CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF THE STUDY

The tax payment has been a spectacle of global significance as it affects every economy regardless of national differences (Oboh& Isa, 2012).The need for its payment was highlighted by Jesus in “Mathew 22 vs 17-21” when the Pharisees asked Him whether it was legitimate to pay taxes or not. His reply “render therefore unto Caesar the things which are Caesar’s and to God the things that are to God’s” suggests that tax payments should be obligatory, non-negotiable, binding and obligatory on all citizens of a country regardless of religion and social status.

(Anthony, 2016) Tax is a necessary charge imposed by a public authority on the income and properties of individuals and companies as stipulated by the government Decree, Acts or Laws unrelatedlyof theparticular amount of service of the payer in return (Omotoso, 2001) Tax payment is not for the direct exchange of good and/or services but a 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 (Okpe, 2000).

Such goals may be in for of high level of employment, stable prices, rapid growth of gross national product, favorable balance of payments position, promotion of a free market economy, satisfaction of collective demands, equitable income redistribution, promotion of infant industries, the encouragement of priority sector, encouragement of balance population development and promotion of labor and capital development (Onoh, 2013).

The level of tax paid by the citizens and the items challenged is determined by the administration. Such decision according to Ngerebo and Masa (2012) is based on the worth of the projects or programs government intends to execute, which is the principal factor of the budget -size. Government also courts the rates, basis, the citizens of typeand the time period to pay the tax, on the development of the economy desired and government’s observationof the standard of living of the citizens.

The amount to which the impact of taxation is handled is dependent on the level of compliance with tax payments which is further dependent on the level of tax learning. Taxes were affect the expenditure size of government, the productivity and level of activities of businesses, the consumption pattern of individuals, the propensity to invest and save the growth path of the economy.

This included income from production sharing, royalties, and corporate income tax on oil and mining companies (Pfister, 2009). According to Bhartia (2009), a tax theory may come from on the assumption that there need not be any bond tax paid and benefits received from state activities. In this party, there are two theories, GDP is generally used as appointer of the economic wellbeing of a country, as well as to gauge a country’s standard of living.

(Investopedia, 2009) The definition of the study is derived from (Omotoso, 2001).Tax is aobligatory charge imposed by a public power on the income and properties of individuals and companies as stipulated by the government Decree, Acts or Laws irrespective of the exact amount of service of the payer in return.

1. STATEMENT OF THE PROBLEM

Tax is a method of raising the revenue for the day to day running of government activities. Government activities involve generating funds and using same to provide security, social amenities, infrastructural facilities, etc, for the inhabitant of the country. Base on this, it is worthy of note that the objective of taxation is in tandem with the functions of government.

However, it is showed that the role of taxation in promoting an economic growth is not felt, primarily because of its poor administration. The major challenges facing tax management include frontiers of professionalism, poor accountability, lack of awareness of the general public on the imperatives and benefits of taxation, corruption of tax officials, tax avoidance and evasion by taxing units, connivance of taxing officials with taxing population, lower rate of tax, poor method of tax collection, etc.

Individual and Tax administration agencies suffer from limitations in manpower, money, tools and machinery to meet the ever increasing challenges and difficulties. Finally, several research has been carried out on tax revenue and economic growth but not even a single research has been carried out on the impact of exercise tax revenue on economic growth (1986-2016).

1. AIM AND OBJECTIVES OF THE STUDY

The aim and objectives of the study is to determine the impact of exercise tax revenue on economic growth. Other specific objectives of the study include;

1. to determine the effect of exercise tax revenue on economic growth.
2. to determine the extent to which exercise tax revenue affects the economic growth of country.
3. to determine the factors affecting exercise tax revenue and its effects on economic growth.
4. to proffer possible solutions to the problems.
   1. RESEARCH QUESTIONS

1      What is the effect of exercise tax revenue on economic growth?

2      What is the extent to which exercise tax revenue affects the economic growth of country?

3      What is the factors affecting exercise tax revenue and its effects on economic growth?

4      What are the possible solutions to the problems?

1. RESEARCH HYPOTHESIS

Ho:  Exercise tax revenue has no significant effect on economic growth.

Hi:   Exercise tax revenue has a significant effect on economic growth.

1. SIGNIFICANCE OF THE STUDY

The study on the impact of exercise tax revenue on economic growth will be of immense benefit in the following reason. First, level of economic growth and development depends much on the country’s tax system.

Second, taxation enhances the macro – economic indexes of a country and speedy up development in all sphere of human endeavor, thereby creating employments and balance of trade. With good tax system, revenue and the citizens’ welfare will also be enhanced.

Thirdly, taxation enhances the financing of public goods, regulate production and consumption patterns as well as serve as vehicle for the protection of infant industries. It will also reduce income inequality.

The purpose of government in taxing the citizens, among others is to provide these basic amenities, protect the lives and property of the citizens as well as create the enabling environment for individuals and corporate organizations to strive. Finally, the study will contribute to the body of existing literature and knowledge to this field of study and basis for further research.

1. SCOPE OF THE STUDY

The study on the impact of exercise tax revenue on economic growth is limited to 1980-2016

1. LIMITATION OF THE STUDY

TIME CONSTRAINTS: One the challenges experienced by the researcher is the issue of time; the research will simultaneously engage in departmental activities like seminars and attendance to lectures. But the researcher was able to meet up with the deadline for the submission of the project.

FINANCIAL CONSTRAINTS: Every research work needs funding; however lack of adequate funds might affect the speed of the researcher in getting materials for completion of the project.

1. DEFINITION OF TERMS

Impact:   A marked effect or influence.

Exercise: An activity carried out for a specific purpose.

Tax: A compulsory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions.

Revenue: Is the income generated from normal business operations and includes discounts and deductions for returned merchandise. It is the top line or gross income figure from which costs are subtracted to determine net income

Economic Growth: is an increase in the production of economic goods and services, compared from one period of time to another. ... Traditionally, aggregate economic growth is measured in terms of gross national product (GNP) or gross domestic product (GDP), although alternative metrics are sometimes used.