CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF THE STUDY

The current globalized society is characteristic by the necessity of existence of redistribution processes due to the fulfilment of elementary state’s functions. At the same time, the government spending as the basic tool of economic policy is conditioned by the necessity of their financing, where the tax revenues usually represent the most significant part of state budget income. Also the serious decline in price of oil in recent years has led to a decrease in the funds available for distribution to the Federal and State Governments. The need for state and local governments to generate adequate revenue from internal sources has therefore become a matter of extreme urgency and importance. This need underscores the eagerness on the part of state and local governments and even the federal government to look for new sources of revenue or to become aggressive and innovative in the mode of collecting revenue from existing sources. Aguolu (2004), states that though taxation may not be the most important source of revenue to the government in terms of the magnitude of revenue derivable from taxation, however, taxation is the most important source of revenue to the government, from the point of view of certainty, and consistency of taxation. Aguolu (2004) further mentioned that taxation is the most important source of revenue to the government. Owing to the inherent power of the government to impose taxes, the government is assured at all times of its tax revenue no matter the circumstances.

        The taxes received by the government are for the economic and educational development in Nigeria. Education (formal and informal), contributes to skill acquisition. Informal education begins at the household level where children are taught how to sweep, clean their environment, fish or farm. By participating in these activities they learn how to do things by themselves and contribute to family income growth. Although such incomes are not recorded in national income accounting, they nevertheless amount to substantial family income. According to Schultz (2002), formal education is a kind of investment in human being that enables them to acquire skills which in turn lead to the economic development of any nation. It is to this regard that the research is based the effect of taxation as a tool for economic and educational development using Lantang north Plateau State as the case study.

1. STATEMENT OF THE PROBLEM

Different approaches to the creation and characteristics of tax system with the connection to budget problems of developed economies emphasize the significance of the issue of mutual interaction between taxes (tax burden) and economic growth and educational development (as a basic aim of the economic policy makers). The clog on the wheel of the actualization of the policy could be as a result of delay or non-payment of tax by tax payer; It could also be as a result of mismanagement of tax funds generated by tax office thereby leading to insufficient funds to execute public sector projects like education sector which then might affect the economic development in Nigeria.

1.3 AIM AND OBJECTIVES OF THE STUDY

The main aim of the research is to determine the effect of taxation as a tool for economic and educational development. The specific objectives of the study are:

1. to determine the relationship between taxation, economic and educational development in Lantang north Plateau State
2. to determine the contribution of taxation to economic and educational development in langtang North Plateau State
3.  to examine the effectiveness of the taxation system in lantang North Plateau State
4. to investigate the factors affecting taxation, economic and educational development in lantang North Plateau State

1.4 RESEARCH QUESTIONS

The study came up with research questions so as to ascertain the above stated objectives of the study. The research questions for the study are:

1. What is the relationship between taxation, economic and educational development in Lantang north Plateau State?
2. What are the contributions of taxation to economic and educational development in langtang North Plateau State?
3.  What is the effectiveness of the taxation system in lantang North Plateau State?
4. What are the factors affecting taxation, economic and educational development in lantang North Plateau State?

1.5 STATEMENT OF THE HYPOTHESIS

H0: taxation has no significant effect on economic and education development in Nigeria

H1: taxation has significant effect on economic and education development in Nigeria

1.6 SIGNIFICANCE OF THE STUDY

The study on the effect of taxation as a tool for economic and educational development will be of immense benefit to the FIRS office in Lantang North Plateau State, the state government and both the tertiary and secondary institutions in Lantang North Plateau State. The study will determine the correlation between taxation, economic and educational development in Lantang north Plateau State. The findings of the study will ascertain the effectiveness of the taxation system in lantang North Plateau State. The study will be able to determine the taxation policies and sources of funds for economic and educational development in lantang North Plateau State

1.7 SCOPE OF THE STUDY

The study will cover on the effect of taxation as a tool for economic and educational development in Langtang North plateau State from 2000-2018

1. LIMITATION OF THE STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work 

1.9 DEFINITION OF TERMS

Tax:            A compulsory levy by the government on its citizen for the provision of public goods and services.

Tax Base:  The object which is taxed for instance personal income, company profit.

Tax Rate:  The rate at which tax is charged

Tax Incidence:  It offers to the effect of and where the burden is finally rested.

FBIRS:       Federal Board of Inland Revenue Services.  It is an operational arm of Federal Board of Inland Revenue which is responsible for the Federal Tax matters.

CITA:         Company Income Tax Act (CITA) is a federal law operated by the FIRS, which deals with the taxation of all limited liability companies in Nigeria with the exception of those engaged in petroleum operations.

JTB:           Joint Tax Board (JTB) is established under Section 85(1) of Decree 104 of 1993 to arbitrate on tax disputes between one state tax authority and another.

VAT:          Value Added Tax is a multistage tax levied and collected on transactions at all stages of sales and distribution.

CGTA:       Capital Gain Tax Act is an act that stipulates that all capital gains arising on disposal of asset of individual partnership and limited companies should be taxed.

PPTA:        Petroleum Profit Tax Act is an act that regulates the petroleum profit tax and also specifies how profit from petroleum will be taxed.

Withholding Tax: This is tax charged on investment income namely: rents, interest, royalties and dividends, presently it is charged as the tax offset.

Economic development: Economic development is the process by which the economic well-being and quality of life of a nation, region or local community are improved

Educational development: Educational development is about facilitating positive change in teaching and learning in post-secondary institutions at the individual, program/department and institutional levels