TABLE OF CONTENT
Title
page i
Certification ii
Dedication iii
Acknowledgment iv
- v
Table
of content vi
- viii
Chapter One 1
– 12
1.1
Introduction
1.2 Statement
of the Research Problem
1.3 Aims
and Objectives of The Study
1.4 Significances
of the Study
1.5 Research
Question
1.6 Research
Hypothesis
1.7 Scope
of the Study.
1.8 Definition
of the Key Terms.
1.9 Organization of the study.
Chapter Two 13
– 44
2.1 Introduction
2.2 Historical Background
2.3 Government Tax Policy
2.4 Objectives of Taxation
2.5 Principles of Taxation
2.6 Forms of Taxation
2.7 Tax Law in Nigeria
2.8 Tax Administration
2.9 Tax Authorities
2.10 Tax System in Nigeria
2.11 Tax Administration
Problems
2.12 Overview of the Nigeria
Manufacturing Sector
2.12 Tax Policies and
Manufacturing Sector
2.14 Tax Incentives to
Manufacturing Companies
2.15 Industrial Constraints
Chapter Three 45
– 51
3.1 Introduction
3.2 Population.
3.3 Sample
Size and Sampling Techniques
3.4
Type and Sources of Data
3.5
Statistical Method of Data Analysis
3.6
Limitation of the Method.
Chapter Four 52
– 64
4.1 Introduction.
4.2
Data Presentation.
4.3
Data Analysis
4.4
Findings
Chapter Five 65
– 70
5.1 Introduction.
5.2
Summary of Findings
5.3
Conclusion
5.4
Recommendation
References 71
– 72
Appendix 73
Questionnaire 74
– 75
CHAPTER ONE
INTRODUCTION
Nigeria the most populous nations
in Africa are governed by federal system,
hence her fiscal operation also adheres to his same principle. This has serious
implication on how the tax policies are structured and operated in the country.
The government fiscal power is based on a three-tier structure divided between the
federal, state and local government each of which has different tax
jurisdiction. As at 2002, about 40 different taxes and levies are shared by all
three levels of government.
Since the late 1980s tax policy (a
fiscal policy instrument) has become a major tool in Nigeria. The reason for this not
for fetched.
First is the need for reconstruction
after the civil war, the industrialization strategy adopted by then import
substitution industrialization policy. Second reason for the rise in the role tax
policy is the falls in the international price oil in the late 1980s this gave
rise to the dominance of fiscal policy of which tax policy is major instrument
in the management of the economy.
Also the persistent budget deficit
since the early 1970s and given the fall in oil revenue made way for the
requirement of a new tax focus that saw the emergence of various reforms in tax
policy.
However, buy the sector was
observed, that the formal private sector was going extinct, economic activities
measured by aggregate output, industrial production non-oil exports etc. were
all showing distress signs. Above all there were strong and wide evidence of
pervasive and decline in the set up of the manufacturing sector leading to
reduced profitability in spite of
increase incentives give to the sector by 1986, all socio-economic indicate
were pointing toward the downward direction. In sum, there was severe in balance
in the sector, it was apparent that the economy required major structural
adjustment.
The structural adjustment programme
was introduced in 1986 to provide t he conceptual frame work for the government
participation in the process of industrialization, tax and related policies fro
influencing industrial development. It also desired to achieve high economic
growth increase in the share of manufactures.
Just immediately after the
introduction of structural adjustment programme it was observed that the reform
measure could not be sustained as the out put of the manufacturing sector was
responding negatively.
In the recent years, the present
civil administration in Nigeria
is giving a great deal of Allenton to the manufacturing sector in the eye of
various tax policies. Through the manufacturing sector not an exclusively
sub-sector in the industrial sector but it is a fact that is largely a major
sector in the Nigerian economy. It comprises wide range of enterprise mostly
producing consumer goods. In order to move from production of consumer goods.
In order to move from production of consumer goods only to production of
capital goods a number of incentives were put in place to boost capital stock.
It is worthy of note that a number of amendments have been made to some of
these tax policies. These include the company income tax act 1990, pioneer
legislation, of our basic industries which are expected to promote is an
appreciation of this, that government embarked on the development of a number
of basic industries such as iron and steel, pulp and paper machine tools, petrol
chemicals etc.
Unfortunately, most of these are yet
to operate effectively on account of the well known problems of inadequate
supply of raw materials, spare parts, infrastructural constraints and weak
managerial capacity.
Administrative
and institutional bottle needs industrials have persistently complained above
the unfavorable investment climate existing in the country, including bottle
neck in the administration of various permits and approved for starting and
operating business. This bureaucratic bottle neck coupled with economic
indiscipline causes a lot inconveniences and administrative delays and all
these business in the country. Also, the lack of clarity of government policy
of payment of royalties of transferring industrial technology from abroad.
Competition with imported Goods
An important features of capital
goods imported into Nigeria
is that, they are bought in as fairly use machines, equipment and spare parts.
Especially goods produced form these machines and equipment are sub-standard
which makes them to be poorly priced if they find their way to the
international market, as against higher quality goods form the mere
technologically advanced countries. Capital gain tax, import duties and host of
others. These amendments are to ensure rapid response to charge in the
manufacturing sector.
1.1 PROBLEM
STATEMENT
The character of government tax
policy in an important signal to economic agent, despite several tax incentives
introduced in the economy and given the importance of a tax policy in the
income management in Nigeria,
the manufacturing sector in Nigeria
is still being characterized by enhancing growth. One could then ask what was the
role of tax policy in inducing growth in the manufacturing sector in Nigeria.
What are the objectives of tax
policy? What characteristic does the Nigeria government tax policy
posses? Can the tax policy be designed to ensure high performance without
bringing corresponding instability in the economy?
The high tax regime though claimed
to ensure maximum revenue accrue to government is structured in a way t hat is
highly characterized by this giving no room for the emergence of new companies
and greater performance.
Furthermore, the unpredictable nature
of the tax policy frame work paying way of maximization of revenue thus creates
a harsh tax climate that encourages evasion. The structures of tariff and
double taxation which have encouraged anti-export bias have also left much to
be desired companies within the manufacturing sector have now found a way of
mitigating the effect of the above mentioned challenges by way of evading tax
and this not bring about desirable economic development.
Finally, the attendant problem of
lack of sufficient incentive to private enterprises in the form of development
rebate, tax holiday, accelerated depreciation allowance, reduced tax related,
that ensure manufacturing enterprises are started and expanded within the economy
have made the sector remain producers of consumer goods which does not however
enhance sustainable economic growth.
1.2 AIMS
AND OBJECTIVES
The main aim of this study is to
assess the government tax policies on the performance of the manufacturing section
Nigeria
with the specific objectives of:
i. Examine the tax policies in the
country
ii. Examine
the significance and the contribution of the manufacturing sector to the
development of Nigeria
economy.
iii. To deal with issues rose in the problem
statement.
iv. To examine the effect of government tax
policies.
v. To create flora upon which other
research work can be based.
1.3 SIGNIFICANCE
OF THE STUDY
In spite of the importance of a
result oriented tax policy in the country, attempts have not been made to
assess development over the years. The tax system in Nigeria is lopsided. This study is
of high importance considering the fact
that it spans through the largest sub-sector in the individual sector of
the Nigeria economy there is the strong need to investigate how tax policies affect this important sector
which act as an engine of growth in both developed and the developing countries
of the world.
1.4 RESEARCH
QUESTIONS
The following research questions are
governance to the study and answers sought to them:
1. What are tax policies operating in Nigeria?
2. Has Nigeria tax system functioned
effectively and efficiently?
3. Of
what importance is the manufacturing sector in the Nigeria economy?
4. What
implication does the government tax policy have on the manufacturing sector?
5. Is the Nigeria tax system properly
arranged and administered?
1.5 RESEARCH
HYPOTHESIS
Null hypothesis (Ho): government tax
policies do not affect the performance of the manufacturing sector.
Alternative hypothesis: government
tax policies affect the performance of the manufacturing sector.
1.6 SCOPE
AND LIMITATION OF THE STUDY
The research work will cover five
years financial analysis within this present civilian regime. There are wide
and varied policy threat of tax policies, this study focus on company income
tax, excise duties and import duties education tax.
However,
a major limitations of the study is lack of access data, this is as a result of some in formation that
were classified in the course of the field study. It must also be added that
the research work is glimpse of part of possible solution to any interested
party on the subject.
1.7 DEFINITION
OF TERMS
a.
Tax
Authority: This refers to the body of person or person responsible
under law of a territory imposing tax on the income of individual for the
administration of the law.
b.
Capital
Allowance: This is claimable on a qualifying capital expenditure
QCE. It is usually granted in place of depreciation charges which are normally
non-allowable expenses utilize to reduce effectively tax liability.
c.
Initial
Allowance: It is claimable once on a qualifying capital
expenditure in the year when it is first put to use.
d.
Annual
Allowance: This is claimable annually over the estimated useful
life of the qualifying capital expenditure. It is estimated as.
AA =
e.
Balance
Adjustment: This is obtained on the disposal of a QCE. It is
derived by comparing the sales proceed from disposed will the tax written down
value (TWDV) at the time of disposal there are only two possibilities.
Balance
allowance: it is obtained where the sales proceed is lower than the tax written
down value, it has the same characteristic an unities and annual allowance.
Balance
charge: this is obtained where sales proceed exceed the tax written down value,
it is an additional taxable profit chargeable to time.
f.
Import
Duties: these are tax imposed on importation of goods in the nation’s
economy as well as manufacturing and sales. It constitutes a major source of
revenue to a country.
g.
Excise
Duties: these are imposed on domestic goods for raising revenue;
this though has been abolished in Nigeria.
h.
Taxation:
this is an act of imposing compulsory terms on eligible citizens, corporate
organization etc this is expected to be paid by them.
i.
Company
Income Tax: this is a charge on the income of a company. It arises
on the proceeding year basis at the rate of 30%.
j.
Capital
Gain Tax: this is changed on the gains arising from the
disposable of chargeable asset. It arises on an actual year basis at the rate
of 10%.
k.
Pioneer
Legislation: this is provided for by the industrial
development (income tax) act. It encourages companies engaged in peculiar
business to be exempted from taxation for a reasonable period of time.
l.
Actual
Year Basis (AYB): this equivalent to the government fiscal year
which commence on 1st January to December 31st.
m. Proceeding Year Basis (PYB):
this is a period which must have ended before the beginning of the government
tax year. This company tax liability arises on PYB.
n.
Education
Tax:
is charged on the assessable profit of a company at the rate of 20%.
1.8
ORGANISATION OF THE STUDY
The
assessment of government tax policies on the performance of manufacturing
sector in Nigeria
which has to deal with how tax is being used in the implementation of government
policies on the manufacturing sector in Nigeria.
Chapter
one of the study deals with the introduction problem statement, the objectives
and significance of the study, the research question, research hypothesis and
which also state the scope of the study and finally the definition of the
terms.
Chapter
two lays emphasis on literature review on the study which talk about the
historical background of Cadbury Nigeria plc, government tax policy, the
objective of taxation, the principles of taxation, also all forms of taxation,
tax authorities and tax system and administration problem, furthermore the
chapter two also talks about the overview of the Nigeria manufacturing sector,
the tax and manufacturing sector, the tax and manufacturing sector, tax
incentives to manufacturing companies and lastly industrial constraints.
Chapter
three is based on the methodology of research which talks about the
introduction, population, sample, size and sampling, the type and source of
data, statistical method of method of data analysis is being analysis and the
limitations of the method.
Chapter
four entails the data presentation analysis and presentation, the introduction
which also talks about data presentation, data analysis and lastly findings.
Lastly
chapter five deals with summary, conclusion and recommendations.
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