THE IMPACT OF TAX ON GOVERNMENT CAPITAL EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA

THE IMPACT OF TAX ON GOVERNMENT CAPITAL EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA 

CHAPTER ONE

A Tax is a fee charged or levied by a government on a product, income, or activity. If it is levied directly on personal or corporate income, it is called a direct tax. If it is levied on the price of a good or service, then it is called an indirect tax. The main reason for taxation is to finance government expenditure and to redistribute wealth which translates to financing the development of the country (Ola, 2001 Jhingan, 2004, Musgrave, and Musgrave, 2004. Bhartia, 2009). Whether the taxes collected are enough to finance the development of the country will depend on the needs of the country and. countries can seek alternative sources of revenue to finance sustainable development (Unegbu and Irefin. 2011). 

The government collects taxes in order to provide efficiently and steadily expanding non-revenue yielding services, such as infrastructure-education, health, communications system, etc, employment opportunities, and essential public services (such as the maintenance of laws and order) irrespective of the prevailing ideology or the political system of a particular nation. Tax is also the nexus between the state and its citizens, and tax revenues are the lifeblood of the social contract. The very act of taxation has profoundly beneficial effects in fostering better and more accountable government (Tax Justice Network (TJN)S revenue 2012). Musgrave and Musgrave (2004) also stated that the economic effects of tax include micro effects on the distribution of income and efficiency of resource use as well as the macro effect on the level of capacity output, employment, prices, and growth. However, the use of tax as an instrument of fiscal policy to achieve economic growth in most less developed countries cannot be reliable because of the dwindling level of revenue generation. Consequent to this, changing or fine-tuning tax rates have been used to influence or achieve macroeconomic stability, A critical examples of governments that have influenced their economic development through revenue from tax are; Canada. United States, Netherlands. The United Kingdom. They derive substantial revenue from Company Income tax. Value Added Tax. Import Duties and have used same to create prosperity (Qluba 2008), A significant share of the tax revenue increase in Africa stems from natural resource taxes. This included income from production sharing, royalties, and corporate income tax on oil and mining companies (Pfister, 2009). Nigeria is a developing country whose major export is mainly crude oil. Also endowed with other natural resources such as; natural gas, lin. iron ore. coal, limestone, lead, zinc, and arable land (Economy Watch, 2011). A& a sovereign nation, Nigeria has a landmass that covers about 923. 768 £q km and have a population of about 149,229,090. According to Tran (200K), emerging economies are nations that have large territories and populations; and they are undertaking extraordinary development projects that call for new infrastructures, such as power-generating plants and telecommunications systems. Also, the United Nations (20(15) asserts that, achieving the Millennium Development Goals (MDGs)} for instance, low-income countries (LICs) arc required to increase their domestic revenues by around 4 percent of the GDP. Also, to meet the MDGs, OECD countries have been urged to raise their level of aid to LICs to about 0.7 percent of their Gross National Income - but this is as nothing when compared to potential tax revenues. The infrastructural developments demand a lot of resources and funding. In many rich countries, tax constitutes 30-40 percent of the GDP (Golit. 2008 and TIN, 2012). Nigeria with a budget of N4,97 trillion for the year 2011, representing a 12% increase of the 2010 annual budget ( Uneghu and Irefin, 2011) shows that taxation is one of the ways of funding infrastructural developments specified in the budget. The tax base in Nigeria had been on the increase in order to mobilize the resources needed to execute infrastructure projects. According to lo Kaldor (3963), those who believe that insufficient growth and investment is mainly a consequence of a lack of resources arc chiefly concerned with increasing the resources available for investment through additional taxation. The availability and mobilization of tax is the fundamental factor on which economic development is sustained and managed. As noted by TIN (3012), tax is the most important, the most beneficial, and the most sustainable source of finance for development. Tax in Africa, for example, is worth ten times the value of foreign aid. The long-term goal of poor countries must be to replace foreign aid dependency with tax self-reliance. However, in Nigeria the contribution of tax has not been encouraging, thus expectations of the government are being cm short. Corruption, evasion, avoidance, and lax haven indicators arc strongly associated with low revenue (Attila, Chambas, and Combes, 2U08), and indeed, corruption functions like a tax itself. According to Adegbie and Fakile. 2C11), the more citizens lack knowledge or education about taxation in the country, the greater the desire and the opportunities for tax evasion, avoidance, and non-compliance with relevant tax laws. In this respect, the country will be more adversely affected because of the absence of tax conscience on the part of individuals and the companies and the (allure of tax administration to recognize the importance of communication and dialogue between the government and the citizens in matters relating to taxation.

In the face of resource deficiency in financing long-term development, Nigeria has heavily resorted to foreign capital, such as loans and aid as the primary means to achieve rapid economic growth. Thereby accumulate huge external debt in relation to the gross domestic product and serious debt servicing problems in terms of foreign exchange flow and, as such majority of the populace live in abject poverty. The government has expressed concern over these and has vowed to expand taxation in order to meet its mandate. Kiabel and Nvokah (2009) argue that the increasing cost of running government coupled with the dwindling revenue has left all tiers of government in Nigeria with formulating strategies to improve taxation, Also, Ndekwu (1991) noted that, more than ever before, there is now a great demand for the optimization of revenue from various tax sources in Nigeria. This probably influenced the decision of the Federal Government of Nigeria (FGN), which is 1991 set up a Study Group on the Review of the Nigerian Tax System and Administration. Also, that an accurate estimation of the optimal level of expenditure requires knowledge of the productivity of the tax system and that it will assist in identifying a sustainable revenue profile for the country. As noted by IMF (cited in TJM, 2012): ''Developing countries must be able to raise the revenues required to finance the services demanded by their citizens and the infrastructure (physical and social) that will enable them to move out of poverty. Taxation will play a key role in this revenue mobilization.

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How To Write Chapter Three Of Your Research Project (Research Methodology)

  • Methodology In Research Paper


    Chapter three of the research project or the research methodology is another significant part of the research project writing. In developing the chapter three of the research project, you state the purpose of research, research method you wish to adopt, the instruments to be used, where you will collect your data, types of data collection, and how you collected it.

    This chapter explains the different methods to be used in the research project. Here you mention the procedures and strategies you will employ in the study such as research design, study design in research, research area (area of the study), the population of the study, etc. You also tell the reader your research design methods, why you chose a particular method, method of analysis, how you planned to analyze your data.

    Your methodology should be written in a simple language such that other researchers can follow the method and arrive at the same conclusion or findings.

    You can choose a survey design when you want to survey a particular location or behavior by administering instruments such as structured questionnaires, interviews, or experimental; if you intend manipulating some variables.

    The purpose of chapter three (research methodology) is to give an experienced investigator enough information to replicate the study. Some supervisors do not understand this and require students to write what is in effect, a textbook.

    A research design is used to structure the research and to show how all of the major parts of the research project, including the sample, measures, and methods of assignment, work together to address the central research questions in the study. The chapter three should begin with a paragraph reiterating the purpose of research. It is very important that before choosing design methods try and ask yourself the following questions: Will I generate enough information that will help me to solve the research problem by adopting this method?

    Method vs Methodology

    I think the most appropriate in methods versus methodology is to think in terms of their inter-connectedness and relationship between both. You should not beging thinking so much about research methods without thinking of developing a research methodology.

    Metodologia or methodology is the consideration of your research objectives and the most effective method and approach to meet those objectives. That is to say that methodology in research paper is the first step in planning a research project work.

    Design Methodology: Methodological Approach

    Example of methodology in research paper, you are attempting to identify the influence of personality on a road accident, you may wish to look at different personality types, you may also look at accident records from the FRSC, you may also wish to look at the personality of drivers that are accident victims, once you adopt this method, you are already doing a survey, and that becomes your metodologia or methodology.

    Your methodology should aim to provide you with the information to allow you to come to some conclusions about the personalities that are susceptible to a road accident or those personality types that are likely to have a road accident.

    The following subjects may or may not be in the order required by a particular institution of higher education, but all of the subjects constitute a defensible in metodologia or methodology chapter.

    Click here to complete this article - How To Write Chapter Three Of Your Research Project (Research Methodology)

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