THE IMPACT OF TAXATION ON THE ECONOMIC AND SOCIAL DEVELOPMENT IN NIGERIA
This research work focuses on the impact of Taxation on the economic and social development in Nigeria. Using secondary data gotten from the CBN statistical bulletin with the help of regression as a statistical tool, we analyzed the postulated hypothesis which dwelt on the relationship that exist between taxation and Economic and social development in Nigeria. It was discovered that taxation has a positive relationship with the economic and social development in Nigeria. The researcher then recommends a well defined policy for inter governmental collaboration, co-operation and co-ordination between different tiers and agencies of government, awareness on the tax payers on the role of taxation in the economic and social development in Nigeria should be created and has been created in this research work. Efforts should also be made by the government to ensure they channel revenue from taxation towards socio-economic activities that will benefit the tax payers.
1.1 BACKGROUND TO THE STUDY
The world we live in presents a picture of appalling contrasts. Some Countries are immensely prosperous, nearly two-thirds of the population of the world subsists on sub-standard incomes. Some Countries of the world are considered as developed and others developing, underdeveloped, or less developed with characteristics including illiteracy, inadequate housing and infrastructural facilitates, lack of medical care, malnutrition, unemployment and low levels of technology.
Nigeria is the most populous Nation in Africa and the 11th in the world and is also endowed with vast human and natural resources but unfortunately, Nigeria is also one of the Nations regarded as underdeveloped or developing.
According to Udabah (2000:1) “the fundamental challenge facing counties like Nigeria is in the transformation of their economic or economic structures from an underdeveloped to a developed status”. This entails the development of their economic wealth for the well-being of their citizens and the formation of social structures in a manner which improves their capacity to fulfill their aspirations.
Okpe (1998:1) stated that the existence of government is a necessity that cannot continue without financial means to pay it’s expenses as there are certain services which the government must provide to it’s citizens because of their essential nature. Government does this to ensure that the supply of such goods and services are evenly distributed in any given society so that the rich and poor alike may benefit. One may ask how does government get such huge amounts to finance the supply of such essential good and services to her citizens. It is true that government mints money but there are other important economic factors that should be considered so that excessive money is not, in circulation in any economic. Thus Olashore (1999:23) noted that for an economic and social balance to be maintained in an economy government found ways of financing her activities and one of such finance apart from loans and grants is taxation.
Taxation plays a crucial role in promoting economic and social activities and growth. Though taxation, government ensures that resources are channeled towards important projects in the society while giving succor to the weak. Orjih (2001:153) stated that taxation is useful in raising revenue, controlling the consumption of certain commodities, controlling monopoly, reducing income inequalities, improving the balance of payments as well as protecting infant industries.
In essence, taxation is a core pillar of a country’s regulatory framework for investment and growth. It features prominently in investment decision making motivated by profit maximization while also spurring local enterprise development but this can only happen when taxation and it’s administration are properly designed.
1.2 STATEMENT OF THE PROBLEM
Nigeria and other African Countries at large are facing a series of challenges when it comes to optimizing taxation for economic and social growth while aiming to reach development targets. Perhaps the most inherently difficult challenge is how to find the optimal balance between a tax regime that is business and investment friendly while at the same time leveraging enough revenue for public service delivery which in turn makes economics more attractive to investors.
The taxation system in Nigeria has not been fully tapped and maximized and its role in promoting economic and social activities and growth is not felt because of it’s poor administration. Thus, Olashore (1999:53) stated that the economy has remained in deep slumber as all macro economic indicators show an economy in dire need of rejuvenation, balancing and indeed radical reform.
Identifying the impact of taxation on economic and social development in Nigeria is a research work born at the right time as there is an urgent need to delve deep and look into the situation of tax evasion and the likes which are punishable by law and also to look into measures required to meet challenges.
This will not only guarantee improved revenue base for the country but also position the country properly to take full advantage offered by the new millennium global tax reform system. This research work shall examine the impact of taxation on economic and social development in Nigeria by analysing the tax gap in the system over the years thereby revealing the critical challenges that need to be tackled.