ASSESSING THE IMPACT OF COMPANY INCOME TAX ON REVENUE GENERATION IN NIGERIA (A CASE STUDY OF FEDERAL INLAND REVENUE SERVICE (FIRS), ABUJA)

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

The need for the government to provide social amenities, engage in developmental projects is a compulsory one for the improvement of the standard of living of the citizenry. But the government has often lamented of lack of fund to embark on these projects, hence the necessity for urgent intensified revenue generation effort by the government through taxation. Tax can be defined as compulsory levies impose by the government on the income, profit and properties of both individuals and corporate bodies for the sole administration of that government which has no compensatory benefits whereas taxation is a gamut of activity which result in payment of taxes. Obviously, there are two major types of taxes, that is the direct and indirect taxes. Examples of direct taxes include personal income tax, company’s income tax, petroleum profit tax, capital gains tax, education tax etc. The focus of this study is on company income taxes as a means of income generation in Nigeria. In Nigeria base on the three tier system, there are three major relevant tax authorities that is, Federal Inland Revenue Service which collects taxes on behalf of the federal government, State Inland Revenue Service which collect taxes on behalf of the state government and the Local Government Revenue Committee which collect taxes on behalf of the local government. (Rotimi, Udu & AbdulAzeez, 2013, Aransiola, 2013, Madugba, Laeyira & Ebere, 2013) Corporations in Nigeria pay tax to federal Inland Revenue Service irrespective of their residence (Okpe, 2015, Ani & Ugbor, 2010, Kiabel & Nkikpasi, 2009, Ojo, 2008). The increasing cost of running government coupled with dwindle revenue has led various state government in Nigeria with formulating strategies to improve the revenue base more so, the near collapse of the national economy has create serious financial stress for all tier of government. Despite the numerous source of revenue available to the various tier of government as specified in the Nigeria 1999 constitution, since the 1970s till now, over 80% of the annual revenue of the three tiers of government came from petroleum. However, the serious decline in the price of oil in recent years has led to a decrease in the funds available for distribution to the states. The need for state and the local government to generate adequate revenue from internal sources has therefore, become a matter of extreme urgency and importance

ASSESSING THE IMPACT OF COMPANY INCOME TAX ON REVENUE GENERATION IN NIGERIA (A CASE STUDY OF FEDERAL INLAND REVENUE SERVICE (FIRS), ABUJA)