CHAPTER ONE
The increasing cost of running government coupled with dwindling revenue has left various state governments in Nigeria with formulating strategies to improve the revenue base. Moreso, to improve the revenue base. Moreso, the near collapse of the National Economy has created serious financial stress for all tiers of government. Hardest hit are the state governments all of whom have experienced unusual reduction in their share of the national revenue from the federation account. Despite the numerous sources of revenue available to the various tiers of government as specified in the Nigeria 1999 constitution, since 1970s till now, over 80% of the annual revenue of the three tiers government of movement come from petroleum.
However, the serious decline in the price of oil in recent years has led to a decrease in the funds available for distribution to the states. The need for state and local governments to generate adequate revenue form internal sources has therefore become a matter of extreme urgency and importance. This need under scores the eagerness on the part of state and local governments and even the federal government to look for new sources of revenue or to became aggressive and innovative in the mode of collecting revenue from existing sources.
The increasing cost of running government is becoming alarming some budgets find recurrent expenditures outplaying capital expenditures. This increasing cost of governance has forced some state to formulate other means of improving their revenue base. It is said that up till now the Nigerian economy has not been diversified from crude oil revenue only since the 1970s Nigeria revenue from crude oil stand over 80% of her annual revenue while other sectors such as the extractive sector and agriculture has received little or no attention or out rightly abandoned.
However, the fluctuations of oil price in recent times, the total collapse of oil revenue in 2009, and the demand for higher and living wages by Nigerian labour congress had led a decrease in the funds available for sharing to the states and local government. It is therefore, paramount that the federal, state and local governments must generate adequate revenue from internal sources. This need underscores the eagerness on the part of state and local governments and even the federal government to look for new sources of revenue or to became aggressive in mode of collecting revenue from existing source especially taxation Kiabel and Nwokal, (2009).
Also Nigeria is richly blessed with oil and gas among other mineral resources, but the over dependence on oil revenue for the economic development of the country has left much to be deserved. According to Ariyo (1997) Nigeria’s over dependence on oil revenue to the total neglect of other revenue source was encouraged by the oil boom of 1973/74. This is unsustainable due to the fluctuation in the oil market which have in most cases plunged the nation into deficit budgets. It was the view of Popoola (2009) that Nigeria tax administration and practice be structured towards economic goal achievement since government budget for the year centres on the oil sector.
Man, no matter his race, religion or creed, has always lived communally. In every society of man, there has been one form of levy or the other, imposed on the people from time to time, to generate resources to improve on their well-being or to institute one from control or another in the society.
Onovo (2005) recognized this public duty thus: “a tax is an impose by a state on persons who are resident or who earns income with in the state”. In the same vein Olukoya (1993), stated that “fundamentally, however, it is compulsory levy on income, since the decision to pay tax is not that of the tax-payer. No rational human being would voluntarily subject his earnings to tax. People pay tax because the law stipulates so”.
The resources raised from tax are used by the authorities (governments) to run the affairs of the state. In under developed economics the money realized through taxation is too meager as compared with other developed world. This results in shortage of capital.
Lawal (2007), “Taxation is this: a system of mobilizing and moving resources between the different sectors of the economy. It is an instrument for redistribution of wealth among the people in an economy”.
Whenever tax matters are in discourse, it pre-supposes the existence of a higher authority in any given socio-economic system.
To this end, tax is a universal liability and one cannot avoid the payment of tax just by avoiding the use of any amenity built with tax money. It is essential therefore, for one to understand that some amenities have inclusionary factors. One cannot say, for instance, that does not want to benefit from national health services, electricity or water supply etc which have exclusionary factors. One can always avoid paying water or electricity bills just by abstaining from the use of it.
Lawal (2007), said “it should be realized that in most countries today, the government has become the greatest spender of money. Taxation has not only influenced the economy of these countries, it has also, become an important instrument of economic policies. Thus, an increase in government spending (tax money) rightly involves a corresponding decrease in individual spending.
In less developed economics like Nigeria, the government is finding it increasingly difficult to marshal the necessary resources in the right place at the right point in time. Bird et al (2000)” in under developed economics, tax resources account for about (10-15) percent of national income while it goes up to 30-40 percent in advanced countries it is this, common knowledge that the less developed counties is the lower in ratio of tax payment to national income.
The dwindling oil prices in the global oil market for a country like Nigeria has been a cause for a major concern as it has seriously affected the economy of Nigeria thus the current economic recession which ought to have been avoided if there were to be an effective taxation mechanism in Nigeria and its subsequent utilization. The poor taxation and the utilization of the revenue generated from this poor taxation in the country has significantly contributed to the under development of the country as basic amenities that would have made the life of an average man easy have not been provided especially as the uncertainty surrounding world oil price which happen to be our major source of income persists. The management and utilization of revenue generated from tax has been nothing to write home about as it has continued to be poor which has made development and the provision of basic amenities difficult in Nigeria.
The major aim of this study is to assess the management and utilization of tax revenue in Nigeria. Other specific objectives of the study are;
The study would be of immense benefit to the general infrastructural and economic development of Nigeria has it would recommend both to government and related stakeholders on the ways in ensuring adequate management and utilization of tax revenue in Nigeria. The study would also benefit students, researchers and scholars who are interested in developing further studies on the subject matter.
H01: There is no significant relationship between utilization of tax revenue and infrastructural development.
H02: Lack of effective management and utilization of tax revenue has no significant impact on the economy of Nigeria.
Considering that tax revenue utilization and management is crucial to economic growth and development of any society, the improved utilization and management of our tax revenue justifies the need for the study.
It is critical that the basic assumption of tax revenue utilization and management strategies be thoroughly examined as understood before assumption. The intent of this research is are to;
This study is restricted to the appraisal of the management and utilization of tax revenue in Nigeria using the federal Inland Revenue service(FIRS) Lagos state as a case study.
1.8 DEFINITION OF TERMS
Incidence Of Tax: This means the burden of tax, therefore the burden of tax responsibility falls on the tax payer or other individuals, indirectly
Tax Payer: This is the individual institution or organization that has the duty to pay tax.
Tax Evasion: This means in will full act of criminally which involves that the failure on the part of a taxable person to disclose his actual taxable income for the purpose of tax assessment and thereby escaping partially or completely from tax liability.
Tax Avoiding: This is the legal method employed by individuals, organization etc paying taxes in order to minimize their tax liability.
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