study examines an appraisal of tax incentives as a tool for economic
development in Nigeria, a case study of federal Inland Revenue services Ilorin,
incentive is a kind of allowance that is deduced from tax payers income before
taking whatever remains of the individuals or corporate body’s income the
essence of this tax incentive is to their obligation duty. Chapter one looked
at the background of the study, the statement of research problem, statement of
hypothesis. It also highlighted the objective of the study, limitation of study,
scope of study and definition of terms. Chapter two was based on review of
relation literature, tax instrument and relevant texts on taxations. Chapter
three outlined the research method used in conducting the research work. It
indicates that this research work was carried out suing the survey research
method. The use of questionnaire and personal interview in collecting relevant
data was adopted. Chapter four, gives the presentation of data collection and
the analysis made on the data collected, it include the test of hypothesis.
Finally, chapter five brings the research work to a conclusion by giving a
summary of findings, conclusion and recommendations.
TABLE OF TABLE
of Contents vii
Background of the Study 1
Statement of Problem 4
State of Hypothesis 5
Objective of the Study 6
Scope of the Study 7
Significance of the Study 7
Limitation of the Study 8
Definition of term 9
2.0 Literature Review 13
2.1 Introduction 13
2.2 Federal Boards of Inland Revenue 14
2.3 Tax Incentives in Personal Income Tax 18
2.4 Tax Incentives in Company
Tax (CITA) 1990 30
2.5 Tax Incentives in Value Added Tax 32
2.6 Tax Incentives in Petroleum Industry 34
2.7 Tax Incentives in Capital Gain Tax 38
2.8 Tax Incentives, a tool for
3.0 Research Methodology 45
3.1 Research Design 45
3.2 Population and Sample Size 45
3.3 Sources of Data Collection 47
3.4 Method of Data Collection 47
3.5 Method of Data Analysis 48
4.0 Data Presentation, Analysis and Interpretation
4.2 Data Presentation, Analysis and
5.0 Summary, Conclusion and Recommendation 63
5.1 Summary of Finding 63
5.3 Recommendation 68
Taxation is a system of
imposing compulsory levy of the citizen or a company base on certain tax or
fiscal law. Taxation is also a system of imposing compulsory levy either directly
or indirectly on all income, goods, services and properties of individual
partnership trustees, executive and companies by the government.
Tax itself is a
compulsory levy imposes by public authority on income, consumption and
production of goods and services. Taxes are levied on personal income
(consisting of salaried, business profit, interest, income, dividend and
royalties, e.t.c). Company profit petroleum profit, capital goods and capital
It is also an important
way of influencing economic activities of a nation as a whole in the promotion
of government social-economics depression e.g to fight inflation, deflation,
economic depression e.t.c to achieve equitable distribution of income.
In addition, it is used
to re-allocate the resource in a socially desired pattern, to discourage the
consumption of certain product and to encourage and protect infant industries
with a country.
Tax incentive are
designed in Nigeria tax system in order to encourage and attract investment in
certain preferred sectors, it also enhance capitals formation thereby leaving
more retained profit arising from tax saving for reinvestment and protect
certain industrial and manufacturing sectors against competition and stimulates
the expansion of domestic production capacity in their areas.
As applied in taxation, the term incentive
involves all measure adopted by government to motivate tax for payer to
favourably to their obligation.
A tax incentive is a
deliberate reduction in the tax liability granted by government in order to
encourage particular economic unit to act in some desirable way.
Tax incentive could
achieve the following, voluntary tax compliance by tax payers due to low rate
or exemption from tax, it encourage investment by attracting foreign investors.
It provides industrial expansion and capacity utilization of industries.
During the pre-colonial
era, taxation functioned principally on either basis in Nigeria as a result of
the organized centralized authority; taxes during this period were levied for
the use of land, religions and education purpose.
independence this changes as tax and tax incentives mostly being administered
by the federal Inland Revenue service. The federal Inland Revenue service is
responsible for company income (CITA 1990), petroleum profit tax act (PPTA
1959) stamp duty act (1996) personal income tax (PTA 1993), value added tax
(VAT 1993), capital gain tax act (CGTA 1990) and withholding tax (WHI 2000).
1.2 STATEMENT OF PROBLEMS
The resulting output
despite the various tax incentive granted by the government is far below
expectation. The problem of implementation is majorly responsible for this
inadequacy. Other associated problems include frequent changes in government
policies, political instability and so on. The above stated problems are what
the researcher intends to address in this research work.
1.3 STATE OF HYPOTHESIS
A hypothesis is an
intelligent guess of solution(s) to a research problem. It is a tentative
explanation for certain phenomena or events which have occurred or will occur
which guides an investigation. After a problem has been well defined, the next
things to do is given a focus or direction to it’s solution.
The hypothesis as regards
this research problem is based on the Null Hypothesis (Ho) and Alternatives
hypothesis (Hi). Below are the hypothesis statement on which the survey of this
research work is based.
incentive is an effective tool in the development of Nigeria economy
incentive is not an effective tool in the development of Nigeria economy.
beneficiaries of tax incentive take advantage of the incentive
beneficiaries of tax incentive do not take advantage of the incentive
1.4 OBJECTIVE OF THE STUDY
The objective of this research
the effectiveness of tax incentives in Nigeria
the level of awareness of tax incentives by the tax
whether tax incentives encourages and attract foreign investors
whether the introduction of tax incentives makes tax evasion or avoidance
whether it serves as an instrument of controlling the economic growth
1.5 SCOPE OF THE STUDY
The scope of the study is
within the Federal Inland Revenue Services. However, it is strictly restricted
to the tax administered by the income tax, petroleum profit and personal income
tax and the tax incentive involved.
1.6 SIGNIFICANCE OF THE STUDY
The significance of this
research work is not far fetched. Tax incentives are granted over years with
the initiation of achieving some objective which among other includes:
generate revenue for the government
discourage tax evasion and avoidance
redistribute income in the society
encourage the growth of infant and local industries
The research work is
therefore devoted to examine these objective and also to evaluate the extend to
which goals and objectives have been achieved
Also, this research, work
explores the various tax incentives available to the various sectors of the
economy and how effectively they have been implemented.
Furthermore, the research
work suggests possible tax incentives as a tool to economic development in
1.7 LIMITATION OF THE STUDY
The attainment of
objective of the research work successfully was impeded by many factors. There
was the problem of time constraint. Another problem faced was that of finances.
There was not much
resources to go gather all the necessary information needed and also not must
resources to purchase all relevant materials needed.
The most serious problem
was the non-challenges of respondents of questionnaire given.
1.8 DEFINITION OF TERMS
The following terms and
defined as they are used in this research work:
It is a compulsory levy imposed by a public authority on incomes consumption
and production of goods and services. They are levied on personal income
profit, company profit, petroleum profit, capital gains and capital transfer.
INCENTIVES: It are instrument and measures adopted by
the government in order to make tax payers respond positively to their tax
EVASION: This is an illegal method of reducing one’s tax
liability such s declaring lower income or refusing to pay tax altogether.
AVOIDANCE: This is a deliberate act of the tax payer to pay less
than be ought to pay legally by taking advantage of a specific provision of the
OF ASSESSMENT: This is the year reaming for twelve month
from 1st January to 31st December. It is the reference
year from which tax is paid. Poior to 1980 it was 1st April of one
year to 31st march of the calendar year.
ALLOWANCE: This is a form of relief granted to business who
incurred qualifying capital expenditure in respect of assets used at the end of
a basis period.
ALLOWANCE: This is an allowance granted in the year of
assessment in which the qualifying capital expenditure was incurred and this
allowance is granted once in life span of any asset.
ALLOWANCE: It is an allowance that is granted every year. An
asset is put to use ad it is prorated based on the numbers of month in the
basis period in the first or commencement year of the business.
CHARGE: This obtained where the sales proceeds is less than
the tax written down value (TWDV) of the time or date of the disposal of an
ALLOWANCE: This obtained where the sales proceeds exceed the tax
written down value (TWDV) of the asset as the time of disposal.
CAPITAL EXPENDITURE: This refer to capital expenditure on
which capital allowance can be claimed.