Thesis Abstract

Abstract
Taxation is a critical aspect of fiscal policy in any economy, playing a significant role in the economic development of a country. This study examines the impact of taxation on economic development in Nigeria from 2003 to 2012. Nigeria, as an emerging economy in Africa, has undergone various tax reforms during the period under review, aimed at enhancing revenue generation and promoting economic growth. The research employs a quantitative research design, utilizing secondary data obtained from the Central Bank of Nigeria (CBN) statistical bulletin, Federal Inland Revenue Service (FIRS) reports, and World Bank databases. The data collected includes tax revenue as a percentage of Gross Domestic Product (GDP), GDP growth rate, foreign direct investment (FDI) inflows, and government expenditure. The findings of the study reveal a mixed impact of taxation on economic development in Nigeria during the period under consideration. Tax revenue as a percentage of GDP shows a fluctuating trend, influenced by changes in tax policies, compliance levels, and economic conditions. The GDP growth rate demonstrates a positive correlation with tax revenue, indicating that increased tax collection can contribute to economic growth through government spending on infrastructure and social services. Furthermore, the study analyzes the relationship between taxation and foreign direct investment (FDI) inflows. The results suggest that a stable and transparent tax system is conducive to attracting foreign investors, as it provides certainty and predictability in tax obligations. However, excessive tax burdens or unpredictable tax policies can deter FDI inflows, leading to reduced investment and slower economic development. Government expenditure is another key variable examined in the study, showing the allocation of tax revenue towards public services, infrastructure development, and social welfare programs. Effective utilization of tax revenue can enhance the provision of public goods and services, stimulating economic activity and improving the overall welfare of the population. In conclusion, this research contributes to the existing literature on the impact of taxation on economic development in Nigeria, highlighting the importance of a well-designed and efficient tax system in promoting sustainable growth and development. Policy implications include the need for tax reforms that balance revenue generation with economic growth objectives, promote tax compliance, attract foreign investment, and ensure transparent utilization of public funds for the benefit of society.

Thesis Overview

1.0     INTRODUCTION:
1.1     OVERVIEW:
One of the major functions of any government especially developing countries such as Nigeria is the provision of infrastructural services such as electricity, pipe-borne water, hospitals, schools, good roads and as well as ensure a rise in per capital income, poverty alleviation, maximize the utility of its citizens, improve their standard of living and so on.
According to Azubike (2009), tax is a major player in every society of the world. The tax system is an opportunity for government to collect additional revenue needed in discharging its pressing obligations. A tax system offers itself as one of the most effective means of mobilizing a nation’s internal resources and it lends itself to creating an environment conducive to the promotion of economic growth. Nzotta (2007) argues that taxes constitute key sources of revenue to the federation account shared by the federal, state and local governments. This is why Odusola (2006) stated that in Nigeria, the government’s fiscal power is divided into three-tiered tax structure between the federal, state and local governments, each of which has different tax jurisdictions. The system is lopsided and dominated by oil revenue. For these services to be adequately provided, government should have enough revenue put in place to finance them. The task of financing these enormous responsibilities is one of the major problems facing the government of which it is of great necessity for these services to be provided to citizens of a state. Based on the limited resources of government, there is need to carry the governed (citizens) along via the imposition of tax on all taxable individuals and companies to augment government financial position. To this end, government have enacted various tax laws and reformed existing ones to stand the taste of time. They include: Federal Inland Revenue Service (FIRS), State board of internal revenue (SBIR), Income Tax Management Act (ITMA), Companies Income Tax Decree (CIID), Joint Tax Board (JIB) etc.
All these are aimed at ensuring adherence to tax payment and discouraging tax evasion and avoidance by citizens. For the purpose of this study, the researcher would be concerned with the impact of taxation on economic development in Nigeria.
1.2     STATEMENT OF THE PROBLEM:
Obviously, the first need of any modern government is to generate enough revenue which is indeed “the breath of its nostril”. Thus taxation is by far the most significant source of revenue for the government. Nigerians regard payment of tax as a means whereby government raises revenue on herself at the expense of their sweat.
It is good to note that no tax succeeds without the taxpayer’s co-operation and that every government expects its citizens to see it as a duty to pay up their taxes. Here, we can ask some thought-provoking questions such as: what makes taxation such a difficult issue? Why do people feel cheated when it comes to tax? Is government making judicious use of taxpayer’s money? In view of these questions above, this study is being carried out to offer solution to them. We shall also look at the following issues and offer recommendations.
1.       Problems affecting the successful operation of tax system in Nigeria.
2.       How to determine the Assessable income.
3.       Process of tax administration in Nigeria.
1.3     OBJECTIVE OF THE STUDY:
The general objective of the study is to assess the contribution of  taxes towards the growth and development of the Nigerian economy.
However, the specific objective of the study includes:
1.       To examine the relevance of taxation in Nigeria.
2.       To determine why people feel cheated when it comes to paying their taxes.
3.       To determine the extent to which federal government has been using the revenues generated from tax.
4.       To examine how tax rate affects the rate of investment in the Nigeria economy.
5.       To know general desirability of firms to invest as a result of tax incentive measures. Generally, this study is carried out to know if tax constitutes the bulk of government revenue and to erase the erroneous that is the exploitation by government for their selfish interest.

1.4     RESEARCH QUESTION:
Upon completion of this research, the following are the questions generated from the above research objectives:
1.       Is taxation relevant in Nigeria?
2.       Do people feel cheated when it comes to paying their taxes?
3.       What is the extent to which federal government has been using the revenues generated from tax?
4.       How does tax rate affect the rate of investment in the Nigeria economy?
5.       Do firms generally desire to invest as a result of tax incentive measures?