and southern Nigeria in the year 1914, taxation was also introduced in the western part of Nigeria. The Yoruba and the Binis who are predominant in the area already had well established tax system of taxation. Tax differs from other sources or forms of revenue in that they are compulsory levies and unrequired that is, they are not paid in exchange for some specific things such as sales of public property or the issues of public debt while taxes are presumable collected for the sake of the welfare of tax payer in independent on any benefit received. They are important exception to this characterization. Payroll taxes are commonly levied on labour income in order to finance retirement benefits, medical payment and other social l security programme.

Taxation includes custom duties, excess duties, purchase tax, income tax, cooperation and proportional tax and fiscal policy. This is to generate revenue to the government pursuit. No nation can do well without funds, tax is one of the main source of income for the government, when the national income of a country is high, the per capital income or income per head will also be high. Consequently such a country individual or citizen will enjoy better standard of living. This can lead to economic growth and development. The direct and immediate effect of direct taxation is reduction in income of the person on whom it is levied. This is to say that the higher the personal or company tax, the lower will be the retained income consequently, the lower the possibility of saving. Uniamakogbe (2006).

Taxation is very important for the economic development of Edo state and Nigeria in general. In the area of social infrastructure like, building of schools, provision of electricity, construction of roads e.t.c. The effect of taxation on the economic development of Edo state and Nigeria in general cannot be ignored because taxation reduces the purchasing power of the tax payer, it also lead to monopoly, finally it narrows the choice of goods in the economy.

1.2 STATEMENT OF PROBLEM

          It has been observed that the word declaration of income is very rampant among self employed citizens.

        There has been general ignorance of tax and therefore, the essentiality of tax payment is not clear to most of the citizen and government in ikpoba-okha local government area of Edo state.

There are divergent views on the roles of tax payment as it affects economic development. This study is an attempt to investigate and its effect on development.

1.3 OBJECTIVE OF THE STUDY

          The objective is aimed at studying the effect of taxation on economic development of ikpoba-okha local government area of Edo state0.

        To achieve these, five specific objectives are set out as follows:

1. To identify the various type of tax
2.  To analyze the revenue generated by the government from taxation 2002-2005 in Ikpoba- Okha Local Government Area of Edo State.
3.  To evaluate the effect of taxes on economic development of the state from 2002-2005.
4. To offer suggestion for overcoming some of the problems attributed to collection of taxes.
5. To highlight the benefits that will be derived from the revenue generated from taxation.

1.4 RESEARCH QUESTIONS

1. Does taxation have effect on economic development in Ikpoba- Okha Local     Government Area of Edo State?

2. Does taxation make people to declare wrong information about their salaries and wages in Ikpoba-Okha Local Government Area of Edo State?

 3. Does taxation help government in the provision of social amenities in Ikpoba-Okha Local Government Area of Edo State?

1.5 SIGNIFICANCE OF THE STUDY

        The study is to provide information on how money generated from taxation is being used for social amenities and road maintenance. In addition, relevance to government institution, stakeholders, revenue bodies and research centres.

1.7 DEFINITION OF TERMS

Direct tax: These are taxes levied directly on the income of an individual and business firm.

Indirect tax: These are taxes levied on goods and services.

Custom taxes: These are taxes imposed on goods sold to other countries.

Fiscal policy:  It is the use of government tax and expenditure policies to influence the level of economic activity.

Progressive tax: It is a compulsory tax country imposed on an individual according to his ability. Example is P.A.Y.E. (pay as you earn).

1. oes taxation bring about development? Yes ( ) No (  ).

Get this material NGN 5,000

Message Us on WhatsApp  »