This project is aimed at evaluation of use of tax as a fiscal
policy of government towards the regulation of Nigerian economy. In the course
of this work, various data were collected and relevant literatures to the
subject matter extensively and exhaustively reviewed. The study used both
primary and secondary sources of data, statistical tools as tables, frequency
distribution, percentages and chi-square (X2) were used in the
analysis of data and testing of hypotheses. The following findings were on the
tested hypotheses that; Fiscal Policy as an instrument is not useful in
determining policy objectives in sector, businesses and individuals in an
economy, dwindling economic trends
(e.g. inflation) do not guarantee true valuation of goods and services for tax purposes in an
economy, fiscal policy has negative effect on organizational growth the
following recommendations were made based on the research finding, that stiff
tax policy (especially fiscal) by government and her agencies that are contrary
to aspirations (or achievement of goals) by sector, business and individuals
should be adjusted in the form of flexible policies that will encourage growth
of all in an economy, periodical review of taxation plans and programmes that
make for successful application of fiscal policies in Nigerian economy should
be adopted and applied, taxation as a tool for fiscal that may not be effective
instrument for control in an economy should be regulated to making it effective
and efficient, etc.
Title page i
Table of contents vi
1.1 Background to the Study 1
1.2 Statement of the Problem 3
1.3 Objective of the study 4
1.4 Research Questions 5
1.5 Research Hypotheses 6
1.6 Significance of the Study 6
1.7 Scope of the Study 7
1.8 Limitation of the Study 8
1.9 Definitions of Terms 10
CHAPTER TWO: LITERATURES REVIEW
2.2 Historical Background on Taxation
in Nigeria 13
2.3 Definition of Tax and Its Purpose 23
2.3.1 Purpose of Taxation 23
2.4 What is Fiscal Policy 24
2.4.1 How Is Tax a Tool of Fiscal
2.4.2 The Following Are Instrument of
Fiscal Policy 26
2.5 Fiscal Policy-How It work in an
2.5.1 Implementation of the Fiscal
Policy in Nigeria 31
2.6 Classification of Taxes 26
2.7 Types of Tax System 34
2.8 Aims and Objectives in Tax
2.9 Administrative Organization 39
2.9.1 The Duties of the Board
2.10 Principles and Legislation of
2.10.1 Legislation on Taxation 43
2.11 Problems Associated With the
Internal Revenue 47
2.12 Fiscal Policy, Growth and Poverty
Alleviation in Nigeria 51
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction 59
3.1 Research Design 59
3.2 Population of the Study 59
3.3 Procedure For Sample
3.4 Stratified Sampling Technique 60
3.5 random Sampling Technique 61
3.6 Instrumentation 61
3.7 Pilot or Pre-Test of Instrument 61
3.7.1 Reliability and Validity of
3.8 Administration of the Instrument 63
3.9 Method of Data Analysis 64
CHAPTER FOUR: DATA PRESENTATION AND RESULT
4.1 Introduction 65
4.2 Analysis of Data 69
4.3 Test of Hypotheses 81
FIVE: SUMAMRY, CONCLUSION
5.1 Summary of Findings 90
5.2 Conclusion 90
5.3 Recommendations 91
5.4 Suggestion for Further Studies 92
Taxation as a tool of fiscal policy refers to action of
institutions (e.g. government and her agency) to sourcing revenue or compulsory
levy imposed and collected on individuals and business firms. To Azubike
(2009:36) is a special kind of payment in that it is compulsory and benefits
for payment do not necessarily correspond (in magnitude) to the amount of tax
paid. In determining taxation as a tool to fiscal policy in Nigeria, two elements
are considered; the base and the rate. Here the tax base is the object which is
taxed (e.g. income, profits, property etc) while the tax rate is the amount of
the tax base paid in tax (usually in form of a flat percentage). Similarly the
nature of fiscal policy as a monitoring tool in taxation to Alii (2007)
concerns shaping the structure, determining the volume of tax revenue and
government expenditure for attaining objectives as; full employment or economic
growth. thus the instrument to him, are various type of taxes and the various
methods of government expenditure, as well as
tailoring consumption, savings domestic and foreign investment pattern.
Inspecific terms Tomety (2007) agreed that objectives in fiscal policy of
taxation include; economic growth, stability in production and employment, Some
implications of taxation as a tool of fiscal policy in Nigeria is the improvement
of the standard of living of the populace and achieving real growth in economic
activities. The reduction of import duty rates on major
raw materials for example is capable of boosting production and varieties in goods
and services available to an economy. On the other hand, it affects organizations;
it for example excise duty could be abolished as prices of goods would go down.
However the reverse could be the case in some instances with price going higher
than the excise duty. To this effect, manufacturers are likely to shift such
burden of costs (unless regulated) to the consumers. This study want to
encourage that organizations should pay tax as this is inevitable to
stabilizing external sectors in an economy and curbs importation as well as
tackle balance of payment dis-equilibrium. Similarly this study will seek to
identify the revenue potentials of tax structure and administration as a fiscal
policy of government in the regulation of organizations and industries in
Nigeria. It will also appreciate the contributions of taxation towards
consumptions and public debts as economic indicators that need controls for the
growth of Nigerian economy.
1.2. STATEMENT OF THE PROBLEM
Tax as a fiscal policy in Nigerian economy is an attempt to check
and control sectors of the economy through imposition of taxes, collection of
revenue and expenditures that benefits all. In other words, when tax as a
process or regulator is properly applied, sectors, business and individuals
will effectively perform roles and responsibilities for growth and development.
These and other laudable achievement of tax as a fiscal policy of government in
regulating Nigerian economy is hampered by the following
Stiff tax policies
(especially fiscal) by government and her agencies that are contrary to
aspirations (or achievement of goals) by sector, businesses and individuals.
Tax evasion by individuals
that does not allow full realization of taxation as a tool of control.
The regressive nature of tax
that discriminate against the low income earners, hence unbalance control among
persons or companies in an economy.
The dwindling economic
trends (e.g. inflation) that does not guarantee true valuation of goods and
services for tax purposes.
Inadequate resources (human
and non- human) in the adoption and application of any given tax structure and
1.3. OBJECTIVE OF THE STUDY
The main theme of this study is to appraise the use of tax as tool
of fiscal policy in the regulation of Nigerian economy. In other words, this
study will provide information on taxation for fiscal policy to two main
parties, viz; government and the tax payers.
Other specific objectives are;
Examining the extent to
which tax has influenced or implied on investment in Nigerian economy.
Examining the structure in
the administration of tax with a view to determining its usefulness to
organizations in Nigeria.
effectiveness of canons or principles of taxation through fiscal policy in
Determining the effect of
stiff tax policies (especially fiscal) by
government and her agencies on the aspirations (or achievement of goals) by
sector, businesses and individuals.
Examining Tax evasion by
individuals that does not allow full realization of taxation as a tool of
Determining if the
regressive nature of tax that discriminate against the low income earners
creates unbalance control among persons or compames III an economy.
Determining the effect of
dwindling economic trends (e.g. inflation) on true valuation of goods and
services for tax purposes
1.4 RESEARCH QUESTIONS
The following research questions will serve as guide in this
To what extent has tax
influenced or implied on investment In Nigerian economy?
Is the structure in the
administration of tax usefulness to organizations in Nigeria?
Is the canon or principles
of taxation through fiscal policy effective in Nigerian economy?
Does stiff tax policies
(especially fiscal) by government and her agencies promote its aspirations (or
achievement of goals )on sector, businesses and individuals?
Does tax evasion by
individuals that allow full realization of taxation as a tool of control in
Does the regressive nature
of tax that discriminate against the low income earners creates unbalance
control among persons or companies in an economy?
Does the dwindling global
economic trends (e.g. inflation) affect true
valuation of goods and services for tax purposes in an economy?
1.5 RESEARCH HYPOTHESES.
The following research hypotheses were formed to guide this study;
(Ho): Fiscal policy as an
instrument is not useful in determining policy
objectives in sector, businesses and individuals in an economy.
(HI): Fiscal policy as an instrument is useful in determining policy
objectives in sector, businesses
and individuals in an economy.
(Ho): Dwindling economic trends (e.g.
inflation) do not guarantee true valuation of goods and services for tax
purposes in an economy.
(HI): Dwindling economic trends (e.g. inflation)
guarantees true valuation of goods and
services for tax purposes in an economy.
(Ho): Fiscal policy has negative effect on organizational growth
(HI): Fiscal policy has positive effect on organizational growth.
1.6 SIGNIFICANCE OF STUDY
This study becomes significant to the extent that it will be able
to highlight previous studies and finding of scholars in this subject area.
Besides, the study becomes significant as long as current findings
from field and study are able to complement previous findings such that both
findings (current and previous) provide the bases for policy formulation and
corporate decision making.
Other beneficiaries are the government and academia. To the
government, this study will be significant to her in managing and controlling
goods and services as well as assets and liabilities in the economy. It will
also assist government in planning and assessing organizations and industries
for tax purposes. It is specifically useful in harnessing resources available
government for even development and growth of sectors of the economy.
To the academia, this study will be added to the existing
materials for reference purposes and further research.
1.7 SCOPE OF THE STUDY
This study will cover the activities of all tax institutions and
payers (within Lagos metropolis) on tax as a fiscal policy of government in the
regulation of Nigerian economy. Since it will be difficult to cover all the tax
institutions and payers in Nigeria, Federal Office of Statistics, Centre Bank
of Nigeria and Federal Inland Revenue Service as well as selected tax payers
will be taken as focal point. In doing this, different departments and
personnel of the institutions will be covered as well as selected tax payers.
OF THE STUDY
The conduct of this research may be limited by the following
factors; Time, which may not be enough for the enormous facts and ideas the
research study may require. Added to this is the content of the topic of study.
Infact the study may require much time for more coverage. Research information
or materials may not easily be available from respondents. Finance may be
another area where the research may encounter some set backs. Most materials
needed for the research work may be quite expensive and not within the reach of
the researcher. This short/comings not
withstanding, adequate data will be collected and analyzed.
1.9. DEFINITIONS OF TERMS
In the course of study some technical words shall be used.
Therefore the following technical words
are hereby defined briefly.
Taxation:- This can be defined as a
compulsory levy on income imposed by a
public authority, irrespective of the exact tax payer in return.
Tax Incentive:- This refers to the benefit provided by government e.g. public
utility services, hospitals, schools, good read, water; from the revenue
collected from taxes. Tariff:- This can be referred to as the rate paid
on goods and services either
imported or exported.
Fiscal policy: Fiscal
policy refers to the management of government
expenditure and taxes and the handling of public debts in such a way as
to accomplished certain objectives.
Quid pro Quo: - This means that the
payer (organizations) cannot claim something equivalent to tax paid.
Alli, B.D. (2007) Managing the tax
reforms process in Nigeria," The
Institute of Chartered Accountants of Nigeria MCPE; Lagos, pp. 130.
Tomety, E.K. (2007) Increasing Shareholders'
Values Through Effective Tax Planning,
the institute of chartered accountants of Nigeria MCPE: Lagos; pp.
Azubike J.U.B (2009) "Challenges of
tax authorities, tax payers in the management of tax reform processes",
the institute of chartered accountants of Nigeria, Lagos; p. 36.