ROLE OF REVENUE MOBILIZATION ON ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIA.
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ROLE OF REVENUE MOBILIZATION ON ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIA.
Chapter one
INTRODUCTION
1.1 Background of the Study
Government revenue is the revenue received by a government to fund its operations and development projects. It is a key tool of the government’s fiscal policy because it allows for more spending (OECD, 2008b). To maximise social and economic welfare, governments must execute a variety of functions in the fields of politics, social policy, and economics.
To accomplish these tasks and functions, the government requires a vast quantity of resources. These resources are known as “public revenues.” Taxation, as well as revenue from administrative activities such as fines, fees, gifts, and grants, make up public revenue.
There are two sorts of public revenue: tax and non-tax revenue (Illyas and Siddiqi, 2010). Taxes are the primary source of public revenue. Taxes are mandatory payments to the government without any direct benefit or return to the taxpayer.
Taxes collected by the government are used to deliver common benefits to all, mostly in the form of public welfare programmes. Taxes do not provide a direct advantage to the taxpayer. It is not based on the straight quid pro quo premise.
The government collects tax money through both direct and indirect taxes. Direct taxes include corporate tax, personal income tax, capital gains tax, and wealth tax.
Customs duty, central excise duty, VAT, and service tax are all examples of indirect taxes (Chaudhry and Munir, 2010). Non-tax revenue refers to revenue generated by the government from sources other than taxes. These include taxes, fines, and penalties, surpluses from public enterprises, a special assessment of betterment levy, grants and donations, and deficit financing.
Fiscal policy, which aligns government revenue and expenditure, is critical in ensuring price stability and long-term growth in output, income, and employment, all of which are essential economic growth indicators (Ahmed 2010).
It is one of the macroeconomic policy instruments that can be used to prevent or limit short-run volatility in output, income, and employment, allowing an economy to reach its full potential.
However, for solid fiscal policy, a thorough grasp of the relationship between government revenue and a country’s economic growth is critical, particularly when dealing with the government’s financial deficits.
The government collects taxes, provides goods and services that are not generated by the private sector, engages in commercial activities, makes cash and in-kind transfers to families and enterprises, and pays debt interest (Abiola and Asiweh 2012).
All of these operations require the government to generate sufficient revenue. Governments generate cash from many sources in order to carry out their development agendas (Ahmed, 2010).
A country’s revenue structure dictates who pays for public goods and services. Countries can share the cost among specific categories of citizens and economic sectors by dispersing revenues across several mechanisms. In all OECD member nations, taxes other than social contributions account for the majority of government revenues.
Revenue is defined as all amounts of money received by a government from external sources, including those originating “outside the government” net of refunds and other correcting transactions, proceeds from debt issuance, investment sale, agency or private trust transactions, and intergovernmental transfers (Ahmed, 2010).
Government revenue is the total amount received by all agencies, boards, commissions, or other organisations that are dependent on the government.
According to the accounting techniques used to generate these figures, revenue includes receipts from all accounting funds of a government, excluding intra-governmental service (revolving), agency, and private trust funds (Chaudhry and Munir, 2010).
According to Ayres and Warr (2006), economic growth is “an increase in a country’s total output (goods or services).” It shows an increase in an economy’s capacity to generate products and services over time. Economic growth refers solely to the quantity of goods and services generated.
Economic growth can be quantified in nominal terms (including inflation) or in real terms (adjusted for inflation, such as the percentage rate of rise in GDP). Economic growth is measured in monetary terms and excludes other factors of development (Illyas and Siddiqi, 2010). Economic growth can be favourable or detrimental.
The term “negative growth” refers to the economy decreasing. Negative growth is linked to economic recession and depression (King and Levine, 1993). Gross national product (GNP) is sometimes used instead of GDP.
To compare multiple countries, statistics can be quoted in a single currency based on current exchange rates or purchasing power parity. The per capita figure is then used to compare nations with differing populations (Beck and Web, 2003).
1.2 Statement of the Problem
Economies with huge public sectors will grow slowly due to substantial tax wedges, whereas a lack of growth-enhancing government initiatives may hinder growth in countries with extremely small governments. However, not all expenditure and finance techniques have the same effect on economic growth.
While economic research indicates that the cumulative influence of taxes on economic development is moderate, current study (OECD, 2008b) demonstrates that there is a link between the types of taxes levied and economic growth.
Several studies have been carried out on government revenue and economic development. In Nigeria, people, particularly the rich and elites, purposefully avoid their civic responsibility to pay taxes and, in certain cases, hire tax specialists to pay less tax to the government.
There is also the issue of falsifying ages and the number of children and dependents in order to lower the amount of tax owed. As a result of these issues, sub-national governments (state and local governments) argue that their current tax bases are inadequate, and hence accruable revenues are insufficient to satisfy their spending targets.
In addition, the statutory allocation from the federation account has been chronically inadequate as a result of a drop in GDP. Given their expenditure patterns, this necessarily lowers their total performance. Taiwo (2008) found that in Nigeria, the allocation of government revenue is biassed in favour of one tax source over another (for example, oil revenue).
Nonetheless, there is strong evidence that oil revenue has a favourable impact on Nigeria’s economic growth (Odusola, 2006). However, the first question is whether other types of taxes are not relevant to examine.
Following from the foregoing, certain concerns arise: what is the relationship between Nigeria’s tax revenue and its economic growth? And how much do other tax bases contribute to a country’s overall tax revenue?
1.3 Objectives of the Study
The primary goal of this study is to determine the impact of revenue mobilisation on economic growth and development. Specifically, the study intends to:
1. Determine the impact of taxes on Nigeria’s economic growth.
2. Look into the impact of tax mobilisation on economic growth and development in Nigeria.
1.4 RESEARCH QUESTIONS.
The following research questions are developed to lead the study:
1. What is the influence of tax generation on Nigeria’s economic growth?
2. What role does revenue mobilisation play in economic growth and development?
1.5 Significance of the Study
This study would be significant for various stakeholders.
This study would add to the body of knowledge available to scholars and academicians in the field of government revenue and economic development. It would also indicate areas for further investigation, allowing future researchers to pick up and investigate them further.
The study would be useful to the government, particularly the Ministry of Finance, in formulating policy decisions whose overall goal is to impact the level of economic activity and government revenue in accordance with the rising government budget.
Finally, the study’s conclusions would be useful to policymakers, particularly those concerned with taxation and budgeting, in order to maintain manageable budgetary deficits.
1.6 Scope of the Study
This research will look at Nigeria as a whole, including the difficulties, effects, and significance of revenue mobilisation in economic growth and development.
1.7 Limitations of the Study
However, over the course of conducting this research, the researcher may encounter several obstacles, such as insufficient funding, insufficient data for the research, and the time required to complete the project.
1.8 Research Methodology
This study focuses on the impact of revenue mobilisation on economic growth and development in Nigeria. As a result, the study uses a traditional way of acquiring information, namely secondary sources.
A sizable portion of the secondary sources used came from published and unpublished works, including items taken from archives, newspapers, conversations, conference papers, magazines, the internet, books, and journal articles, among others.
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