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| Chapters: 1-5
| Pages: 69
TAX AS A STIMULUS GROWTH AND DEVELOPMENT IN NIGERIA
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 SUMMARY
This paper has tried to explain the terms “tax” and “taxation”. Tax has been explained to mean a compulsory levy, which is required to be paid by every citizen, and it is generally considered as a civic duty of every taxable person in a country. Taxation on the other hand has been explained to mean the concept and science or the process of imposing tax on the citizens. Various taxes collected by each level of government e.g. Federal, State and Local governments were also discussed in detail. How to sustain economic growth and development was also discussed in this paper. The paper proceeded to analyze the major taxes collected by government from 1995 to 2004 and the cost of operation by the Federal Inland Revenue Service to collect these taxes from 1999 to 2004 based on the available data. Public expenditure which is defined as the expenses incurred by government in the performance of its various obligations was also discussed in detail. Public expenditure leads to the specific uses of tax as a stimulus for economic growth and development in a country. Criticisms of how tax revenue has been handled, (squandered or misused) by government officials also received the attention of this paper.
5.2 CONCLUSIONS
There is no gain saying the fact that tax revenue constitutes a major source of government revenue (pubic revenue). Revenue collected through various taxes is meant to be used for various specific projects to better the lives of citizens in a country. In the light of this, it is strongly advised that cognizance should be taken of the “specific uses” that Lagos State government has been putting its revenue to. These include: re-habilitation of old roads and construction of new ones, canalization and drainage system, construction of pedestrian bridges, provision of BRT buses, to ease the transportation problem in the state, and the beautification of Lagos State to mention just a few. All these have multiplier effects on the economy, such as creation of jobs for thousands of people, opening up links between rural and urban areas and inducing new investors into the state with the utmost objective of stimulating economic growth and development in the state. It is advised that other state governments and even the federal government should emulate this lofty idea of good governance in order to make life better for the citizens of this country. Governments at all levels should embark upon public expenditure that will stimulate economic growth and development so that apathy among many taxpayers in this country will be a thing of the past.
5.3 RECOMMENDATIONS
In order to achieve economic growth and development through specific uses of tax, the following recommendations are suggested:
Tax Education: It is very essential for government to give adequate tax education to the general public. Since changing the errant mindset of older Nigerians on tax matters is nearly impossible, it becomes imperative to inculcate a new mentality in the next generation of taxpayers. This may be a long-term solution for an endemic problem but certainly will yield better result.The idea of liaising with the ministry of education to inculcate the need to pay tax in our young people as being proposed by Omoigui (2004) is also a welcome one. She was however, quick to say “But I accept that the government also needs to win the trust and confidence of the people if we are to get them to pay taxes”.
Stimulation of Effective Demand: Government should invest in specific productive and viable projects that would create employment for the generality of the people. This will enhance people’s ability to demand for goods and services.
Stabilization of Prices and Employment: Market mechanism (i.e. the forces of demand and supply) alone may not likely achieve economic growth and development in a country.The more advanced and free the market mechanism, the more prone the economy is to the vagaries of income, employment and price fluctuations. Therefore, public expenditure can be devised as an anticyclical tool to create “effective demand” thereby, stimulating investment activities. It is instructive to emphasis that the total demand needs to be controlled so that the demand flows match the supply flows, otherwise, the stimulating effect may lead to an inflationary tendencies.
Public Expenditure and Redistribution of Income and Wealth: The inequality of income and wealth is an important evil of market mechanism. Inequalities in income and wealth do not only result in economic injustice but also distort production and employment patterns. Specific use of tax for public expenditure such as direct purchases, production of vital public goods and subsidies can ensure the supply of certain goods and services to the desired level. An example of this was the establishment of the Nigerian National Supply Company (NNSC) and purchase of fertilizers and selling them to farmers at subsidized rates.
Public Expenditure and Economic Growth: In developed economies, public expenditure helps to maintain a smooth growth rate through economic stabilization, stimulation of investment activities and social welfare. In developing economies like Nigeria, public expenditure has an important role to play in reducing regional disparity, developing social overheads, creation of infrastructure for economic growth in terms of communication and transportation facilities, education and training, research and development and so on. It is therefore, imperative for governments at all levels to ensure that the public expenditure that are embarked upon are those that will stimulate economic growth and development.
Efficient and Effective Budgetary Allocation: For there to be economic growth and development in this country, governments at all levels should strive very hard to ensure the efficiency and effectiveness of budgetary allocation on the basis of priorities, transparency of public expenditure and assuring the multiplication effect of public expenditure on the real economy.
Recognition of Benefits to Tax Producers: In order to use tax as a stimulus for economic growth and development, government fiscal policy should rather function in the benefit of tax producers than in the benefit of tax collectors and such policy should rely on a real partnership between state and contributor.
Possible Reduction in Tax Rate: Government may consider possible reduction in tax rates so as to encourage compliance by different categories of taxpayers. For instance, the government of Romania has reduced profit tax from 25% to 16%, whereas, Nigerian Companies Income Tax is 30% (Government of Romania, 2006: 3).This 30% tax rate is considered to be high and needs to be reviewed downward. A possible decrease in tax rate if well managed will lead to an increase of the taxation base by development of the existing business and increase of direct foreign investments. This will also reduce the share that underground economy has on GDP.
Possible use of Single Tax Rate: Government may consider the application of single taxation rate, both for Personal Income Tax and for Profit Tax. The taxation rate should be a competitive one as compared to the countries that Nigeria competes with, in order to attract direct foreign investment.
Collaboration With the Economic and Financial Crimes Commission (EFCC): A part from the conventional processes for getting and punishing tax offenders in Nigeria, the Federal Inland Revenue Service should partner with the Economic and Financial Crimes Commission to track down those who are flouting the tax laws.
Adherence to the Basic Conditions and Principles of Sustainable Economic Development: Finally, strict adherence to the basic conditions for sustainable economic development such as Democracy, Fairness, Interdependence, Responsibility and Accountability;general principles of sustainable development such as Environmental and economic integration, Maintenance of biological diversity and conservation of natural resources, Precaution, prevention and evaluation, Cooperation, partnership and participation, Education, training and awareness as explained earlier in this paper is a very good impetus for specific uses of tax as a stimulus for growth and development of any nation.
REFERENCES
Adeyeye, G.B.(2004). An overview of Personal Income Tax in Nigeria (A case study of Lagos state). Global Journal of Accounting, Lagos, Vol.1, No.2.
Anyaduba, J.O. (1999). Companies Income Tax in Nigeria (1sted.). United City Press, Benin City, Nigeria, Pp.1-56.
Bourdages, Jean-Luc (1997). Sustainable Development: Conditions, Principles and Issues.http://www.part.gc.ca/information/library/PRBpubs/bp458-ehtm, assessed on 6th September, 2004.
Bukar, K (2004). Are Nigerians ready to pay tax? BBC News, http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/1/hi/world/africa/ 461412, assessed on 6th September, 2004.
Federal Board of Inland Revenue (FBIR) (1997). Highlights of Nigerian Taxes.
Federal Government Press, Lagos, Nigeria
Federal Inland Revenue Service (2006). Budget Funds Received By FIRS 1999-2005, Computer print-out obtained from the Federal Inland Revenue Service.
Federal Inland Revenue Service (2006). Tax collection for 1999-2004 (as per CBN
Transfer), Computer print-out obtained from the Federal Inland Revenue Service.
Figaredo, R. de Rato (2005). The Quality of Fiscal Adjustment, Remarks
By Rodrigo de Rato y Figaredo, Managing Director of the International Monetary
Fund to the Dutch constituency, Tbilisi, Georgia, June 12.
http://www.imf.org/external/np/speeches/2005/061205.htm, assessed on 6th September, 2007.
Government of Romania (2006). Fiscal Budgetary Policy,Government Program,
http://www.gov.ro/engleza/obietive/afis-docdiverse-pg-eng.php?iddoc=17, assessed on 24th February, 2006.
Lagos State Board of Inland Revenue (1999&2002).“Guidelines on Personal Income Tax” JEEM-ADE Nigeria Company, Lagos, P.12.
Maffry, A. Jr. (1997). Nigeria – the giant of West Africa. Business America, http://findarticles.com/articles/mi_m1052/is_nl-2_v118/ai_19118708/, assessed on 25th April, 2009.
Napolitano, J. (2006). Governor’s Growing Smarter Oversight council: Moving Arizona Forward, Strategies for success: Proposed Growing Smarter Guiding Principles for Arizona. Arizona Department of Commerce.www.azcommerce.com, assessed on 6th April, 2006
Oakland, W.H. (1988). “Business Taxation in Louisiana: An Appraisal” in J. Richardson ed., Louisiana’s Fiscal Alternatives, Louisiana State University Press, New Orleans, Pp. 159-187.
Oakland, W.H. and Testa, W.A. (2000). The Benefit Principles as a Preferred Approach to Business in the Midwest, (Pre-edit draft: as ultimately published in Economic Development Quarterly), May, Pp. 7-9.
Ogundele, A.E. (1999). Elements of Taxation and Practice in Nigeria (1st ed.). Libri
Serve Nigeria Ltd, Lagos, Nigeria, Pp. 13-17. Omoigui, I. (2004). Are Nigerians ready to pay tax? BBC News,http://newsvote.bb .co.uk/mpapps/pagetools/print/news.bbc.co.uk/i/hi/world/Africa/461412, assessed on 6th September, 2004.
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 SUMMARY
This paper has tried to explain the terms “tax” and “taxation”. Tax has been explained to mean a compulsory levy, which is required to be paid by every citizen, and it is generally considered as a civic duty of every taxable person in a country. Taxation on the other hand has been explained to mean the concept and science or the process of imposing tax on the citizens. Various taxes collected by each level of government e.g. Federal, State and Local governments were also discussed in detail. How to sustain economic growth and development was also discussed in this paper. The paper proceeded to analyze the major taxes collected by government from 1995 to 2004 and the cost of operation by the Federal Inland Revenue Service to collect these taxes from 1999 to 2004 based on the available data. Public expenditure which is defined as the expenses incurred by government in the performance of its various obligations was also discussed in detail. Public expenditure leads to the specific uses of tax as a stimulus for economic growth and development in a country. Criticisms of how tax revenue has been handled, (squandered or misused) by government officials also received the attention of this paper.
5.2 CONCLUSIONS
There is no gain saying the fact that tax revenue constitutes a major source of government revenue (pubic revenue). Revenue collected through various taxes is meant to be used for various specific projects to better the lives of citizens in a country. In the light of this, it is strongly advised that cognizance should be taken of the “specific uses” that Lagos State government has been putting its revenue to. These include: re-habilitation of old roads and construction of new ones, canalization and drainage system, construction of pedestrian bridges, provision of BRT buses, to ease the transportation problem in the state, and the beautification of Lagos State to mention just a few. All these have multiplier effects on the economy, such as creation of jobs for thousands of people, opening up links between rural and urban areas and inducing new investors into the state with the utmost objective of stimulating economic growth and development in the state. It is advised that other state governments and even the federal government should emulate this lofty idea of good governance in order to make life better for the citizens of this country. Governments at all levels should embark upon public expenditure that will stimulate economic growth and development so that apathy among many taxpayers in this country will be a thing of the past.
5.3 RECOMMENDATIONS
In order to achieve economic growth and development through specific uses of tax, the following recommendations are suggested:
Tax Education: It is very essential for government to give adequate tax education to the general public. Since changing the errant mindset of older Nigerians on tax matters is nearly impossible, it becomes imperative to inculcate a new mentality in the next generation of taxpayers. This may be a long-term solution for an endemic problem but certainly will yield better result.The idea of liaising with the ministry of education to inculcate the need to pay tax in our young people as being proposed by Omoigui (2004) is also a welcome one. She was however, quick to say “But I accept that the government also needs to win the trust and confidence of the people if we are to get them to pay taxes”.
Stimulation of Effective Demand: Government should invest in specific productive and viable projects that would create employment for the generality of the people. This will enhance people’s ability to demand for goods and services.
Stabilization of Prices and Employment: Market mechanism (i.e. the forces of demand and supply) alone may not likely achieve economic growth and development in a country.The more advanced and free the market mechanism, the more prone the economy is to the vagaries of income, employment and price fluctuations. Therefore, public expenditure can be devised as an anticyclical tool to create “effective demand” thereby, stimulating investment activities. It is instructive to emphasis that the total demand needs to be controlled so that the demand flows match the supply flows, otherwise, the stimulating effect may lead to an inflationary tendencies.
Public Expenditure and Redistribution of Income and Wealth: The inequality of income and wealth is an important evil of market mechanism. Inequalities in income and wealth do not only result in economic injustice but also distort production and employment patterns. Specific use of tax for public expenditure such as direct purchases, production of vital public goods and subsidies can ensure the supply of certain goods and services to the desired level. An example of this was the establishment of the Nigerian National Supply Company (NNSC) and purchase of fertilizers and selling them to farmers at subsidized rates.
Public Expenditure and Economic Growth: In developed economies, public expenditure helps to maintain a smooth growth rate through economic stabilization, stimulation of investment activities and social welfare. In developing economies like Nigeria, public expenditure has an important role to play in reducing regional disparity, developing social overheads, creation of infrastructure for economic growth in terms of communication and transportation facilities, education and training, research and development and so on. It is therefore, imperative for governments at all levels to ensure that the public expenditure that are embarked upon are those that will stimulate economic growth and development.
Efficient and Effective Budgetary Allocation: For there to be economic growth and development in this country, governments at all levels should strive very hard to ensure the efficiency and effectiveness of budgetary allocation on the basis of priorities, transparency of public expenditure and assuring the multiplication effect of public expenditure on the real economy.
Recognition of Benefits to Tax Producers: In order to use tax as a stimulus for economic growth and development, government fiscal policy should rather function in the benefit of tax producers than in the benefit of tax collectors and such policy should rely on a real partnership between state and contributor.
Possible Reduction in Tax Rate: Government may consider possible reduction in tax rates so as to encourage compliance by different categories of taxpayers. For instance, the government of Romania has reduced profit tax from 25% to 16%, whereas, Nigerian Companies Income Tax is 30% (Government of Romania, 2006: 3).This 30% tax rate is considered to be high and needs to be reviewed downward. A possible decrease in tax rate if well managed will lead to an increase of the taxation base by development of the existing business and increase of direct foreign investments. This will also reduce the share that underground economy has on GDP.
Possible use of Single Tax Rate: Government may consider the application of single taxation rate, both for Personal Income Tax and for Profit Tax. The taxation rate should be a competitive one as compared to the countries that Nigeria competes with, in order to attract direct foreign investment.
Collaboration With the Economic and Financial Crimes Commission (EFCC): A part from the conventional processes for getting and punishing tax offenders in Nigeria, the Federal Inland Revenue Service should partner with the Economic and Financial Crimes Commission to track down those who are flouting the tax laws.
Adherence to the Basic Conditions and Principles of Sustainable Economic Development: Finally, strict adherence to the basic conditions for sustainable economic development such as Democracy, Fairness, Interdependence, Responsibility and Accountability;general principles of sustainable development such as Environmental and economic integration, Maintenance of biological diversity and conservation of natural resources, Precaution, prevention and evaluation, Cooperation, partnership and participation, Education, training and awareness as explained earlier in this paper is a very good impetus for specific uses of tax as a stimulus for growth and development of any nation.
REFERENCES
Adeyeye, G.B.(2004). An overview of Personal Income Tax in Nigeria (A case study of Lagos state). Global Journal of Accounting, Lagos, Vol.1, No.2.
Anyaduba, J.O. (1999). Companies Income Tax in Nigeria (1sted.). United City Press, Benin City, Nigeria, Pp.1-56.
Bourdages, Jean-Luc (1997). Sustainable Development: Conditions, Principles and Issues.http://www.part.gc.ca/information/library/PRBpubs/bp458-ehtm, assessed on 6th September, 2004.
Bukar, K (2004). Are Nigerians ready to pay tax? BBC News, http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/1/hi/world/africa/ 461412, assessed on 6th September, 2004.
Federal Board of Inland Revenue (FBIR) (1997). Highlights of Nigerian Taxes.
Federal Government Press, Lagos, Nigeria
Federal Inland Revenue Service (2006). Budget Funds Received By FIRS 1999-2005, Computer print-out obtained from the Federal Inland Revenue Service.
Federal Inland Revenue Service (2006). Tax collection for 1999-2004 (as per CBN
Transfer), Computer print-out obtained from the Federal Inland Revenue Service.
Figaredo, R. de Rato (2005). The Quality of Fiscal Adjustment, Remarks
By Rodrigo de Rato y Figaredo, Managing Director of the International Monetary
Fund to the Dutch constituency, Tbilisi, Georgia, June 12.
http://www.imf.org/external/np/speeches/2005/061205.htm, assessed on 6th September, 2007.
Government of Romania (2006). Fiscal Budgetary Policy,Government Program,
http://www.gov.ro/engleza/obietive/afis-docdiverse-pg-eng.php?iddoc=17, assessed on 24th February, 2006.
Lagos State Board of Inland Revenue (1999&2002).“Guidelines on Personal Income Tax” JEEM-ADE Nigeria Company, Lagos, P.12.
Maffry, A. Jr. (1997). Nigeria – the giant of West Africa. Business America, http://findarticles.com/articles/mi_m1052/is_nl-2_v118/ai_19118708/, assessed on 25th April, 2009.
Napolitano, J. (2006). Governor’s Growing Smarter Oversight council: Moving Arizona Forward, Strategies for success: Proposed Growing Smarter Guiding Principles for Arizona. Arizona Department of Commerce.www.azcommerce.com, assessed on 6th April, 2006
Oakland, W.H. (1988). “Business Taxation in Louisiana: An Appraisal” in J. Richardson ed., Louisiana’s Fiscal Alternatives, Louisiana State University Press, New Orleans, Pp. 159-187.
Oakland, W.H. and Testa, W.A. (2000). The Benefit Principles as a Preferred Approach to Business in the Midwest, (Pre-edit draft: as ultimately published in Economic Development Quarterly), May, Pp. 7-9.
Ogundele, A.E. (1999). Elements of Taxation and Practice in Nigeria (1st ed.). Libri
Serve Nigeria Ltd, Lagos, Nigeria, Pp. 13-17. Omoigui, I. (2004). Are Nigerians ready to pay tax? BBC News,http://newsvote.bb .co.uk/mpapps/pagetools/print/news.bbc.co.uk/i/hi/world/Africa/461412, assessed on 6th September, 2004.
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