TAX AND THE ECONOMIC PERFORMANCE IN NIGERIA.
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TAX AND THE ECONOMIC PERFORMANCE IN NIGERIA.
Chapter one
INTRODUCTION
1.1 Background of the Study
Taxation is a technique of raising money through taxes paid by residents in exchange for government services.
The Raismais commission, which met in 1957, established Nigeria’s current tax legislation. Prior to this period, we only had what was known as the income tax ordinance for the colonies, which was very standard throughout all of them and contained relatively comparable requirements.
Raim’s advice served as the foundation for a clause in the Nigerian Constitution Order Council of 1960, Section 70(1), which granted the parliament exclusive authority to create laws for Nigeria or any part of it based on certain consistent rules governing personnel income tax.
When Nigeria became a republic in 1963, the mid-western region was formed from the western region, and they adopted the western region’s tax law with the amendments, the position under the republican constitution of 1963, and that the regions (now divided into states) assumed jurisdiction over the income tax of individuals other than companies.
While the federal government took over corporate taxation, the uniform principles under the Income Tax Management Act and regional taxes in the federal territory of Lagos were maintained.
The Nigerian economy has been and continues to be characterised by a respectable degree of openness, therefore its performance can be improved by developing the external sector.
The Nigerian external sector has historically been dominated by primary commodities, which are well known for their low price and income elasticity of demand, modest growth in demand, terms of trade, and export earnings volatility (Lakan, 2006).
This mono-culture arrangement caused immeasurable hardship for the people of the country. For example, from 1970 to the present, oil exports have accounted for almost 90% of overall foreign exchange revenues.
The hardship of fluctuating oil prices has slowed the various nations’ development efforts significantly. For example, the government’s fiscal operations were interrupted in 2009, when federally-collected revenue fell by 38.4% (CBN, 2009), owing primarily to reduced oil prices in the international market caused by the worldwide economic catastrophe.
This has caused the Nigerian economy to swing from the “oil boom era,” as exemplified by the buoyant economy of the period with massive infrastructural development and the Udoji award, to the “oil doom” period, which arose from an oil glut in the global oil market since 1981, only to neglect the non-oil export productive base.
This has resulted in panic measures by various governments, including the Economic Stabilisation Act of 1982, the Buhari/Idiagbon regime’s counter-trade policies, and the Babangida administration’s implementation of Structural Adjustment Programmes (SAP).
Furthermore, in the aftermath of the recent global economic crisis, the government was forced to implement policy steps to address the issues and keep the economy from falling into recession. The policy actions adopted focused primarily on three broad fronts: monetary easing, fiscal easing, and trade policy.
Regardless of the type of government a country practices, it is clear that the government clearly identifies its revenue sources and how to allocate mobilised funds to various expenditure centres and projects that will improve the lives of its citizens (Shah and Shah, 2006; Ola and Offiong, 1999).
Government revenue sources include both coercion and voluntary parts. However, the major sources of revenue available to a local government are: 1) tax income; 2) administrative revenues (for example, fees, licences, fines, and taxes on profits from certain private sector activities); 3) public debts or loans; and 4) commercial revenues (or income from investments in municipal bonds and receipts from government business enterprises).
In truth, taxes are one of the ways that governments get the public to pay for their services. Taxes are mandatory payments imposed by the government on individuals and corporations in the form of personal income tax, corporate income tax, excise taxes, import duties, value added tax (VAT), and so on.
Direct taxes are mandatory in the sense that they are deducted at the source from an employee’s income. In this scenario, tax evasion is impossible.
It is now a concern that billions of naira are lost each year owing to tax fraud and avoidance by Nigeria’s self-employed people. Both the federal and state governments have already taken different steps to address this issue, but to no avail.
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