CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
The revenue received by a government to fund its operations and development programs is referred to as government revenue. It is an essential tool in the government’s fiscal policy because it facilitates government spending (OECD, 2008b). To enhance social and economic wellbeing, governments must execute a variety of duties in the political, social, and economic realms. The government need a considerable amount of resources to carry out these tasks and functions. These funds are referred to as Public Revenues. Taxes, 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 revenue and non-tax revenue (Illyas and Siddiqi, 2010). Taxes are mandatory payments to the government for which the taxpayer receives no direct benefit or return. Government taxes are used to give common benefits to all citizens, primarily in the form of public welfare programs. Taxes provide no immediate advantage to the person who pays them. It is not founded on the notion of direct reciprocity. Direct and indirect taxes are used by the government to raise revenue. Corporate tax, personal income tax, capital gain tax, and wealth tax are examples of direct taxes. Customs duty, central excise duty, Value Added Tax (VAT), and service tax are examples of indirect taxes (Chaudhry and Munir, 2010). The term “non-tax revenue” refers to money collected by the government from sources other than taxes. Fiscal policy, which aligns government revenue and expenditure, is critical for price stability and long-term growth in output, income, and employment, all of which are essential indicators of economic growth (Ahmed, 2010). It is a macroeconomic policy tool that can be used to prevent or limit short-run volatility in output, income, and employment in order to get an economy to its full potential. However, a good knowledge of the relationship between government revenue and a country’s economic growth is critical for smart fiscal policy, such as correcting the government’s financial deficits. All of these initiatives necessitate the government raising sufficient funds. Governments generate cash from a variety of sources in order to carry out their development plans (Ahmed, 2010). Who pays for public services and goods is determined by a country’s tax structure. Countries can share the cost among specific groups of citizens and sectors of the economy by dispersing revenues across several mechanisms. Taxes other than social contributions account for the majority of government revenue in all OECD nations. Revenue is defined as all money received by a government from outside sources, such as money received from “outside the government” after refunds and other rectifying transactions, revenues from debt issuance, investment sales, agency or private trust transactions, and intergovernmental transfers ( (Ahmed, 2010). The amount received by all agencies, boards, commissions, or other entities classified as dependent on the government is referred to as government revenue. Ayres and Warr (2006) define economic growth as “an increase in a country’s overall output (goods or services).” It refers to a rise in an economy’s capacity to generate products and services from one historical period to the next. The number of goods and services produced is the only measure of economic growth. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which include inflation and are expressed as a percentage rate of rise in the gross domestic product (GDP). Economic growth can be favorable or unfavorable. The economy is declining, which is referred to as negative growth. Negative growth is linked to recession and depression in the economy (King and Levine, 1993). GNP (gross national product) is occasionally used as a substitute for GDP (gross domestic product). The statistics may be quoted in a single currency, depending on either current exchange rates or purchasing power parity, in order to compare several nations. The per capita figure is then used to compare countries with differing population sizes (Beck and Web, 2003).
STATEMENT OF THE PROBLEM
Substantial tax wedges will limit growth in economies with large public sectors, but a lack of growth-enhancing government initiatives may stifle growth in countries with extremely small governments (Barker, Buckle and St Clair, 2008). However, not all spending and funding approaches have the same effect on economic growth. While economic research reveals that taxes have a moderate cumulative influence on economic growth, current research (OECD, 2008b) suggests that there is a link between tax kinds and economic growth. Several studies on government revenue and economic development have been undertaken. In Nigeria, people, particularly the wealthy and elites, actively avoid their civic duty of paying tax and, on occasion, hire tax specialists to help them pay less tax to the government. There’s also the issue of lying about one’s age and the number of children and dependents in order to lower the amount of tax that must be paid. As a result of these reasons, subnational governments (state and municipal governments) argue that their current tax bases are inadequate, and hence accruable revenues are insufficient to satisfy their expenditure targets. In addition, due to a drop in GDP, the statutory allocation from the federation account has been badly inadequate. Given their expenditure patterns, this necessarily lowers their total performance. In Nigeria, according to Taiwo (2008), the distribution of government revenue is skewed in favor of one tax basis or the other (e.g., oil revenue). Nonetheless, the overwhelming evidence of oil revenue’s positive impact on Nigeria’s economic growth cannot be overstated (Odusola, 2006). However, the first question is whether or not other types of taxation should be considered.
OBJECTIVES OF THE STUDY
The primary goal of this research is to determine the impact of revenue mobilization on economic growth and development. More specifically, the study aims to:
1. Determine the impact of taxes on Nigeria’s economic growth.
2. Examine the impact of revenue mobilization on Nigeria’s economic growth and development.
RESEARCH QUESTIONS
The study will be guided by the following research questions:
1. What effect does taxation have on Nigeria’s economic development?
2. What role does revenue mobilization play in economic development and growth?
SIGNIFICANCE OF THE STUDY
Several stakeholders would benefit from this research:
This study would add to the body of knowledge of scholars and academicians in the field of government revenue and economic development. It would also recommend subjects for future research, so that future researchers may pick up on these topics and investigate them further. The study will be useful to the government, particularly the Ministry of Finance, in making policy decisions with the ultimate goal of influencing economic activity and government revenue in keeping with the growing government budget. Finally, the conclusions of this study will be useful to policymakers, particularly in questions of taxation and budgeting, in order to keep budget deficits under control.
SCOPE OF THE STUDY
The issues, effects, and function of revenue mobilization on economic growth and development will be thoroughly studied in this research, which covers Nigeria as a whole.
DELIMITATION OF THE STUDY
However, the researcher can anticipate several restrictions in the course of doing this research, such as a lack of funding, insufficient data for the research, and the time required to complete the project.
RESEARCH METHODOLOGY
The focus of this research is on the impact of revenue mobilization on Nigeria’s economic growth and development. As a result, the study uses one of the more traditional methods of acquiring data, namely secondary sources. Materials gathered from: Archives, Newspapers, debates, Conference papers, Magazines, Internets, Books, and Articles in journals, among other sources, made up a significant portion of the secondary sources utilised.
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