AN EMPIRICAL INVESTIGATION OF THE INFLUENCE OF TAXATION ON THE NIGERIAN ECONOMY (1980 – 2006 (ECONOMICS PROJECT TOPICS AND MATERIALS)
ABSTRACT
The main objective of this project work is to critically examine the influence of taxation on the Nigerian economy. There is a considerable debate over the appropriate role for the tax policy in Nigeria. In one view, likes reduces deficits and ease budgetary pressures, thereby emphasizes the distortionary effects associated with increased taxation and the positive benefits of a carefully designed tax system. This research tests these propositions by measuring the impact of government taxation and expenditure on real gross domestic product. A theoretical model is derived which shows that the impact of government expenditure, paradoxically, has an insignificant negative effect on RGDP in Nigeria. Custom and excise duties has a significant positive effect on economic growth in Nigeria. Company income tax affects economic growth, in negative and significant way.
CHAPTER ONE
BACKGROUND OF THE STUDY
Capitalism as advocated by Adams Smith (1776) in his book, “The Wealth of Nation” implies an economic system where the means of production and distribution of goods and services lies in the hands of individual. To enhance the smooth running of the economic system, a well secured environment through the maintenance of law and order to including the provision of social overhead by the government. Government need resources (finance) to meet up with this endless task. Hence, the concept of taxation becomes eminent.
Taxation has existed since the birth of early civilization and it could be said that it is part of the price to be paid for living in an organized society. However, taxation is not just a means of transferring money to the government to spend as it thinks fit, it also has a tendency to reflect prevailing social values and priorities. The system of taxation is a socio-economic model, representing society’s social, political and economic needs often being reflected by changes to the system of taxation.
Oriakhi, (2002) defines taxation “as a compulsory levy an those who are taxed have to pay the sums irrespective of any corresponding returns of services or goods by the government, the government of most developing countries profess a desire to stimulate and guide the economic, and social development of their nations. The tax system is often identified as one of the most power levers available to those government to move the economy. Anyanwu (1997) view taxation as “compulsory transfer of payment of money from private individuals, institution or groups to the government. Taxation, system of raising money to finance government. All government requires payments of money taxes from people. Government uses tax revenues to pay soldiers and police, to build dams and roads, to operate schools and hospitals, and for hundreds of their purposes. Throughout history, people have debated the amount and kind of taxes that a government should impose, as well as how it should distribute the burden of those taxes across society.
