ASSESSING ECONOMY GROWTH IN DEVELOPING COUNTRIES, ROLE OF TAX COLLECTOR

ASSESSING ECONOMY GROWTH IN DEVELOPING COUNTRIES, ROLE OF TAX COLLECTOR

CHAPTER ONE

INTRODUCTION

1.1       Background To The Study

Tax is a financial issue and its payment is a civil duty. It is the imposition of a financial burden for the government on individual firm and companies. In general based, the word tax means any contribution imposed by the government upon individual and companies for the use of government to provide facilities or services as rendered by the state. It is not a voluntary payment or donation but an enforced contribution made on the pronouncement or directive of legislative authorities.

The subject of taxation has received considerable intellectual and theoretical attention in the literature. Taxation is one of the most volatile subjects in governance both in the developing and developed nations. Tax refers to a compulsory levy by a public authority for which nothing is received directly in return (James and Nobes, 2015). According to Nightingale (2011), tax is a compulsory contribution, imposed by government, and while taxpayers may receive nothing identifiable in return for their contribution, they nevertheless have the benefit of living in a relatively educated, healthy and safe society. She further explained that taxation is part of the price to be paid for an organized society and identified six reasons for taxation as provision of public goods, redistribution of income and wealth, promotion of social and economic welfare, economic stability and harmonization and regulation.

According to Chaudhry and Munir (2010), tax as a source of government revenue consists of direct and indirect tax.  Direct tax is a form of tax that is levied on the income of individuals both civil servants and self-employed persons. OECD (2013) popularly called it Personal Income Tax (PIT),the burden of PIT is borne by the person on whom it is imposed. The concept of direct tax is not restricted to individual’s income in the form of pay As You Earn (P.A.Y.E) alone. It extends to profits of corporate bodies whose burden cannot be shifted. On the other hand, indirect tax is a type of tax that is levied on goods and services. Unlike direct tax, the burden of indirect tax can be shifted as in the case value added tax, import duties, among others.

Government needs a great deal of revenue in order to perform its duties effectively. Without adequate fund, development and improvement in human welfare will be hampered. The primary motive of taxation in all countries of the world is to generate funds to sustain economic growth and development. According to Osho, Ogumnyankin and Fadekinto (2020) taxation is the primary sources of government revenue. They opined that, it is an instrument for moving resources from the private hands to the public in order to achieve some of the country’s economic and social goals.

Despite the importance of PIT revenue, generation as key to economic development there has been a lot of tax evasion which is a major problem plaguing many emerging economies across the globe and Nigeria’s  situation seems peculiar when viewed against the scale of corrupt practices prevalent in the country.

Despites the importance of taxation to economy growth in a developing nation, many still evade tax in one way other other. Lekan and Kajola (2016), said that tax evasion is a deliberate practice of not disclosing full taxable income so as to pay less tax. This behavior is seen as a criminal act of disobeying the provision of tax laws. They also pointed out methods by which people evade tax to include failing to furnish correct return, statement or information or keep records required, making false return by a way of omitting or understating income liable to tax, presenting large amount of expenses in other to reduce taxable income and deliberating tax payment.

That is why Salawu (2015) further stressed that tax evasion is a crime that impedes government fiscal policy. This means that tax evasion makes government effort at regulating the economy ineffective.

Tax collectors either as an individual staff of the government or as a government agency plays a significant role in ensuring that the right income accrue from tax to the government is rightfully paid. Therefore, the need for this study to access economy growth in developing countries with the view of ascertaining the roles of tax collector.

1.2       Statement Of The Problem

It has been noted that tax system in developing countries has come to play a significant role, as a major source of revenue to the federal government  by way of imposing tax on tax payers and it is for them to pay up the tax.  The act of evading and avoiding tax by most registered companies and  some individuals has however affected the revenue base of the  government especially in providing essential services in the society. People naturally prefer to reduce their tax liabilities by deliberately overstating  their expenses and make false entries and fictions in their books of  account. Thus, their act however, causes tremendous reduction in the  revenue accruable to the government which eventually shrinks revenue to  the treasure of government. The inability of tax collectors or revenue board to collect substantial amount of money from tax is as a result of evasion and avoidance of tax. This research work access economic growth in developing countries with the view of examining the role of tax collectors.

1.3       Objective Of The Study

The general objective of this study is access economic growth in developing countries: role of tax collectors with particular references to Nigeria economy.

The specific objectives of this study are as follow

1. To analyze the state of economic growth in Nigeria
2. To evaluate the contribution of tax to the economic growth of Nigeria
3. To assess the role of tax collectors in increase tax revenue in Nigeria
4. To identify the factors or problems militating against the tax assessment and collection in Nigeria.

1.4       Research Questions

1. What is the state of economic growth in Nigeria?
2. What is the contribution of tax to the economic growth of Nigeria?
3. What is the role of tax collectors in increase tax revenue in Nigeria?
4. What are the factors or problems militating against the tax assessment and collection by tax collectors in Nigeria?

1.5       Statement of hypothesis

H0: Tax revenue did not play significant role in the economic growth of developing countries.

H1: Tax revenue plays significant role in the economic growth of developing countries.

1.6       Significance of the study

This research work would be relevant to various tax authorities; the Federal Board of Inland Revenue, Local Government revenue committee as well as their tax officials who are responsible to collect tax on individual or corporate bodies. It gives them insight on how to improve the tax administration.

The research would also help the professional bodies like the chartered institute of taxation of Nigeria and the institute of chartered accountants of Nigeria as well as their members to see the areas of deficiency in the collections and call for improvement in tax revenue.

This research would also be relevant to the future researchers and the dents of accounting, economic, business administration and other social and management sciences as well as the legislations which will also benefit immensely from this research because it will form basis of tax policy formation, implementation and administration.

1.8       Scope and Limitation of the Study

Since no single research can validly cover all areas of the topic the researcher tends that thrust of this project will be limited the scope of the study to Nigeria Economy.

Limitation of the Study

It is not unusual for research to encounter some difficulties in course at their research and these may include.

1. Finance: This is always a major limitation in a study of this nature, since the individual may not have enough money to carryout all the necessary research.
2. Lack Of Data: There are areas where data is available but which the researcher cannot lay hands on because the relevant information is sometimes termed confidential and unavailable to outsiders.
3. Lack Of Co-Operation:- By some of the respondents whom he administered certain copies of his questionnaire and vocal interview.
4. Delay in giving back its him some of the copies of the questionnaires for some of the respondents.

1.9       Operational Definition Of Terms

Taxation: This is a Compulsory levy imposed by the government to defray the cost of government and communal services.

Gross Domestic Product: This is the market value of all officially recognized final goods and services produced or the primary indicators used to gauge the health of a countries economy.

Development: This is the sustained concerted actions of policymakers to promote taxation and economic health of a specified area.Growth: This is the increase in the amount of tax paid by the tax payers over time or it is the conventionally measure in percentage rate of increase in real GDP calculated in real terms.