ABSTRACT
An
appraisal of tax holiday incentive programme could apart form critically
examine the nature of and type of incentive after proceed form two angle –
Micro and Macro. The micro aspect is an attempt to access the significances of
the programme in the beneficiary while the macro aspect is the attempt to
excess the whole aspect of aspect of the programme to the government and to the
economy.
This
paper only attempt to analyze the impact of holiday tax on investment on the
pioneer industry form the macro aspect (that is – assessing the significances
in the investment decision of the benefinciary0 it is one thing to grant tax
holiday relief to the qualified companies and it is another thing whether the
infant industry incentive is crucial in the investment decision of the
companies affected t commence and continued operation.
The fact
that the benefiting company has precedes substantial return from the point of
view of the economy dose not mean that the tax holiday incentive, which they
enjoy, is superfluous. Much the same result could have been archived without
the enjoyment for he incentives. The general belief particularly among
incentive will induce an interpretation to set up the operation n the priority
areas approved by the government. This was the belief in 1952 and 1958 when the
aid to pioneer industrial ordinance and the industrial development (income tax
relief) acts were posed respectively.
This
provides is with the tax holiday, which is the significances to pioneer income
companies profit and Liquidity Company.
Bill
Borrow and Porter “ liquidity model for physical incentive evaluation” is used
in this work to measure the extent the industry is incentive induced.
Based
partly on the result of the analysis and partly on the different conception of
the effectiveness of tax holiday scheme. It is concluded that not only the
infant or the pioneer companies are incentive induced but also that the scheme
is working out effectively with those companies qualified and granted the
status.
TABLE OF
CONTENT
Title page
Approval page
Dedication
Acknowledgement
Abstract
Table of content
CHAPTER ONE:
1.1 Introduction
1.2 Statement
of the problem
1.3 Objective
of study
1.4 Significance
of study
1.5 Statement
of the hypothesis
1.6 Scope of
the study
1.7 Scope of
the study
1.8 Definitions
of terms
CHAPTER TWO:
2.1 Review of
the related literature
2.2 Preambles
2.3 Classifications for fiscal incentives
2.4 Objective if tax holiday
2.5 Nature of legislative position on the holiday tax
2.6 The fiscal scarifies
2.7 Criticism of tax incentive scheme
2.8 Holiday tax scheme
2.9 The pioneer industry
2.10
Method of evaluation for the impacts of
tax holiday
2.11 The liquidity method
2.12 The survey approach
2.13 The computation profit approach
2.14 The pioneer/ infant company
CHAPTER
THREE
3.1 Research design and methodology
3.2 Source of data
3.3 Primary
3.4. Area of study
3.5 Populations for the study
3.6 Instrument for data collection
3.7 Reliability for the instrument
3.8 Validity of the instrument
3.9 Method of administration
3.10 Method of data analysis
3.4 Secondary data
3.5 Sample used
3.6 Method of investigation
CHAPTER FOUR
4.1 Data analysis and interpretation
4.2 data presentation and analysis
4.3 Test of hypothesis
CHAPTER FIVE
SUMMARY, FINDINGS, CONCLUSION AND
RECOMMENDATION
5.1 Summary of the findings
5.2 Conclusion
5.3 Recommendation
BIBLIOGRAPHY
APPENDIX / QUESTIONNAIRE
CHAPTER ONE
INTRODUCTION
Tax
policy among other being the basic objective of the encouraging capital
formation for economic development.
Income that
would otherwise be spent on non-essential is usually taxed out of their holder
to mobilize enough savings to finance needed investment both in the
manufacturing and social overhead capital.
However, in
thud capital formation, sole development of the economy lies in the conflict
between the need for high rate to raise enough capital for the government owned
investment in utilities and infrastructures which are essential for development
and industrializations and the need to keep tax rate low enough to encouraged
private investor in industries and in agriculture.
The
situation is further compounded by the fact that by and large, income are low
in the development economy (giving rise to low tax revenue generally) and those
tax which vary directly and rise progressively with the income and which are
most effective in retrieving a good portion of gain of the economic development
are the once likely to affect return from private investment.
In
other to meet up with those conflicting demand, the approach is to combine high
rate of tax with preferential treatment to categories of desired development
activity (with penalty tax for undesired activities). At 45%, the company
income tax rate in Nigerian as considered high enough could be an effective
tool for any necessary deduction in the economic activity. But apart from the
deriving, the must effective way of mobilizing capital , there is still he need
to direct investment to the desired sector of the economy. Other dilemma here
is that investment which meet the main motor of the private investor (capital
profits) are not necessary those that bring about high social benefits. In fact
before 1964, value added production was quit unattractive to entrepreneur. They
regard trading and contract business as the quickest way of increasing the
income. In addition, the British trading firm that dominated the economy with
the assistance of the colonial government discourages diversified
indoctrination in Nigerian to protect their own trading interest.
But with
the Nigerian political independency in 1960, come the international completion
for the Nigerian vast market. The intensification of this competition coupled
with the government active encouragement gave impetus to industrialization. The
investment in the industry after a public policy is a challenge to influence
the level, composition and direction of the manufacturing output and capital
production. Such policies at first encouraged the domestic production of
various goods previously imported but latter emphasis has shifted to
maximization of value added to the grose domestic product the policy is
therefore at encouraging the utilization of our local raw material by the
manufacturing firm in place of the imported ones and also for encouraging
production for foreign market. Nigerian has been utilizing a system of fiscal
incentive, which is consciously manipulated to influence the direction of
investment in activities in the private sector. These incentives are embodies
in fire legal enactment as follows;
1.
The industrial development (income tax relief) Act of
1958 as amended by decree 22 of 1971.
2.
The industrial development, (import duties relief) Act
of 1957.
3.
Costumes duties (dumped and subsidized goods Act of
1958.
4.
The customs (draw back) regulation of 1958
5.
The income tax (amendment) Act of 1959)
THE STATEMENT OF PROBLEM
Tax
holiday scheme is wildly used by the developing countries in the belief that it
is a useful fiscal industrial policy for rapid economic development, sine it is
activity in the preferred sector of the economy. But the scheme can activity be
providing subsidy to all the firm benefiting by it without necessary
stimulating fir example if for a firm that enjoys tax holiday, the volume and
timing of the incentive as well as the decision concerning the input and output
market of an opportunity and other pioneer and other infant company sector.
Condition of the firm remains as would have been without the tax holiday.
Though the subsidy is enjoy but that firm become socially non beneficial.
It
is therefore important to determine and to what extent is a firm stimulated to
invest by tax holiday and them know which among the infant industry are
stimulated and which are not from the which knowledge we can then determine the
extent of the effectiveness of the tax scheme.
OBJECTIVE OF THE STUDY
In
deciding whether a companies incentive included that (is stimulated) , two
things comes to mind, whether the company decide to go into business because of
the offer ( of the tax holiday which we shall not investigate here) also
whether the company subsequent decision on investment are included by tax
holiday subsidy.
Apart from
using the liquidity model to evaluate the extent of inducement for subsequent
investment of infant industry in Imo State (selection region) this study will
also examine other basic issue that influence the effectiveness of tax holiday
scheme.
SCOPE OR
DELIMITATION OF THE STUDY
The
researcher carried out the study wit limits imposed by practical consideration
of the financial involvement and time constraint. Considering the geographical
areas of the nation, the researcher chose seven companies in Imo State.
RESEARCH
QUESTION
The
following research question is used for the project topic” the impact of tax
holiday investment in private or infant industries ( a case of companies in Imo
State.
1.
Did your industry decide to go into business in the
first place because for the offer of tax holiday
2.
Is your industry subsequent decision on investment
induced by tax holiday subsidy
3.
Is tax holiday scheme influencing the size of
investment in your industry
4.
In what can increase in the investment as a result of
fiscal inducement (some time coupled with the condition that indigenous labour
must be used by the benefiting company) cause the red action in unemployment.
5.
How can tax holiday scheme be used to redirect
investment pattern
HYPOTHESIS FORMULATION
In
order to employ a scientific approach to the realization of the objective of
this research work, the following hypothesis were analyzed.
Ho: the impact
of tax holiday on investment is not favorable in the infant industry in Imo
state.
Hi; the impact
of tax holiday to the infant industry in Imo state is favorable in Imo state
SIGNIFICANCE OF THE STUDY
The holiday
involves the government expenditure in two forms
(a)
In form of subsidy to the infant industry
(b)
In form of cast of administering the pioneer scheme
Been
an expenditure, there should be benefit to show for it 9 particularly in this
austere time) else the fund expended on it should be directed to other areas of
need. This is why the evaluation of the scheme becomes important. Beside the
scheme is an industrial policy, which there are alternative and one of which is
government direct participation in the sector in which private investors lad
behind. If the scheme is found to be an effective inducement, the alternative
strategy for building stock of profitability investment in the relevant sector
should take it place.
DEFINITION OF TERMS
The
definition is for use in this book only and not for general standard
definition. They are relevant to this context
1.
Infant or pioneer industry: industry
operating in Nigerian and in those areas where the government consider being
beneficial to the Nigerian and assistance to which will in public interest.
2.
Tax holiday: the period of time allowed of
granted to the pioneer industry to enjoy income tax relief
3.
Investment: the economic activity design to
increase in dimension of growth or to maintain the production quality of the
existing stock or capital.
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