CHAPTER ONE

1.0      INTRODUCTION

1.1   BACKGROUND OF STUDY

Taxation is one of the oldest means by which the cost of providing essential services for the generality of persons living in a given geographical area is funded. Globally, governments are saddled with the responsibility of providing some basic infrastructures for their citizens. Functions or obligations the government may owe her citizens include but are not restricted to: stabilization of the economy, redistribution of income and provision of services in the form of public goods (Abiola & Asiweh, 2012).

Taxation is a major source of government revenue all over the world and governments use tax proceeds to render their traditional functions, such as: the provision of roads, maintenance of law and order, defence against external aggression, regulation of trade and business to ensure social and economic maintenance (Appah & Eze, 2013). The primary function of a tax system is to raise enough revenue to finance essential expenditures on the goods and services provided by government; and tax remains one of the best instruments to boost the potential for public sector performance and repayment of public debt as enunciated by (Okoye & Raymond, 2014).

         The whole essence of tax revenue is to generate revenue to advance the welfare of the people of a nation with focus on promoting economic growth and development of a country through the provision of basic amenities for improved public services via proper administrative system, and structures. Tax revenue plays a crucial role in promoting economic activity growth and development. Through tax revenue, government ensures that resources are channeled towards important projects in the society, while giving succor to the weak.

The role of tax revenue in promoting economic activity and growth may not be felt if poorly administered. This calls for a need for proper examination of the relationship between revenue generated from taxes and the economy, to enable proper policy formulation and strategy towards its efficiency. According to Olashore (2009), the Nigerian economy has remained in a deep slumber with macroeconomic indicators reflecting an economy in dire need of rejuvenation, revival and indeed radical reform. Also in the view of Oni (2008), tax administration needs to be revamped and refunds of taxes as well as duty drawbacks administration are inefficient.

According to Azubike (2009), a system of tax avails itself as a veritable tool that mobilizes a nation’s internal resources and it lends itself to creating an environment that is conducive for the promotion of economic growth. Therefore, taxation plays a major role in assisting a country to meet its needs and promote self-reliance. In Nigeria, tax revenue has accounted for a small proportion of total government revenue over the years compared with the bulk of revenue needed for development purposes that is derived from oil (Uremadu & Ndulue 2011).

The serious decline in the prices of oil in recent times has led to a decrease in the funds available for distribution to the federal, state and local governments as noted by (Nzotta, 2007). Consequently, dependence on oil as a particular or main source of revenue in Nigeria has become risky and not beneficial for sustainable economic growth. It is worse for Nigeria where there are fluctuations in prices in the oil market; thereby creating concerns amongst Nigerians and indeed the Nigerian government on the need to diversify the economy.

1.2   STATEMENT OF THE PROBLEM

The government of Nigeria is faced with multifaceted problems ranging from corruption, embezzlement, poor financing, mismanagement of funds and poor leadership. This has deterred the growth and developments of all level of government in Nigeria. However, unfortunately, it is evidenced that, the role of tax revenue in promoting economic growth in Nigeria is not felt, primarily because of its poor administration. The major challenges facing economic growth and tax administration and revenue in Nigeria include, poor accountability, lack of awareness of the general public on the imperatives and maximum benefits of taxation, corruption of tax officials, tax avoidance and evasion by taxpayers, connivance of taxing officials with taxing population, poor method of tax collection. Finally, several researches has been carried out on tax revenue and economic growth but not even a single research has been carried out on economic growth and tax administration (tax justice, revenue) in Nigeria.

1.3   AIMS AND OBJECTIVES OF STUDY

         The main aim of the study is to examine economic growth and tax administration in Nigeria. Other specific objectives of the study include;

1.          to determine the factors affecting economic growth and tax administration in Nigeria.

2.          to determine the effect of economic growth on tax administration in Nigeria.

3.          to determine the influence of economic growth on tax administration in Nigeria.

4.          to proffer possible solutions to the problems.

1.4   RESEARCH QUESTIONS

1.          What are the factors affecting economic growth and tax administration in Nigeria?

2.          What is the effect of economic growth on tax administration in Nigeria?

3.          What is the influence of economic growth on tax administration in Nigeria?

4.          What are the possible solutions to the problems?

1.5   STATEMENT OF RESEARCH HYPOTHESIS

H0:    Economic growth has no significant effect on tax administration, justice and revenue in Nigeria.

H1:      Economic administration has a significant effect on tax administration, justice and revenue in Nigeria.

1.6   SIGNIFICANCE OF STUDY

The study on economic growth and tax administration (tax justice, revenue) in Nigeria will be of immense benefit to the entire government in the sense that it will enable them to know that oil and non oil revenue are major sources of revenue to the government. This can be used to achieved economic growth, maintaining equilibrium in the economy by combating element of depression, inflation or deflation, achieve equity in income and wealth distribution and address issues of poverty and promote socioeconomic development, hence the need to find out the extent tax revenue impacts on Nigeria’s economic growth. The study would be of importance to policy makers at national level as they designed policies aimed at enhancing economic and development through a better tax revenue system. Policymakers, especially federal Inland Revenue Service will use the outcome of the study to gauge its performance, and determine the level of input it would have to make impact positively to the Nigeria.

Specifically it assists the Federal Government of Nigeria in the light of dwindling oil revenue in Nigeria. This study would assist the government to block revenue leakages, harness greater revenue sources, evolve an effective policy framework which would guarantee quality tax administration and foster economic prosperity on the citizenry. It also gives useful opinion to the government on how to generate more income from tax so as to be less dependent on income from the unstable oil sector alone. Nigeria oil which had been the main source of revenue earner for Nigeria government over the years.  Finally, the study will contribute to the body of existing literature and knowledge to this field of study and basis for further research.

1.7   SCOPE OF STUDY

The study on economic growth and tax administration is limited to Nigeria.

1.8   LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9   DEFINITION OF TERMS

Economic GrowthAn increase in the amount of goods and services produced per head of the population over a period of time.

TaxIs money that people have to pay to the government.

AdministrationThe process or activity of running a business, organization, etc

JusticeThe maintenance or administration of what is just.

RevenueIs the income that a business has from its normal business activities, usually from the sale of goods and services to customers. 

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