ABSTRACT
Every government takes the issue of taxation seriously. Since its creation, Akwa Ibom State government has aimed at raising the level of the enacted tax laws revenue available for execution of government programmes. The laws serve to improve the structure of the tax system and promote the realization of economic development objectives. Despite the laws put in plans, many people believe that the needs substantial changes. The impact of taxation on economic development of Akwa Ibom State was the topic of this study. It was to explain the intricacies of the tax system, the determination of revenue capacity and to rest the rate at which tax revenue has contributed to the economic development of Akwa Ibom State. Data for this study were obtained from primary and secondary sources. The research methodology was descriptive. Tables and simple percentages were used to analyze the date obtained from respondent who were workers of Akwa Ibom State Board of Internal Revenue (The case of study). The study revealed that taxation is relevant to economic development of Akwa Ibom State and tax evasion hinders the process of development. It was recommended that the government should properly educate that taxpaying public on the benefits of taxation while revenue staff should be trained and encouraged to improve the machinery of tax collection in the state.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The first sacrifice one makes to the upliftment of one’s state or nation is to pay tax. Tax revenue helps modern governments to discharge responsibilities to citizens.
In Akwa Ibom State, there is the added need for the government to provide the desired infrastructure for rapid economic development; the state needs increased funding from different source. One major source is taxation.
This study was concerned with assessing the impact of taxation on economic development of Akwa Ibom State. Taxation remains the most important fiscal instrument for revenue mobilization by governments.
Taxation served as the dues that one pays for the privileges of membership in an organized society (Frankin 1983).
Furthermore, it could be viewed as a means by which a government implements decisions to transfer resources from the private to the public sector.
Taxation is a major instrument of social and economic policy, in which payment is not voluntary but enforced contribution enacted by legislative authority. (Bennett, 1980).
Chief U. U. Okowuem, in his articles “effects of taxation on investment development” further stressed the fact that, “taxation provides the most appropriate instrument for increasing savings for capital formation out of domestic source”.
Tax can basically be divided into direct and indirect. Direct taxes are those levied directly on the tax payers income. It includes personal income tax, company income tax, petroleum income tax, capital gains, stamp duties and penalties.
Indirect taxation, on the other hand are those taxes imposed indirectly on the payer’s incomes, they include import, export and excise duties etc. (Agyei 1983:3) They play important roles in Akwa Thom State.
It has been a strong force on economic development in the state from the pre-colonial, colonial and post colonial era. Ola (1981:67) equally enumerates tax benefits to include:
1) Acting as an instrument on fiscal policy
2) To make available trade growth and development. The maximum flow of human and material resources consisted with the current consumption requirement.
3) Reducing, where there exists the extreme inequalities in the wealth, income and consumption standard.
4) Maintain reasonable economic development in the face of long run inflation, pressures and short run international price movements.
5) It is particularly hopeful to the businessmen who enjoy the benefits of social services provisions of employment for individual and making available funds to governments.
1.2 STATEMENT OF THE PROBLEM
Improving tax payment can help attract more investment to increase growth and reduce poverty in Akwa Ibom State. Tax evasion has been a major constraint. It reduces the level of revenue available to government for development projects. In this study, the researcher would be concerned with looking at the impact of taxation on economic development in Akwa Iborn State.
Tax is seen as a catalyst to economic development, it is used for payment of national debt, it helps in improvement of balance of payment, it covers the cost of administration etc.
All these and many others are the importance of taxation. Failure to pay tax hinders development.
Hence this study seeks to examine all the contribution of taxation, and also factors that hinder the effective payment of tax in Akwa Ibom State with a view to providing suggestions and solutions on how to solve the problem of taxation in the State.
1.3 OBJECTIVES OF THE STUDY
The general objective of this study was to ascertain the impact of taxation on the economic development of Akwa Ibom State.
However the specific objectives include the following:
1) To examine the objectives of taxation and its relevance to Akwa Ibom State.
2) To assess the contribution of tax towards Akwa Ibom State economic development.
3) To find out the problems that may have affected the successful operation of tax system in Akwa Ibom State.
4) To make recommendations for efficient operation of tax system in Akwa Ibom State.
1.4 RESEARCH QUESTIONS
1) How relevant is taxation to the economic development of Akwa Ibom State?
2) Does tax evasion hinder economic development in Akwa Ibom State?
3) What are the factors militating against tax operation in Akwa Ibom State?
4) How effective is taxation as an instrument of fiscal policy in Akwa Ibom State?
5) How can tax evasion be minimized in Akwa Ibom State?
1.5 RESEARCH HYPOTHESIS
In order to arrive at a dependable conclusion, the following null (Ho) and alternative (Hi) hypothesis were formulated.
- H0) there is no significant relationship between tax evasion and economic development.
- Hi) There is a significant relationship between tax evasion and economic development.
- H0) There is no significant relationship between payment of tax and improved revenue profit of government Hi) There is significant relationship between payment of tax and improved revenue profit of government.
- Ho) There is no significant relationship between taxation and infrastructural development of Akwa Ibom State. Hi) There is significant relationship between taxation and infrastructural development of Akwa Ibom State.
1.6 SIGNIFICANCE OF THE STUDY
It is envisaged that, the result of this study would be of benefit in the following areas:
1) It will be of benefit to the Board of Internal Revenue, Akwa Ibom State.
2) It will help individuals and groups to know the impact of taxation on economic development
3) To provide the framework for further studies on the subject.
4) It shall suggest alternative ways for effective and efficient administration of tax in Akwa Ibom State.
1.7 SCOPE AND LIMITATION OF THE STUDY
The study is concerned with the impact of taxation on economic development of Akwa Ibom State.
Limitation
There were some problems that the researcher encountered in the course of the study. Some of them were:-,
1) Financial constraints
2) Time constraints
1.8 DEFINITION OF TERMS
Taxation: This is a compulsory payment made by each eligible citizen towards the expenditure of the state (Ewa Udu, 1989).
Economic Development: This is the reduction or elimination of poverty, inequality and unemployment. It is also the rate of growth per capital income which engineers substantial transformation within the economy (Dudley, 1869:3)
Tax Avoidance: This refers to legal way by which a tax payer legally minimizes his/her tax liabilities through careful planning of tax payer legally minimizes his/her tax liabilities through careful planning of tax payers affairs or through advantage loophole existing in tax laws and regulation (Ola,1981).
Development: The Oxford Advance Learners dictionary defines development as the gradual growth of something so that it becomes more advanced, stronger etc.
Public Finance: This is defined s the management as well as the study, of the raising and spending of government funds to finance the activates of the government and to provide a practical mechanism of positive control over the economy (Agu and Ewa, 1989).
Unemployment: This can be described as the state of worthlessness experienced by persons who are members of the labour force who perceived themselves and are perceived by others as capable of working (Fayana 200).
1.9 HISTORICAL BACKGROUND OF AKWA IBOM STATE OF BOARD OF INTERNAL REVENUE UYO.
The Board of Internal Revenue Uyo, Akwa Ibom State is located at Idongesit Nkanga Secretariat, Uyo
It was established in the year 1987 under the Military Government of Governor Jonathan Tunde Ogbeha who was the first Governor of Akwa Ibom State after the state was created from Cross River State on September 23 1987.
Management
Mr. Bassey Onyong Andy is the chairman of Akwa Ibom State Board of Internal Revenue Uyo.
Activities
The Akwa Ibom State Board of Internal Revenue is responsible for collecting the bulk of internally generated revenue (I.G.R) in Akwa Ibom State of Nigeria.
By virtue of the provisions of Akwa Ibom State Board of Internal Revenue Law of 1999, the Agency has powers of jurisdiction in the assessment and collection of all taxes, levies fees and penalties due, to the state government under relevant laws.
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