CHAPTER ONE
1.0Â Â Â Â Â Â INTRODUCTION
1.1Â Â Â Â Â Â BACKGROUND
The political economic and social development of any country depends on the amount of revenue generated for the provision of infrastructure in that given country. However, one means of generating the amount of revenue for providing the needed infrastructure is through a well structure tax system.
Azubike{2009} is of the view that tax is a major player in every society. The tax system is an opportunity for government to collect additional revenue needed in discharging its pressing obligations. A tax system offers itself as one of the most effective means of mobilizing a nation’s internal resources and if lends itself to creating an environment conducive to the promotion of economic growth. nzontta{2007} on the other hand, argues that taxes constitute key sources of revenue to the federation account shared by the federal, state and local governments.
Appah, et al {2004}. Tax is a compulsory levy imposed on a subject or upon his property by the government to provide security social amenities and create conditions for the economic well-being of the society also anyanwu{1996} and ayanfo{1997} stated that tax are imposed to regulate the production of certain goods and services, protection of infant industries, control business and curb inflation, reduce income inequalities etc.
On the other hand, tosuu and abizadeh{2 005} acknowledge that taxes are used as proxy for fiscal policy. They outlined five possible mechanisms by which taxes can affect economic growth. first taxes can inhabit investment rate through such taxes as corporate and personal income, capital gain taxes, second ,taxes can slow down growth in labour supply by disposing labour leisure choice in favour of leisure . Third ,tax policy can affect on research and development expenditure . fourth, taxes can lead to a flow of resources to other sector that may have low productivity. Finally, high tax on labour supply can distort the efficient use of human capital high tax burdens even though they have high social productivity.
Revenue has be defined by various scholars at different time . it lacks universal accepted definition . according to Webster new international dictionary (Third edition) revenue could be defined as the annual or periodically yield to taxes , exercise as the other sources of income that the nation state or public sector collect or receives into their treasury for public use ; this means that it is a public income of whatever kind. Dixon (2000) sees amount revenue as the total amount obtained from the sale of a merchandise services to customers. According to prater (2005) this revenue is an income. fayemi (2001) sees it as all tolls, taxes, impress, rates, fees, duties, fine, penalties, fortunes and all other receipt of government from whatever source arising over a period either one year or six months.
Flesher and flesher (2007) define revenues as an increase in owners’ equity resulting from the performance of the service or sale of something’s this definition is an chore on the concept of equity which may increase due to sale of goods or provision of services in other words there are two sides revenue; something received and given. Taxes are fees charged or levied by the government on a product, income, or activities. If it is levied directly on personal or corporate income, it is called a direct tax, if it is levied on the price of goods and services, than it is call indirect taxes. The main reason for taxation is to finance government expenditure and to redistribute wealth (Worlu and Emake 2012).It has observed over the years that income tax revenue has generally been grossly understated due to improper tax administration arising from under assessment and inefficient machinery for collection (Okafor, 2012).He further stated that, income tax is levied on income such as salaries, business profit, interest, dividend commission, royalties and rent. It may also be charged on capital gains and petroleum profits. Taxation yields very substantial revenue to government.
Therefore it has a bearing on the Gross Domestic Product (GDP) which is the standard indicator for measuring economic well being of a nation. The nature and level of taxes vary according to the economic policies adopted by the various tax authorities .Intense advocacy for better tax incentive in many countries is a clear indication of growing concern for economic growth and sustainable development .these tax holiday, capital allowance, tax payer right of election, re- investment allowances, investment tax credit, interest subsidy, and export processing zone (PE2) incentives. They are expected attract more investment which would ultimately translate to higher future production in the economy. Much as the impact of tax incentives on productivity, employment, and economic growth has been examined extensively; evolution of the impact of tax incentives on corporate financial performance is still relatively limited in the literature Ohaka and Agundu (2012) .
The increase cost of running government coupled with dwindling revenue has led various state governments in Nigeria with formulating strategies to improve the revenue base. More so, the near collapse of the National economy has created serious financing stress for all tiers of government. Despite the numerous sources of revenue available to the various tiers 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 come from the petroleum. However, the serious decline in the in the price of oil in recent years has led to a decrease in the fund available for distribution to the states. The need for state and local government to generate adequate revenue from internal sources has therefore become a matter of extreme agency and importance. This need underscores the eagerness on the part of the state and local government and even the federal government to look for new source of revenue or to become aggressive and innovative in the mode of collecting revenue from existing sources.
Development is a sine qua non for modern civilization. In order to carry out development at all nooks and crannies of the society, it is the responsibility of the ogun state government to provide direct development to people to a certain level. Development is associated with funds and much revenue is needed to plan, execute and maintain infrastructures at the state level. The needed revenue generated for such development projects, like construction of accessible roads, building of public schools health care centres, construction of bridge are generated from taxes, royalties, haulage, fines and grants from the states, national and international governments. These funds could either be obtained internally or externally. Thus, the ogun state government cannot embark, execute and possibly carryout the maintenance of these projects without adequate revenues generation.
