1.1 Background of the Study 

The federal system of government implies the existence of more than one level of government, each with different taxing powers and expenditure responsibilities. United Nations (1961) defined Local Government as a political subdivision in a federal system which is constituted by law and has substantial control of local affairs, including the power to impose taxes or to exert labour for a prescribed purposes, local governments everywhere in the world and for whatever system of government was created to provide services.

Olu (2000) sees local government as the third tier or level of government created for the purpose of efficient and effective administration of the localities. Justification for the creations of local Governments as outlined by Ekpe (2006) includes; 

⦁ Bringing government to the grassroots level, thus encouraging a sense of belonging among the local populace     

⦁ Facilitating effective and efficient government and administration 

⦁ Fostering even and rapid socio-economic development of the community they serve.

⦁ Provision of utility services and amenities to the local people.

⦁ Helping the central government in the maintenance of law and order.

With these justifications, the hope was that this tier of government would have enough funds for their functions. What has been noticed over the years is that most of the lower-level governments have almost permanently complained about inadequate funds and inter-government fiscal relations have been characterized by struggle for increased shares from the federation account (Akpakpan, 2003). The inability of local governments to generate adequate internal revenue has been attributed to ineffectiveness of the local government system due to corruption.

Akpakpan (2010) observed that, though the claim of ineffectiveness and corruption in local government system cannot be ascertained empirically, yet the inability and unwillingness of officials to release information to researchers and even members of their constituencies snacks off accountability and transparences in the management of local government resources.

Responsible government all over the world, be it at the Federal, State or local government level are concerned with the provision and maintenance of social services for their citizens. In carrying out these social responsibilities, a huge amount of money is needed. One of the major sources of fund available to government to execute its numerous programs is imposition of taxes. Governments at various levels enact laws to impose taxes and to enforce their payment so that revenue can be generated. 

However, despite many stringent penalties and fines in the tax laws, it appears that a lot of individuals and corporate entities still do not see the reason why they should pay correct taxes or pay taxes at all. Hence, they try in some cases to avoid payment of taxes in other extreme cases, evade taxes (Bukar, 2004; Omoigua, 2004) 

The effect of taxation covers all the changes in the economy resulting from the imposition of a tax system. Tax is a major source of government fund, and this fund is the bedrock of development. The infrastructural developments demand a lot of resources and funding. The tax base in Nigeria since had been on increase in order to mobilize the resources needed to execute infrastructural projects. Tax revenue is one of the ways of funding infrastructural development. 

However, in Nigeria the contribution of tax revenue has not been encouraging, thus expectations of government are being cut short.  Corruption, evasion, avoidance and tax haven indicators are strongly associated with low revenue and indeed, corruption functions like a tax itself. According to Adegbie and Fakile (2011), the more citizens lack knowledge or education about taxation in the country, the greater the desire and opportunities for tax evasion, avoidance and non-compliance with relevant tax laws. 

Ademolekun (2005) noted that one of the recurrent problems facing local government development in Nigeria is dwindling revenue generation as characterized by annual budget deficits and insufficient funds for meaningful growth and viable projects development. This statement implies that local government has ineffective taxation policies which to a large extent affect the revenue base. Thus, they so much depend on revenue from federal statutory account. This background brings us to the study of taxation and development of Uyo Local Government Area. 

Tax has been defined by various authorities and professional in various ways. Webster’s   dictionary of the English language defines tax as a charge imposed by government authority on property, individuals, or transactions, to raise money for public purpose. Black’s law dictionary describe tax as a ratable portion of the produce, property and labour of the individual citizen taken by a nation.  Tax is compulsory levies which a government imposes on its citizens to enable it obtain the required revenue to finance its activities (Adesola, 2008). 

Examining the various definitions of tax, one observes that taxation is very important for any government if it has to make any meaningful economic development. Thus, this study is concerned with development at the grass root as being the goals of the local government administration. Thus, in an attempt to carryout development at all nooks and crannies of the society , the local government as the third tier of government that is nearest to the people is saddled with the responsibility of direct development of the people to  a certain level. 

Development is highly associated with fund, much revenue is needed to plan, execute and maintain infrastructures and facilities at the local government level (Okoli, 2000). The needed revenue generated for such developmental projects like construction of accessible roads, building of public centres, construction of bridges among others are soles generated from states, national and international government. 

Thus, the local government cannot embark, execute and possibly carryout the maintenance of these projects and other responsibilities without adequate taxation. This is the basic reason why development is skeletal at some local government councils in Nigeria. The issue of poor taxation is not exceptional to local government in particular. This, however pronouncedly affect development negatively in local government councils. In the project, the issue to address is how far this poor taxation can affect and hinder the development of Uyo Local Government Area. 

1.2 Statement of the Problem 

The local government council takes direct care of the grass root people that is the problem in the rural areas.  These groups of people sometime lack essential facilities and condition of the modern civilization (Udeh, 2008). They lack pipe borne water to drink, do not have electricity, accessible roads, poor educational infrastructures and facilities to mention but a few. 

This is one of the major reasons of rural-urban migrations of movement. This has made our cities to be congested and increase in many criminal activities. Based on the above and foregoing assertions, it is seen that the impact of the poor taxation on the development of the rural area is a serious problem, this might be as a result of poor taxation. The issue of taxation must be addressed squarely. Hence the researcher is bothered to find out the impact of taxation on the lives of the people at the rural area and how it has affected development of Uyo local government area. 

1.3 Objectives of the Study

The broad objective of the research is to evaluate the impact created by taxation on the development of Uyo in Akwa  ibom State.  The other objective of the study includes: 

1. To find out the major revenue sources of Uyo local government area.

2. To examine the lineup of problems associated with taxation in  Uyo Government Area.

3. To examine the methods to be adopted for prompt collection of tax in Uyo Local Government Area. 

1.4 Research Questions 

1. What are the sources of revenue in Uyo Local Government Area? 

2. What are the methods to be adopted for prompt collection of tax in Uyo Local Government Area? 

3. What are the problems associated with taxation in Uyo Local Government Area? 

1.5 Statement of Hypothesis 

1. Ho: Taxation is not a viable source of local government revenue for the development of Uyo Local Government Area. 

Hi: Taxation is a viable source of local government revenue for the development of Uyo Local Government Area.

2 Ho: There is no significant relationship between taxation and development of Uyo Local Government Area. 

Hi:   There is a significant relationship between taxation and development of Uyo Local Government Area. 

1.6 Significance of the Study

The significance of any human endeavour is measured by its relevance to solving human problems. The findings of this study would help the Uyo local government area to identify the problems associated with revenue generation and its consequences on development of Uyo Local Government Area. 

However, the study will be of great significance to managers of organizations, entrepreneurs, and investor especially those whose organizations’  tax are within the purview of the local government administration; as it reveals the irregular tax policies and practices that can jeopardize the  effectiveness and sustenance of their businesses. It will as well enable local government councils capitalizes on their gains while focusing on areas of comparative advantage. 

Also, major beneficiaries of this study are auditors and accountants, as well as financial analysts, government personnel and the revenue tax board will benefit from this study. 

1.7 Scope of the Study 

The study is focused on the importance of taxation on government revenue. The study also focuses on the impact of revenue of Uyo local government area and how it affects the development of the local government area. It will also involve the analysis of problems associated with revenue generation and its impact on the development of Uyo local government area.  

1.8 Limitation of the Study 

The study is confined to Uyo local government area  in Akwa Ibom State, the study only identify with the taxation and development   it will also involve  the analysis of problems associated with revenue generation and its impact on the development of Uyo local government area. 

Furthermore, there is no human Endeavour without constraint thus, in the course of the research, the researcher was constraint  by some factors. The limitation to this work border on the availability of fund (financial constraint), deliberate hoarding of useful information and materials by concern authority, another problem was time constraints. These among others served as limitation to the research work. 

However, effort was made by the researcher to reduce the effect of these factors on the content validity of the research work. 

1.9   Definition of Terms 

Some concepts require proper explanation to enhance our understanding of the theme, where necessary, opinion of scholars will be cited to explain the terms. The researcher will also give some fundamental definition of terms used in the study.  

1. Local Government: According to Lawal (2000) local government as a political subdivision of a nation in federal system which is constituted by law and has substantial control of local affairs which include the power to impose taxes or exact labour for prescribed purpose. 

Williams (2006) defines local government as involving the conception of territorial, non-sovereign community possessing the legal right and the necessary organization to regulate its own affairs.

2. Revenue: Public revenue could be defined as the funds generated by the government to finance its activities. In other words, revenue is the total fund generated by government, (Federal, State and local government) to meet their expenditure for a fiscal year. This refers to the grand total of money of income received from the source of which expenses are incurred. Revenue could be internal or external revenue.

3. Revenue Generation: This is the process of sourcing revenue for local government in carrying out their aims and objectives (Udeh, 2008).  

4. Tax: Tax can be defined as a compulsory levy by government on goods, services and wealth. It provides definite source of revenue for government expenditure (Udeh, 2008). It is a way by which government obtain extra money from income of individual and companies. Tax can be direct and indirect. A tax is a payment made by the tax payers and used by the government for the benefit of all citizens.

5. Tax evasion: Tax evasion means illegal reduction in one’s tax liabilities, thereby paying less than the appropriate amount and not paying at all.

6. Tax avoidance: Tax avoidance is the act of streamlining one’s financial affairs within the law so as to minimize the tax liabilities.

7. Development: According to Ake (2001) development is the process by which people create and recreate themselves and their lives circumstances to realize higher levels of civilization in accordance with their own choice and values. It is also a type of social change in which new ideas are introduced into a social order to produce higher per capita income and levels of living through more modern production methods and improved social organization.



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