ABSTRACT
This study examined the Effectiveness of Taxation As An Instrument For the Control of Money in Circulation. Taxation which is an instrument used by the government to levy individuals and corporations directly or indirectly as a source of getting money for the maintenance of the state, maintaining economy stability, boasting aggregate investment, reduce inflation amongst others is adjudged to be the major source of public revenue. The problem of the study is that people see taxation as a tool for the exploitation of the ordinary man by the government and has generated a great deal of sentiments among taxpayers, some of who argue that the government unjustifiably rid them of investments and consumption income. The main objectives of the study are to examine the important role of taxation in an economy, to evaluate the various types and classes of taxation, to identify the major problems of taxation, and to determine the impact of taxation on money in circulation. The research questions and hypotheses are structured in line with the objectives of the study. The research is survey and empirical in nature. The main source of data for the study is secondary data. The instrument used for data collection include data on petroleum profit tax (PPT) and company income tax (CIT), paid by quoted companies in Nigeria spanning the period of 1999 to 2007 which was available. The average money in circulation (AMC) are also obtained for each year, and are classified according to the total tax collected (PPT + CIT) = Total tax collected (TTC). Data were analysed through the statistical tools of simple Linear regression and correlation analysis. Therefore, the correlation coefficient between the Total Tax Collected (TTC) and the Average Money in Circulation (AMC) shows that there is a positive linear relationship. The study found that the chief source of revenue for most industrialized countries is the income tax. The income tax is levied on both individual personal incomes and corporations profit. The work concludes that taxation is a veritable instrument used by government authorities to regulate and collect sums of money from both natural and legal persons for the benefit of the whole citizens. On the other hand, taxes reduces a tax payers wealth (money) and this causes the individuals to re-arrange his/her economic priorities. The study recommends that more generalized rates should be enforced to reduce tax avoidance and tax evasion. This will broaden the base and reduce the tax burden on a few individuals and firms. The study suggests that further work be carried out on this particular topic with emphasis on the areas which are not covered by this work.
TABLE OF CONTENTS Pages
Title page … … … … … … … … … ii
Approval Page … … … … … … … … iii
Declaration … … … … … … … … … iv
Dedication … … … … … … … … … v
Acknowledgements … … … … … … … vi
Abstract … … … … … … … … … vii
Table of Contents … … … … … … … viii
List of Tables … … … … … … … … xi
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study … … … … … … 1
1.2 Statement of Problem … … … … … … 2
1.3 Objectives of the Study … … … … … … 5
1.4 Research Question … … … … … … … 5
1.5 Research Hypothesis … … … … … … 5
1.6 Significance of the Study … … … … … 6
1.7 Scope of the Study … … … … … … … 7
1.8 Limitations of the Study … … … … … … 7
1.9 Definition of Terms … … … … … … 8
References … … … … … … … … 9
CHAPTER TWO: LITERATURE REVIEW
2.1 Overview of Taxation … … … … … … 10
2.2 Development of Taxation in Nigeria … … … … 12
2.3 The Importance of Taxation … … … … … 14
2.4 Introduction of Money in the System … … … … 15
2.5 Types and Function of Money … … … … … 17
2.5.1 Coins … … .. … … … … … 17
2.5.2 Legal Tender … … … … … … … 18
2.5.3 Convertible and Inconvertible Money … … .. … 18
2.5.4 Bank Deposit Subject to Withdrawal by Cheque … … 19
2.5.5 Other Types of Money … … … … … … 19
2.6 Functions of Money … … … … … … 20
2.7 Definition of Tax … … … … … … … 22
2.7.1 Nature of Tax … … … … … … … 23
2.8 Qualities of a Good Tax System … … … … 24
2.9 Analysis of Various Types of Taxes … … … …
And their Classification … … … … … … 26
2.10 Problems of Taxation … … … … … … 33
2.11  Effectiveness of Taxation as An instrument for the control Of Money in Circulation                  …     …     …     …     …     36
2.11.1 To check Inflation … … … … … … … 36
2.11.2 To Check Deflation … … … … … … 36
2.11.3 Personal Income Tax … … … … … … 37
2.11.4 Corporation Tax … … … … … … 37
2.12 Effect of Tax on Consumption, Savings and Investment … 39
2.13 The Incidence of Taxation as it Affects money in Circulation 43
2.14 Summary of Literature Review … … … … … 44
References … … … … … … … … 46
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction … … … … … … … 48
3.1 Source of Data … … … … … … … 48
3.2 Instrument Used for Data Collection … … … … 48
3.3 Problem Encountered… … … … … … 48
3.4 Presentation of Data … … … … … … 49
3.5 Method of Data Analysis … … … … … … 50
3.5.1 Regression Analysis … … … … … … 50
3.5.2 Correlation Analysis … … … … … … 52
CHAPTER FOUR: PRESENTATION ANALYSIS AND INTERPRETATION OF DATA
4.0 Introduction … … … … … … … 53
4.1 The Simple Linear Regression … … … … … 53
4.2 Test for Adequacy and Significant Impacts of the Model … 55
4.3 Product Moment Correlation Co-efficient … … … 57
References … … .. … … … … 58
CHAPTER FIVE: SUMMARY OF RESEARCH FINDINGS, Â RECOMMENDATION AND CONCLUSION
5.0 Introduction … … … … … … … 59
5.1 Summary of Findings … … … … … 59
5.2 Conclusions … … … … … … … … 60
5.3 Recommendations … … … … … … … 61
5.5 Area
Appendices … … … … … … … … 64
Appendix 1 … … … … … … … 64
Appendix II … … … … … … … 65
Bibliography … … … … … … … 66
LIST OF TABLES Page
Table 1           Computed Data of TTC and AMC for the period of 2007    50
Table 2           ANOVA Table for Simple Regression                                    52
Table 3 ANOVA Table for Tests 56
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Taxation which is a major source of public revenue has been variously defined to include an obligatory transfer of money from the taxpayer to a public authority (government). Odinge (2003:18) notes that the payment of tax unlike payment of price for acquisition of something of a material value implies the settlement of tax payer’s civic liability to the government.
Other definition of taxation include, a non-punitive but yet compulsory levy imposed by government on the property and incomes of individuals and corporations. According to Ajakaiye (1999:56) a tax is a form of levy imposed by the state on people, corporate bodies or goods and services.
Government action in tax collection is however justifiable in the sense that government performs at least the following functions for the welfare of its citizens.
- Provision of education, water supply, Postal and transportation services.
- Internal security which includes the prohibition of secessional tendencies.
- Prevention of external aggression e.g. protection of the country’s boarders.
- Set and maintain public infrastructure.
- Organize and execute state projects etc.
Ajayi (2002:18), notes that  taxation is an instrument of fiscal policy by the government. In this regard, taxation may be defined as an instrument through which government achieves its desired goals by the variation of taxes in its fiscal policy. In other words, taxation can be defined as an instrument used by the government to levy individuals and corporations directly or indirectly as a source of getting money for the maintenance of the state, maintaining economy stability, boasting aggregate investment, reduce inflation amongst others.
