ABSTRACT
This study examined the impact of companies’ income tax on internally Generated revenue (proxy by IGR) in Ekiti state. Secondary time series panel data was collected for the period 2005 to 2014 from the Statistical Bulletin of the Central Bank of Nigeria (CBN). The study employed Ordinary Least Squares (OLS) technique based on the computer software Windows SPSS 20 version for the analysis of data, where gross Domestic product (GDP), the dependent variable and proxy for economic growth, was regressed as a function of company income tax (CIT) and value-added tax (VAT), the independent variables. The results of the analysis showed that both company income tax and value-added tax have significantly positive impact on internally Generated revenue. Based on the findings, the study recommended that government should strengthen the tax administration system to broaden the tax income, and embark on tax education to ensure voluntary tax compliance. The study also recommended that the tax authorities should employ qualified tax professionals who should be regularly trained and be retained in the tax administration system for efficient tax administration and collection.
CHAPTER ONE
INTRODUCTION
1.1 Background Of The Study
Taxation is the system of raising money in form of taxes paid by the citizens of the country in return for the services rendered by the government.
It could be recalled that taxation is instituted by God, this is traced back to “Mattew chapter 22 vs. 17-21”, when the Pharisees asked Jesus whether it is lawful to pay taxes or not. The Pharisees were later told render therefore to Caesars the things that are Caesar’s and to God the things that are to God.
According to Lekan .S. etal (2006), tax was described and not defined in the statues, but according to Cambridge international dictionary of English, it is “an amount of money paid to the government usually a percentage (%) of personal income or company profits”.
According to Okpe I.I (2000) tax is the transfer of resources and income from the private sector to the public sector in order to achieve some of the nation’s economic and social goals.
Taxation is universally accepted as a powerful tool in the hands of any government to raise income for its services and to ensure equitable distribution of income among its citizens.
Therefore, in every modern communities, a large amount of taxation is necessary for a public expenditure increases to promote social progress, taxation which is the main sources of funds also increases.
The present tax laws in Nigeria emanated from the Raismais commission in 1957. Before this time we only had what was called the income tax ordinance for the colonies and which was rather common in all the colonies and the provisions were very similar. Raim’s recommendation was the basis of provision in the Nigerian constitution order council of 1960 section 70(1) which conferred an exclusive power upon the parliament to make laws for Nigeria or any part thereof with certain uniform principles in respect of personnel and company income tax.
During 1963 when Nigeria became a republic, the mid-western region was created out of the western region and they adopted the western region tax law accordingly with the amendments, the position under the republican constitution of 1963 and that the regions (now divided into states) assumed jurisdiction over the income tax of person other than companies. While the federal government assumed jurisdiction over the taxation of companies, the uniform principles under the income tax management act and the regional taxes in Ekiti State.
Thus, after the creation of former 12 states in 27th may 1967, the state assumed the tax laws of the regions in which they were before the creation of such states. The uniform principle covered by the income tax management act of 1961 was as follows:
(i) Specifies what income are exempted from tax.
(ii) What constitute income for tax purposes.
(iii) Upholds residence on the basis for taxation or in the alternative, the principal place of business.
(iv) And recently prescribed the rates of tax and personal reliefs.
1.2 Statement of The Problem
There is high incidence of tax evasion and avoidance by tax payers. This may affect the amount of revenue collectible by the government for the running of administration. Furthermore, it is hoped that people were wrongly assessed and the assessment sometimes result to regressive taxation.
1.3 Research Questions
1. What are the likely effects of corporate income tax changes on corporate private investment performance in Nigeria?
2. What are the likely effects of corporate private investment on internally Generated in Ekiti State?
3. What are the likely policy recommendations arising from the simulation application of the impact of tax reduction in Nigeria?
1.4 Objectives of the study
The main objective of the study is to examine the effect of corporate income tax on IGR in Ekiti State 2002 – 2022.
The specific objectives are:
1. To examine the effects of corporate income tax rate reduction on corporate private investment in Nigeria.
2. To evaluate the effects of corporate private investment on internally Generated in Ekiti State.
To make policy recommendations for efficient and effective tax system 3. reforms
1.5 Research Hypotheses
H0: There is no link between corporate income tax reduction and corporate private investment growth in Nigeria.
H1: There is link between corporate income tax reduction and corporate private investment growth in Nigeria.
1.6 Significance Of The Study
The topic “company income tax on internally Generated in Ekiti State”, will educate the entire public on how the federation could encourage economic development and also how a reduced tax could promote the standard of living of the tax payer and increases his capital formation and investment thereby, resulting in a higher gross National Product (GNP) of the economy (country) and also promote the industrial development of the nation.
The study will be of immense benefit to the following group of persons.
(a) Government of the federation of Nigeria.
(b) The business community for the purpose of companies income tax.
(c) The tax experts especially the practicing professional accountants.
(d) Enugu state university community.
(e) The Nigerian Institute of Management and Nigerian Statisticians.
(f) The economist and financial analysts or capitalist.
(g) The students of Accountancy profession and other allied professions.
(h) The tax-payers, especially the employers of labour and the employees of various organisations.
(i) Tax researchers
1.7 Scope And Delimitation
This topic company income tax on internally Generated in Ekiti State we cover all the 36 states of the federation and Abuja and the entire economy but the writer intends to limit this topic to only Ekiti state due to financial handicap, distance and time constraints.
Therefore, since the same tax Acts are applied throughout the federation Republic of Nigeria, the study of Ekiti tax system and economy shall be deemed to serve other states of the federation. Thus, the writer will rely heavily on the board of internal Revenue and state ministry of finance and Economy planning since they have adequate information and data on the government of Ekiti state of Nigeria, thereby covering all the local government areas of the state.
Since there are often changes in the tax laws of Acts both at the state and federal level of government, the writer may wish to visit the chief inspector of taxes of some urban and rural local government areas in the state in other to confirm the information or data so collected from the Board of Internal Revenue and the state Ministry of Finance and Economy Planning.
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