| Content | CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The concept of job satisfaction has been developed in many ways by many different researchers and practitioners. One of the most widely used definitions in organizational research is that of Locke (1976), who defines job satisfaction as "a pleasurable or positive emotional state resulting from the appraisal of one's job or job experiences" (p. 1304).Others have defined it as simply how content an individual is with his or her job; whether he or she likes the job or not.It is assessed at both the global level (whether or not the individual is satisfied with the job overall), or at the facet level (whether or not the individual is satisfied with different aspects of the job). Spector (1997) lists 14 common facets: Appreciation, Communication, Coworkers, Fringe benefits, Job conditions, Nature of the work, Organization, Personal growth, Policies and procedures, Promotion opportunities, Recognition, Security, and Supervision. A more recent definition of the concept of job satisfaction is from Hulin and Judge (2003), who have noted that job satisfaction includes multidimensional psychological responses to an individual's job, and that these personal responses have cognitive (evaluative), affective (or emotional), and behavioral components. Job satisfaction scales vary in the extent to which they assess the affective feelings about the job or the cognitive assessment of the job. Affective job satisfaction is a subjective construct representing an emotional feeling individuals have about their job. Hence, affective job satisfaction for individuals reflects the degree of pleasure or happiness their job in general induces. Cognitive job satisfaction is a more objective and logical evaluation of various facets of a job. Cognitive job satisfaction can be unidimensional if it comprises evaluation of just one facet of a job, such as pay or maternity leave, or multidimensional if two or more facets of a job are simultaneously evaluated. Cognitive job satisfaction does not assess the degree of pleasure or happiness that arises from specific job facets, but rather gauges the extent to which those job facets are judged by the job holder to be satisfactory in comparison with objectives they themselves set or with other jobs. While cognitive job satisfaction might help to bring about affective job satisfaction, the two constructs are distinct, not necessarily directly related, and have different antecedents and consequences. Job satisfaction can also be seen within the broader context of the range of issues which affect an individual's experience of work, or their quality of working life. Job satisfaction can be understood in terms of its relationships with other key factors, such as general well-being, stress at work, control at work, home-work interface, and working conditions. A study title "Analysis of Factors Affecting Job Satisfaction of the Employees in Public and Private Sector", in India concluded that in India Employees tend to love their job if they get what they believe is an important attribute of a good job. Weightage factor of each such attribute based on exhaustive survey has been calculated. Region, sector and gender wise study of job satisfaction has provided consistent picture with respect to distribution of data set analyzed showed that most of the employees in Indian industry are not satisfied with their job except for a few like male in commerce sector and female in education sector. Total job satisfaction level of males is found to be higher than that of woman. Total job satisfaction level in manufacturing sector is found to be very low. Job satisfaction is the level of contentment a person feels regarding his or her job. This feeling is mainly based on an individual's perception of satisfaction. Job satisfaction can be influenced by a person's ability to complete required tasks, the level of communication in an organization, and the way management treats employees.Job satisfaction falls into two levels: affective job satisfaction and cognitive job satisfaction. Affective job satisfaction is a person's emotional feeling about the job as a whole. Cognitive job satisfaction is how satisfied employees feel concerning some aspect of their job, such as pay, hours, or benefits.Many organizations face challenges in accurately measuring job satisfaction, as the definition of satisfaction can differ among various people within an organization. However, most organizations realize that workers' level of job satisfaction can impacttheir job performance, and thus determining metrics is crucial to creating strongefficiency. Despite widespread belief to the contrary, studies have shown that high-performing employees do not feel satisfied with their job simply as a result of to high-level titles or increased pay. This lack of correlation is an significant concern for organizations, since studies also reveal that the implementation of positive HR practices results in financial gain for the organizations. The cost of employees is quite high, and creating satisfaction relevant to the return on this investment is paramount. Simply put: positive work environments and increased shareholder value are directly related. Some factors of job satisfaction may rank as more important than others, depending on each worker's needs and personal and professional goals. To create a benchmark for measuring and ultimately creating job satisfaction, managers in an organization can employ proven test methods such as the Job Descriptive Index (JDI) or the Minnesota Satisfaction Questionnaire (MSQ). These assessments help management define job satisfaction objectively. Typically, five factors can be used to measure and influence job satisfaction: Pay or total compensation The work itself (i.e., job specifics such as projects, responsibilities) Promotion opportunities (i.e., expanded responsibilities, more prestigious title)Relationship with supervisor Interaction and work relationship with coworkers.In addition to these five factors, one of the most important aspects of an individual's work in a modern organization concerns communication demands that the employee encounters on the job. Demands can be characterized as a communication load: "the rate and complexity of communication inputs an individual must process in a particular time frame." If an individual receives too many messages simultaneously, does not receive enough input on the job, or is unsuccessful in processing these inputs, the individual is more likely to become dissatisfied, aggravated, and unhappy with work, leading to a low level of job satisfaction. Superior–subordinate communication, or the relationship between supervisors and their direct report(s), is another important influence on job satisfaction in the workplace. The way in which subordinates perceive a supervisor's behavior can positively or negatively influence job satisfaction. Communication behavior—such as facial expression, eye contact, vocal expression, and body movement—is crucial to the superior–subordinate relationship The research therefore seek to provide an appraisal of the concept and scope of job satisfaction with a case study of UAC PLC
1.1 STATEMENT OF THE PROBLEM
The complexity and inability of many firm to measure and determine the job satisfaction level of their employee compounds the ability of the firm to motivate their employees effectively to achieve employee job satisfaction. when employees are satisfied on their jobs they are highly motivated to perform maximally. Many organizations face challenges in accurately measuring job satisfaction, as the definition of satisfaction can differ among various people within an organization. However, most organizations realize that workers' level of job satisfaction can impact their job performance, and thus determining metrics is crucial to creating strong efficiency. Despite widespread belief to the contrary, studies have shown that high-performing employees do not feel satisfied with their job simply as a result of to high-level titles or increased pay. This lack of correlation is an significant concern for organizations, since studies also reveal that the implementation of positive HR practices results in financial gain for the organizations. The cost of employees is quite high, and creating satisfaction relevant to the return on this investment is paramount. Simply put: positive work environments and increased shareholder value are directly related. Some factors of job satisfaction may rank as more important than others, depending on each worker's needs and personal and professional goals. To create a benchmark for measuring and ultimately creating job satisfaction, managers in an organization can employ proven test methods such as the Job Descriptive Index (JDI) or the Minnesota Satisfaction Questionnaire (MSQ). These assessments help management define job satisfaction objectively Therefore the problem confronting this research is to appraise the concept and scope of job satisfaction with a case study of UAC PLC.
1.2 RESEARCH QUESTION
1 What is the nature of the concept and scope of job satisfaction
2 What is the effect of job satisfaction on employee performance
3 What is the nature and effect of job satisfaction on employee performance in UAC PLC
1.3 OBJECTIVE OF THE RESEARCH
1 To determine the nature of the concept and scope of job satisfaction
2 To determine the effect of job satisfaction on employee performance
3 To determine the nature and effect of job satisfaction on employee performance in UAC PLC
1.4 SIGNIFICANCE OF THE RESEARCH
The research shall appraise the nature and impact of job satisfaction on employee performance It shall determine measures for appraising the job satisfaction level employees and profer useful information to managers and organisations.
1.5 STATEMENT OF THE HYPOTHESIS
1 Ho Employee performance in UAC is low
Hi Employee performance in UAC is high
2 Ho Job satisfaction level in UAC is low
Hi Job satisfaction level in UAC is high
3 Ho Impact of job satisfaction on employee performance is low
Hi Impact of job satisfaction on employee performance is high | ABSTRACT
Taxation and its product, Tax have been very important vehicles for economic policies of many countries of the world. For a very long time, tax has been a major source of revenue for various levels of governments. For instance, in Nigeria, the laws of the land stipulate the categories of taxes that are collectable by each of the three tiers of government. This is with a view to enhancing basic economic growth and development at all levels of government. However, the manner in which taxes are administered on corporations in Nigeria is a major concern to the majority of Nigerians. Traditional schools of thought advocated the theory of low income tax rates’ influencing economic development, whereas modern schools of thought propagated the theory of higher income tax rates producing greater economic growth, especially for developed nations. In order to justify these thoughts, an attempt was made taking Nigeria as a case study to pin point the effect of low and high income tax rates on economic growth of developing nations. Secondary data sources were utilized in this study. In this study various parameters were taken into account including income tax rates, income tax revenue, total revenue and GDP of the country in the nominal and real value of the money. It was located that high income tax rates negatively affect the economic growth of Nigeria. The study found that government’s policies on income tax affect the revenue of corporations in the country. It was concluded that tax regulation is very relevant in order for government to be able to act justly on the various sectors of the economy.
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
According to Black Law Dictionary, tax is a rateable portion of the produce of the property and labor of the individual citizens, taken by the nation, in the exercise of its sovereign rights, for the support of government, for the administration of the laws, and as the means for continuing in operation the various legitimate functions of the state. The Institute of Chartered Accountants of Nigeria (2006) and the Chartered Institute of Taxation of Nigeria (2002) view tax as an enforced contribution of money, enacted pursuant to legislative authority. If there is no valid statute by which it is imposed; a charge is not tax. Tax is assessed in accordance with some reasonable rule of apportionment on persons or property within tax jurisdiction. Sanni (2007:5) advocated tax an instrument of social engineering which can be used to stimulate general or special economic growth.
The Company Income Tax amongst countries of the world varies, especially in the developing countries. Gordon and Wei Li (2008) notes that to some extent, these differences may simply reflect differences in social preferences for public vs. private goods. Countries differ substantially, for example, in the amount spent on the military, on infrastructure investments, on publicly provided education, or on social insurance. Higher spending levels require higher revenue, leading to higher tax rates.
To some extent, these differences may also reflect differences in the political support for redistribution. More redistribution naturally requires higher tax rates on the rich in order to finance lower tax rates or transfers to the poor. Governments with a stronger preference for redistribution would rely more on progressive personal income taxes, whereas other governments may choose less progressive personal taxes and make more use of proportional taxes such as a value-added tax or a payroll tax.
Other differences, though, are more puzzling based on conventional models of optimal tax structure. Regardless of a country’s tastes for public vs. private goods or for more or less redistribution, Diamond and Mirrlees [2001] forecast that the optimal tax structure will preserve production efficiency under plausible assumptions. (Coelho, Isaias, and Graham, 2001). This rule out tariffs in any country that lacks market power in international markets. It rules out differential taxes on goods produced domestically in one industry vs. another. Atkinson and Stiglitz (1996) go further and argue that as long as a country can flexibly choose the rate structure under the personal income tax, then it has no reason to choose differential tax rates on the consumption of different goods. Not only does this rule out differential excise tax rates by good but it also rules out taxes on income from savings, which implicitly impose higher tax rates on goods consumed further into the future.
Regarding possible revenue from seignorage, Friedman (1999) argued that a country would optimally choose a deflation rate sufficient to generate a nominal interest rate close to zero, so as to avoid any real costs of liquidity. While these forecasts of no tariffs, no taxes on capital income, uniform taxes on consumption, and deflation, are not consistent with any existing tax structures, they are not sharply inconsistent with observed tax policies among the most developed countries. With GATT and now the WTO, tariffs are indeed very low among developed countries.
At this point, nominal interest rates are very low among most developed countries, even if deflation is rare. While capital income is still subject to tax in various ways, Gordon, Kalambokidis, and Slemrod [2004] report evidence that the U.S. collects little or no net revenue from taxes on capital income, and imposes relatively low distortions on investment and savings. While even the richest countries maintain some important excise taxes, e.g. on gasoline, cigarettes, and liquor, an argument can easily be made that these specific taxes help internalize various consumption externalities.
Tax policies in developing countries are much more puzzling, however, in light of these forecasts from the optimal tax models. These differences are laid out in more detail in section I. The corporate income tax is a much more important source of tax revenue among developing vs. developed countries, as are tariffs and seignorage. Poorer countries collect much less revenue from personal income taxes, yet it seems puzzling that distributional preferences should systematically be so much weaker among poorer countries (Bird, 1999). On net, poorer countries collect on average only two-thirds or less of the amount of tax revenue that richer countries do, as a fraction of GDP. Yet, given the severe needs for investments in say infrastructure and education in these countries, is it plausible that the lack of revenue simply represents differing tastes for public vs. private goods in poor vs. rich countries?
One natural response to these differences between forecasted policies and those observed in developing countries is to conclude that the policies in developing countries should be changed. Newbery and Stern [1987], for example, set out the standard forecasts from optimal tax models as an ideal tax structure that developing countries should emulate. This is also the basis for recommendations, e.g. from the World Bank and IMF, that developing countries should reduce their tariff and inflation rates, and rely more on value-added taxes with a uniform rate across industries, rather than on excise taxes or corporate income taxes (Campillo, Marta and Jeffrey, 1997).
In this study, we explore whether the inconsistency between the forecasts from optimal tax models and the data reflects instead a problem with the models. The starting point for our approach is the observation of greater tax enforcement problems in poorer countries. According to the estimates reported in Schneider and Enste [2002], for example, the informal economy on average is only about 15% of GDP among OECD countries, and thus small enough that it should not be a driving factor in the choice of tax structure. However, among developing countries, the median size of the informal economy they report is 37% of GDP, ranging from 13% in Hong Kong and Singapore to 71% in Thailand and 76% in Nigeria.
With such a large informal sector, any effects of the tax structure or of government policies more generally, on the size of the informal sector can be of first-order importance in the choice of these policies. Yet at this point, we know relatively little about how policies affect the size of the informal sector, or why the informal sector is so much larger in developing than in developed economies (Diamond, Peter and James Mirrlees, 2001). It is in this respect that this present study shall examine the impact of company income tax revenue on developing economies using Nigeria as a reference point.
Statement of Problem
Poorer countries have indeed shifted towards more use of the value-added tax in recent years, in part based on the advice and assistance of international organizations. But otherwise the puzzling differences remain. This leaves unanswered why poorer countries so systematically choose the wrong policies, and why these wrong policies have remained so stable over time. Perhaps political economy problems are more severe among developing countries, and some important domestic constituency gains from the policies that standard models find perverse. Yet these puzzling policies are found under many different types of governments, drawing their support from many different constituencies. (Coelho, Isaias, and Harris, 2001).
Perhaps poorer countries lack the best enforcement methods, e.g. based on modern information technology. Certainly computer technology helps pool information from different sources. Bird (1999) argues, however, that the key problem is acquiring reliable information, not processing it. In considering problems associated with income tax of developing economies, problems statements like the following arises:
Does government policy on company income tax affect the revenue of corporations in developing countries?
Of what relevance is tax regulation on the development of companies’ in developing economies?
Does effective income tax helps in the building strong economies?
1.3 Objectives of study
The main purpose of this study is to:
To examine whether government’s policies on income tax affect the revenue of corporations.
To examine the relevance of tax regulation on the development of companies’ in developing economies and
To ascertain the impact of the company income tax revenue on the development of the Nigeria economy
1.4 Scope of study
This study is to effectively make an in-depth study on the impact of company income tax revenue on developing economies using Nigerian economy as reference point. This study will reveal the impact of taxation on revenue of organizations and as well focus on taxation policies and variances that occur among selected developing countries. The duration for this study will cover a five year period 2004 – 2008
1.5 Significance of study
In this project work, efforts will be made to examine companies income tax, and organization’s efforts at fulfilling their financial obligations. This analysis will throw more light on the adequacy of revenue generation of companies and taxes imposed on such income generation.
However, this study will be of great significance to shareholders, investors and management of companies as it reveals the openness of standards of financial reporting practices. It as well enable companies capitalizes on their gains while focusing on areas of comparative advantage.
Also, major beneficiaries of this study are auditors and accountants, as well as financial analysts, government personnel and the revenue taxation board will benefit from this study.
1.6 Limitation of study
In the process of writing this project, the researcher encountered some limitations. First, the researcher was constrained by time, the insufficiency of finance made the researcher almost tired of the project work. This went further to compound the researcher’s problem, since they were using the limited resources available for them to also work on the project.
Another constraint encountered by the researcher was scarcity of information. The relevant information from the CBN and other relevant bodies in most cases are not up to date. This also contributes to the delay of information been required to enhance the research.
1.7 Definition of terms
Taxes: this is the money imposed on Individuals, groups or organizations who are engaged in business or gainful economic activities that is geared towards profit making.
Company income tax: This Tax is payable for each year of assessment of the profits of any company at a rate of 30%. These include profits accruing in, derived form brought into or received from a trade, business or investment.
Policy: can be referred to as prudent conduct, sagacity or general plan of action to be adopted by an organization.
Taxation policy: therefore, is the general plan of action on the pattern of arriving at a taxable amount that is considerable both to the management and shareholders or investors of the companies.
Financial obligation: it is the expected activities pertaining to the monetary accumulation, earnings and transactions records of companies. Paying taxes to government is one of such obligations.
REFERENCES
Atkinson, A.B. and J.E. Stiglitz. 1996. “The Design of Tax Structure: Direct vs. Indirect Taxation,” Journal of Public Economics 6, pp. 55-75.
Bird, R. (1999) "The Administrative Dimensions of Tax Reform in Developing Countries." In Tax Reform in Developing Countries, edited by Malcom Gillis. Durham: Duke University Press.
Chartered Institute of Taxation of Nigeria (2002) Concept on income tax: Cited at http://accounting.concepts/htm retrieved date: April, 13, 2007
Coelho, I.K, Isaiasal, T.Y and Harris, H. (2001) “Bank Debit Taxes in Latin America -- An Analysis of Recent Trends,” IMF Working Paper 01/67.
Campillo, Marta and Jeffrey A. Miron. 1997. “Why Does Inflation Differ Across Countries? In Reducing Inflation: Motivation and Strategy, edited by C. Romer and D. Romer. Chicago: University of Chicago Press.
Diamond, Peter and James Mirrlees. 2001. “Optimal Taxation and Public Production,” American Economic Review 61, pp. 8-27
Friedman, Milton. 1999. “The Optimal Quantity of Money.” In The Optimal Quantity of Money and Other Essays, edited by Milton Friedman. Chicago: Aldine Publishing Company.
Gordon, Roger H. 2008. "A Public Finance Perspective on Economic Growth." Mimeo.
Gordon, Roger H. 2003. “Taxes and Privatization.” In Public Finance and Public Policy in the New Century, edited by Sijbren Cnossen and Hans-Werner Sinn. Cambridge: MIT Press.
Gordon, Roger, Laura Kalambokidis, and Joel Slemrod. (2004a). “A New Summary Measure of the Effective Tax Rate on Investment.” In Measuring the Tax Burden on Capital and Labor, edited by Peter Birch Sorensen, pp. 99-128.
Institute of Chartered Accountants of Nigeria (2006) definition of tax. Cited at http://accounting.concepts/htm retrieved date: April, 13, 2007
Newbery, David and Nicholas Stern. 1987. “The Theory of Taxation for Developing Countries.” New York: Oxford University Press.
Sanni, J.S (2007:5) "A Public Finance Studies on Economic Growth." McMillan Publishing Co. IB
Schneider, Friedrich. 2002. “Size and Measurement of the Informal Economy in 110 Countries around the World.” Mimeo, Department of Economics, Johannes Kepler University of Linz. | CHAPTER ONE
HISTORY OF DEVELOPMENT
In Nigeria their so many form of taxation dating back of the
days of our great ground father whose by communities dated themselves through communal labour to prosecute community projects.
Taxation is process on machinery by which group or communities made contribution from their income in some agree amount and method for the purpose providing amentias for the society. It is because of this it I often referred to as civic responsibility.
It is important to note that the present tax has in Nigeria was been out of the Rouseman’s Commission of inquiry of last.
But before that, we only had what was called the income tax ordinance for the colonies and which was very similar Raismars recombine nature was the basis for providing in section to, subsection of the Nigeria prospects for reform (Anarticle published in Business Time on May 20, 1786).
Taxation can be divided in two basic profiles we have the direct taxation sand indirect tax is based on ascertainment of income rather on individual a group of individuals co-operate bodies and institution under this was have personal income tax and company income tax. The personal income is one which of individual is assessed and resident by the state on those individual resident in the state, which the companies income tax is cleared on corporate bodies is the responsibility of federal government through the federal board of inland revenue indirect taxation is lived on consumption of goods or services and each of consumption.
In various countries, various government rely heartily on taxation on as in aid to encouraging capital formation policy.
In a developing economy, tax may be collected strutted in such way that the high may be collected and even raise revenue for the economy of the country.
PRESENT DAY TAXATION IN NIGERIA
Taxes are one of the major sources or revenue for all
government in Nigeria.
The taxes collected income back to the tax payer in the form of social amenities, like building as school, hospital.
Nigeria tax is an assessment imposed by the State of Federal Government to enable them provide service for Nigeria citizens present day tax administration in Nigeria is guided by the following Act Decree:
1. Income tax management Act (ITNIA) 1961. This governs the taxation of individual. (Individuals, trustees, executors, partnership and families) the Act was amended by the finance (miscellaneous taxation provision) Decree 1986,1983,1990,1992, 1994 and 1996.
2. Company Income Tax act (CTA) 1979, this registered companies. It also suffered some amendments.
3. Petroleum Profit Tax Act (PPTA), 1959 as amended this Act regulates the assessment and collection of petroleum. Tax payable by entries that engage in the secretion and sale of petroleum oil in Nigeria.
4. Capital Gains Decrees (CGD), 1976, this was introduced by Decree 44 of 1967. it takes care of gain accruing to any person on or after 1st of April 1967 on the disposal of fiscal assets.
STATEMENT OF PROBLEM
The existence of tax evasion and tax avoidance in Nigeria tax
system poses a lot question in the inquisitive mind of some people especially in the board of inland revenue as to the way and how of this existence.
This brings about reactions from various sections of the economy. This reaction are the problems this research work going to address itself to.
OBJECTIVE OF STUDY
Based on the statesman of problem this study, the write
intends to x-ray the following issues as decide the mind of the public:
Reason for tax evasion and avoidance
To x-ray the impact of tax avoidance
To make recommendations the board on Inland Revenue.
15. HYPOTHESIS
The null hypothesis (Ho): revenue generated form tax has a negative impact on the development of Nigerian Economy. The alternative hypothesis;
>Revenue generated from tax has a positive impact on the development of Nigerian Economy
Hypothesis II
Null hypothesis (Ho): that tax aviation and avoidance has created a reduction in the revenue generated from tax
(Ha) the alternative hypothesis; that the revenue generated from tax is more merger compare to revenue generated from other source as such government cannot do without tax.
SIGNIFICANCE OF STUDY
The way in this term paper has been planned and carried out
off enough information and explanation to inquisitive minds. This project is aimed to beneficial to the following:
Though this term paper, enough awareness will be created so that the public attitudes of not paying tax will be nullified.
This term paper will offer a source of secondary data collection forming research student
The Board of Inland Revenue, this enable to know how they will treat any tax evader they come across.
DINIFITION OF TERMS
Tax is defined as a levy imposed by the government against
the income profit or wealth of the individuals, partnership and organization, also it is a levy the government makes no direct benefit to the tax payer.
Taxation is divided into various types such income tax, corporate tax, capital transfer tax.
Classification Of Taxes
proportional Tax
regressive tax
Direct Tax
Indirect Tax
Progressive Tax
1. PROPORTIONAL TAX: This is a system of taxation where by people pay tax in proportional to their incomes for instance if a cocoa farmer who earns N20,000 should pay N2,000.
2. REGRESSIVE TAX: This is a system of taxation whereby the poor man pays some amount as the rich man and also where the amount paid is not recited to the person’s income, e.g. community tax.
3. DIRECT TAX: This is a system of taxation born or paid directly by the payer to the government, in this people know what they pays annually. It is also a tax the impact and incidence of taxation fail on and the same person that pays it. E.g. personal income, company tax, expenditure tax.
4. INDIRECT TAX: This is tax imposed on person but paid partly or wholly by another person. The impact and incidence falls on different person e.g. impact duties, export duties, exercise duties, purchase tax, custom duties and entertainment tax.
5. PROGRESSIVE TAX: This is a system of tax which taxes a large portion of higher income than that of lower income. The more income a person earns, the higher tax which he/she will pay, in the people suffer more than the poor people.
CHARACTERISTICS/OBJECT OF MORDERN TAX SYSTEM
Adam Smith and down certain principles funding taxation and
those principle are canons of taxation for memory purpose the ECCEEA.
EQUALITY: - This is on of the characteristics of taxation which state that the tax payer in the same income group should pay equal tax. Here there is no room for favouritism.
CERTAINITY: - This means that the tax payer should know the amount of tax due to him, when to pay it and method of payment.
GOVENIENCE: - This time of tax payment should convenience to the tax payee. The pay-as-you earn (PAYE) is a good example of the convenience.
ECONOMY: - This principle recognize the need to prevent the cost of collecting the tax not be more the revenue from tax. That is to say the cost of collecting tax should no be excessive.
ENFORCEABILITY: - It says that the government should be able to enforce the tax as levied.
ACCEPTABILITY: - The tax should acceptable to the tax payer as a way of raising revenue for the government.
OBJECTIVE PF MORDEN TAX
The objectives of modern tax include the following: -
provision of free – social service like health and education
achievement of desirable social ends, that is help in discouraging excessive and drinking.
Generation of revenue it need to carry out its function
To protect home industries by imputing discrimination tariffs.
To provide incentive for industries and investment e.g. granting of allowance for capital investment
Maintenance of favorable balance of payment that is help encouraging more export than import.
DEFINITION OF RELEVANT TERMINOLOGIES
Tax Avoidance: Tax avoidance is the reorganization of economic activity possibly at some cost to lower tax payment.
Tax Evasion: This means that the tax payer is doing something that is against the law that is illegal something and if found he/she will be dealt with under the law.
Tax Code: - This is total relief and alliance grant to an individual tax payer divided by two.
Income Tax: This is tax on income. It may be personal or company income.
Person: This includes an executor, company partnership families or individuals.
Collectors of Tax: This does not handle money or collect taxes but their effect result in taxation paying in the casher.
Inspector of Tax: Under the control of the board are a large number of inspector who
(i). receive and return other information from tax payer; (ii). Make assessment;
(iii). Deals with claims for repayment and defect errors
They tackle down evasion
Nigeria Company: means any company that control and management of whose business are exercised in Nigeria.
Tax Authority: This mean the person or body of people responsible under the law.
Internet working means an individual who works at any time during a year of assessment other than or member of Nigeria army on the Nigeria. For a daily wage or customarily earns his live hood in more than one place in Nigeria and his total income does not exceed at N600. | ABSTRACT
Governments need to put in more effort in attracting investors into their country through tax reforms if it wants to achieve economic growth and enhance standards of living. The research considered certain variables that affect investor’s decision as to where to invest. These included the location, type of activity and time variables, which were very important due to the fact that, the laws pertaining to each one of them concerning the tax rate to be paid, incentives, exemptions, relief and holidays to be enjoyed varies.
The data for the research were obtained from both primary and secondary data. To obtain first hand information on whether investors in the country did consider the tax system in their investment decision, the study used questionnaires and interviews. The researcher designed 22 questions for the taxpayers and was distributed to 30 companies and individuals.
In the research, it was discovered that tax laws influences investment and location decision and for that matter a very important tool in attracting investors into the country. Again, the tax incentive that has the greatest impact on investment was also the reduction of corporate tax rate. However, certain constraint such as the level of interest rate and uncertainty about the economy were also discovered.
The researcher recommended that there was the need for reforms of the general tax system by creating efficiency and transparency in tax collection and elimination of unnecessary taxes and levies, which adds unnecessary costs to transactions.
CHAPTER ONE
1.0 INTRODUCTION
Every government and most especially those in the developing economies are concerned about the economic growth of their nation. As a result, they put in much effort to achieve higher rate of economic growth and raise the standard of living of its citizens.
The critical issue has been how to attract investors and generate the needed resources domestically using tax instruments that are least harmful to both the government and the investors. This will obviously involve reforming the tax system to ensure efficiency by widening the tax net without necessarily increasing the tax rate.
Governments continue to encourage foreign investment as an integral part of its economic policy. Ghana embarked on a privatization program in the early 1990s. The government at one point controlled more than 350 state-owned enterprises but nearly 300 were privatized by the end of 2000 and as at December 31st 2005, 351 had been privatized leaving just a handful of state-owned enterprises. For example, the government’s, stated priority privatization in the 2007 budget included Ghana Telecom, Western Wireless (Westel), Tema Oil Refinery, Ghana Oil Company and State Insurance Company. They also pursued privatization through selling of State-owned shares on the Ghana Stock Exchange (GSE).
The government recognizes attracting foreign direct investment requires an enabling legal environment and has passed laws that encourage foreign investment and repeated some that has previously stifled it. In the United States for example, there was a decline in investment some years ago. In order to stimulate investment, a new tax Act was introduced in 2002 and 2003. This helped the economy to regain its stand by the late 2003, investment returned to its pre-recession trend and the economy expanded at a healthy rate of 3.9% and despite the dislocations that was as a result of the hurricanes and steep rise in energy prices, registered 3.2%. A research conducted in United States by a Joint Economic Committee presented a case that, “lowering the cost of capital through tax legislation can be both timely and effective in stimulating economic growth”.
Governments need to put in more effort in attracting investors into their country through tax reforms if it wants to achieve economic growth and enhance standards of living.
The most important source of government revenue is from tax. According to the 2006 budget, the government introduced some tax incentives for venture capital investment and reduced tax rate on personal and corporate income in order to strengthen the private sector and enhance the disposable income of householders. Tax rate for companies in categories A and B were lowered, and rate for other categories were abolished with regard to the National Reconstruction Levy.
Various studies have shown that changes in the tax system have great impact in investment decisions. Feldstein (1982) observed that “adverse changes in the tax variables since 1965 have depressed investment by more than 40%” Hassett and Hubbard “recent empirical studies appear to have reached a consensus that the elasticity of investment with respect to the tax-adjusted user cost of capital is between -0.5 and -1.0” Hassett and Hubbard cited other studies that concluded that tax over the last forty years have had a large effect on investment. A research by House and Shapiro showed that temporary investment tax incentives did stimulate investment.
1.1 BACKGROUND STUDY
In my study, I will consider certain variables that affect investor’s decision as to where to invest. These, which include the location, type of activity and time variables, are very important because the tax laws pertaining to each one of them concerning the tax rate to be paid, incentives, exemptions, relief and holidays to be enjoyed varies.
Due to these continuous changes in the tax law, there is the need for such information to be publicized since it goes a long way to determine the growth of the economy, divert resources to a particular sector of the economy and also protect the local industries, at the same time attracting foreign investors.
This is what Ghana has embarked on in recent times and my study will try to analyze the budget from January 2010 to April 2012 and see the various attempts by the government to generate more revenue by attracting investors into the country.
Analyses of the budget in recent times had indicated that the government continually decreases the tax rate to widen the tax net. Even though in terms of tax revenue composition, our main source of revenue is derived from indirect taxes (VAT especially), these are indirect taxes paid by consumers on some goods and services to the state through registered individuals or businesses. It has been realized that revenue from direct taxes continues to rise. In 2010, it constituted 38.71% of total tax revenue and increased to 42.84% in 2011 and this can be attributed to the persistent reduction of the corporate tax rate by the government as part of its efforts to improve the environment for private sector businesses.
These few changes and many others that have not been mentioned here brought to the fore the need to observe how decision on where to invest, what to invest in and when to invest changes as the tax system pertaining to these changes. These are serious issues which must be considered because the transition of developing countries into developed countries depend largely on the extent to which people invest their resources to promote economic growth.
1 ORGANIZATIONAL PROFILE
The Ghana Revenue Authority (GRA) under the ministry of finance and economic planning of the republic of Ghana is a public service organization charged with direct tax administration.
GRA as a revenue agency is very strategic in the achievement of national goals. It has therefore embarked on a mission of improving the quality of service delivery to taxpayers and the general public through simplifying processes and clarifies rules and procedures. It has set up time frames for prompt completion of tasks in order to render them more transparent to the public. The main objective of the Ghana Revenue Authority (GRA) is to create a customer oriented revenue collection organization focused on quality service to enhance voluntary tax compliance.
The Ghana Revenue Authority (GRA) is assisted in its endeavor at improved quality service delivered by the ministry of public sector reform.
VISION
The Vision of the GRA is to be an effective Tax Administration Agency that applies the tax laws fairly, efficiently and with integrity in order to collect revenue for National Development.
MISSION
The Mission of the GRA is to optimize tax revenue through the fair application of tax laws, to promote voluntary compliance through improved customer service and taxpayer education, and to effectively and efficiently administer the tax laws through well-trained and motivated staff.
The Ghana Revenue Authority (GRA) has five (5) main Departments. These are:-
1.2 STATEMENT OF THE PROBLEM
In every thriving economy, investors’ main aim is to invest scarce resources to yield maximum returns on them. The government also needs to cater for its expenditure and development of the country.
It has therefore become necessary to generate the needed resources from domestic economy using tax instruments that are least harmful to both the investor and the government
In Ghana, there have been several policies to attract investors into the country but it is not clear whether investors utilize these policies which have been put in place to benefit both the Government and investors in all.
It is in light of this, that this research tries to investigate into the following issues:
How the changes in the tax system affects investment decision in the country.
Whether tax reliefs, incentives, exemptions and holidays have an impact on investment decisions on a particular location.
1.3 RESEARCH OBJECTIVES
To find out the extent to which the various tax reforms affect investment decision in the country.
To evaluate the various tax reforms in the formal sector over the past few years.
To explore the impact of corporate tax on firm location decision in Ghana.
1.4 RESEARCH QUESTIONS
i. What are the rationales behind or the reasons for tax reforms?
ii. What are the problems of tax reforms?
iii. What are some of the tax incentives used in attracting foreign direct investment?
iv. Should tax rate concepts be used to examine the effect of tax reform on investment?
1.5 SIGNIFICANCE OF THE STUDY
The study will be useful in the following ways:
Firstly is that, it will educate prospective investors on the best alternative business to invest in, based on the tax law for that particular sector.
Secondly, it will also encourage existing investors to expand their investments to other sectors of the economy as well.
Furthermore, it will also enlighten investors to the various tax incentives, reliefs, exemptions and holidays available to and how they can take advantage of them.
Moreover, it will help individuals to also understand how investors react to changes in the tax system and how it affects the economy both negatively and positively.
And fifthly, the study will add more value to existing literature since it will be updated with current issues and rates in the various sectors of the economy.
And lastly, in Ghana, it is a requirement for the attainment of a Bachelor of Science degree. It is also a requirement of All Nations University for a degree program.
1.6 SCOPE OF THE STUDY
This study is to assess the changing structure of the tax system in Ghana from January 2010 to April 2012 and suggest ways to improve the tax administration in the country to bridge the gap between public expenditure and domestic revenue.
Abdallah (2006) Taxation in Ghana defines taxation as the levying of compulsory contributions by public authorities having tax jurisdiction to defray the cost of their activities. It can also be seen as a means by which government implement decision to transfer resources from the private to the public sector.
Various types of tax can be grouped into Direct or Indirect. Direct Tax include: Income tax, capital gains tax, gift tax and corporate tax. Indirect Tax includes Excise duty, Custom duty and Value Added Tax (VAT). They are called indirect because the Administering authorities, the Customs, Excise and Preventive Service and the VAT Services do not collect taxes from consumers but do so indirectly through importers, manufactures and other intermediaries.
Reilly and Norton, Investments (2003), 6th edition defines investment as the current commitment of resources for a period of time in the expectation of receiving future resources that will compensate the investor for:
The time the resources are committed
The expected rate of inflation
The risk, that is uncertainty of the future payments
Internal Revenue Act (2000), Section 94 defines investment as a manner in which a person may derive gains, profits or income other than from a business or employment.
Details of this will be given in chapter two.
1.7 LIMITATIONS OF THE STUDY
During the study, the researcher encountered certain limitations such as time constraint. This did not permit the researcher to expand his population base and to make certain enquires into areas that could have been useful to the study.
There was difficulty in having access to certain information due to the fact that sufficient records were not available.
And lastly, target respondents may not be willing to provide adequate and prompt feedback of questionnaires.
1.8 METHODOLOGY
This study took the form of cross sectional studies employing the survey strategy. This will enable me to collect large sample of data from a sizeable population in a highly economical way and allow for easy comparison. The researcher used purposive sampling technique in selecting his sample size of 30 respondents. My case study will be the staff and management of The Ghana Revenue Authority, koforidua Branch.
Source of data:
Primary source data will be collected through structured interviews and questionnaires. Secondary source of data will also collected from journals, books, academic or scholarly articles, government publications reports and articles from the internet.
1.9 CHAPTER SCHEME
This study will be organized in the form of five chapters:
Chapter one deals with introduction, problem statement, objectives significance, methodology limitation and scope of the study.
Chapter Two will deal with a discussion of the trends and reforms of the tax system.
Chapter Three will analyze data collected.
Chapter Four will look at the impact of changes in the tax system on investment decision in Ghana.
Chapter Five will deal with findings, recommendations and conclusions. | ABSTRACT
After the economic depression of the 1930’s the concept of economy. Many nations began to implement policy measures aimed at both raising revenue for the government and encouraging investment via investment tax credit.
In Nigeria, the concept of taxation, especially as it relates to tax incentive had been an important topic for discussion both in the government circle and in the private sector. A review of the annual budgets of the federal Government reveal that the government usually give tax concessions and incentives to firms/ corporations in the following lines of business: manufacturing, agriculture and the mining sector. Over the years, successive administrations in the country had continued to reduce rate of effective taxes. In 1996 for instance, the highest rate of income tax was further reduced to 25% from 30% because increasing revenue from consumption taxation would compensate the military regime them felt that the loss in revenue as a result of the income tax cut. Would be compensated by increasing revenue from consumption taxation.
The purpose of this project/ research, therefore is to ascertain the effects of tax incentives to the development of manufacturing industries in Nigeria by using Emenite (NIG) Limited as a case study. The project/ research consists of five chapters.
While chapter one served as the introductory part of the project/ research, chapter two dealt with the literature review where the various forms of tax incentives in Nigeria and the school of thoughts on the subject matter were discussed. Chapter three discussions the methodology for the research and chapter four dealt with data analysis. Finally in chapter five, the researchers discussed the findings of the research, summary, conclusion and recommendations.
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY:
The concept of taxation sharp momentum after the great would of economic depression of 1930’s. After the depression aimed at raising enough capital to provide for social overhead expenses and at the same time embarking on several ways to lift the standard of living of their citizens.
In Nigeria, there are many forms of taxations in practice dating back to the days of our great grand fathers, that is before the coming of our colonial masters, whereby communities tax themselves through labour to execute community projects or to help the community suppress external attack or aggression. Therefore, taxation can be referred to as machinery by which communities or groups are made to contribute part of their incomes in some agreed amount and method for the purpose of administering the society. This accounts for the reasons why taxation is often referred as civic responsibility.
The present tax laws in Nigeria was borne out of the Raisman’s fiscal commission of inquiry of 1957. Before them, we only had what was called the income tax colonies with similar providing section 70, subsection 1 of the Nigeria constitution, order in council of 1960 which conferred an exchange power upon parliament to make laws for the whole Nigeria or any part of the country with respect to personal income tax. In the exercise of these powers the federal government enacted the income tax management act of 1961 (ITMA) and because Lagos territory was being administrated as a region it enacted the personal income tax (Logos). Act 1961.
On April 1961, the income tax management act came into operation and all the existing laws at the regional level had to be amended to bring them into conformity with what the Raisman fiscal commission recommend in 1958, the introduction of uniform basic principle of taxing income of persons other than limited liability companies throughout the country. Oliver Wendell Homlmes, United States Supreme Court judge said, “Taxes are the price we pay for a civilized society”.
Nigeria and been an encouragement by the government to attract individuals and corporate bodies to invest in the country. The idea of the research was to assess how the incentives had helped industries grow and how companies had availed themselves of these opportunities.
STATEMENT OF PROBLEMS
The study entitled effects of tax incentive in the development of manufacturing industries attempt to determine the way by which some organization or firm especially Emenite Ltd. Emene has utilized huge amounts of money. Nigerian government sacrifice every year by way of tax incentive towards the development of manufacturing industries.
Some of the problems, which they encounter, are as follows.
Liability of the tax incentives scheme to redirect the investment patterns of individuals and corporate bodies towards the development of manufacturing industries.
The level in efficiency in administering tax incentives scheme has made it impossible using it to attract foreign investors to the manufacturing industries.
Liability to use tax incentives in generating employment in manufacturing industries.
Most manufacturing industries are unable to apply tax incentives in a flexible manner.
PURPOSE / OBJECTIVE OF THE STUDY
The purpose this study is as follows:
To ascertain the extent tax incentives have redirect investment of individuals and corporate bodies towards the development of manufacturing industries.
To establish how inefficiency in administering tax incentive scheme has made it impossible using it to attract foreign investors to manufacturing industries.
To ascertain the extent by which most manufacturing industries are unable to apply tax incentive in a flexible manner.
RESEARCH QUESTIONS
The research questions of this study are as follows:
To what extent does tax incentives redirects the investment pattern of individuals and corporate bodies towards the development of manufacturing industries?
To what extent does inefficiency in administering tax incentive scheme distorts foreign investors to manufacturing industries?
To what extents does tax incentive help in employment generation?
To what extent does most manufacturing industries were unable apply the tax incentives in a flexible manner.
SIGNIFICANCE OF THE STUDY.
This work will be very useful to the government. It will enable the government to know the extent manufacturing industries have been responding to the available tax incentives.
Government, through this research could evaluate the profitability of the tax incentives that is whether the revenue in other words, it will enable government to know whether tax investment patterns of individuals and corporate bodies towards the development of manufacturing industries.
This study will also enable government to compare the identify those that are profitable to the Nigerian economy at large.
This study will go a long way to sensitize companies and individuals on the existing tax incentives available to the manufacturing industry and their companies to make qualitative investment and tax decision modeled to elevate the organization’s growth patterns.
SCOPE / DELIMITATION OF THE STUDY
For the scope if this study, the researcher will restrict himself to the corporation tax incentive available to the manufacturing company in Nigeria. With particular reference to Emenite (NIG) Ltd. As a case study.
DEFINITION OF TERMS
Incentive: - According to advanced learner’s Dictionary, the word incentive is “that which incites or rouses a person action”
Therefore, tax incentive, encompasses all the measures adopted by the government to motivate tax payer or manufacturing companies to respond to their tax obligations. This may includes adjustments to tax policy aimed at lessening the effects on an industry.
The taxation of consumption rather than income may, for instance be considered as an incentive by people who believe that tax payers find it more difficult to bear their income tax burden or direct taxes exert a harsher incidence on the tax base. An incentive is created when the government deliberately manipulates the tax system to the advantage of a potential investor or corporate body by adopting favorable tax policies.
Manufacture: According to the award illustrated dictionary (COZA), manufacture is defined as making of articles by physical labour or machinery especially on large scale; branch of such an industry.
Industry: the same dictionary defined “industry” as a branch of trade or manufacture, especially one employing much labour and capital infect, manufacturing in general. | ABSTRACT
The research provides a conceptual and analytical appraisal of tax reforms and revenue generation. The study seek to determine the effectiveness of tax reform policy toward achieving high revenue to government and public utility.It analyses the concept of taxation,types and significance.
CHAPTER ONE
INTRODUCTION
The tax system in Nigeria is made up of the tax policy, the tax laws and the tax administration. All of these are expected to work together in order to achieve the economic goal of the nation. According to the Presidential Committee on National tax policy (2008), the central objective of the Nigerian tax system is to contribute to the well being of all Nigerians directly through improved policy formulation and indirectly though appropriate utilization of tax revenue generated for the benefit of the people. In generating revenue to achieve this goal, the tax system is expected to minimize distortion in the economy. Other expectations of the Nigerian tax system according to the Presidential Committee on National tax policy (2008) include;
Encourage economic growth and development.
Generate stable revenue or resources needed by government to accomplish loadable projects and or investment for the benefit of the people
Provide economic stabilization.
To pursue fairness and distributive equity
Correction of market failure and imperfection.
In an attempt to fulfill the above expectation, the national tax policy is expected to be in compliance with the principle of taxation, the lubricant to effective tax system. The Nigerian tax system has been flawed by what is termed multiplicity of tax and collecting entities at the three tiers of government levels – Federal, State and Local government (Ahunwan, 2009).
BACKGROUND OF THE STUDY
According to the report of the presidential committee on National Tax policy (2008), Tax policy formulation in Nigeria is the responsibility of the Federal inland Revenue Services (FIRS), Customs, Nigerian National Petroleum Corporation (NNPC), National Population Commission (NPC), and other agencies but under the guidance of the National Assembly i.e. the law making body in Nigeria (Presidential committee on National tax policy, 2008). Suffice it to say that if there must be any effective implementation of the Nigerian tax system or attainment of its goal, the use of the national tax policy document remain absolutely essential. According to the Presidential Committee on tax policy (2008), “Nigeria needs a tax policy which does not only describe the set of guiding rules and principles, but also provide a stable point of reference for all the stakeholders in the country and upon which they can be held accountable. James and Nobes (2008) decried the inability of tax policy to meet up with efficiency and equity criteria against which it is being judged. It was further noted that tax policy is continually subjected to pressure and changes which most time does not guarantee outcome that are in line with the overall goal (James and Nobes 2008). Unfortunately, most policy changes in Nigeria are without adequate consideration of the taxpayers, administrative arrangement and cost plus the existing taxes. This has in no small measure hindered the effective implementation and goal congruence of the nation’s tax system. Citing (Bird and Oldman 1990), James and Nobes (2008) stated as follows “
STATEMENT OF THE PROBLEM
The problem confronting this research is to determine the nature of tax reforms and its impact on revenue generation in Nigeria, applying a longitudinal analysis.
1.3 RESEARCH QUESTION
1 What constitute tax reforms in Nigeria?
2 What is the effectiveness of tax reform towards revenue generation in Nigeria?
OBJECTIVE OF THE STUDY
To determine the nature of tax reform in Nigeria
To determine the effectiveness of tax reform policy towards revenue generation to government
SIGNIFICANCE OF THE STUDY
The study shall analyze tax reform policy and determine its effectiveness towards revenue generation to government.
It shall also serve as a source of information on issues of tax reforms in Nigeria
STATEMENT OF HYPOTHESIS
0 Tax revenue generation in Nigeria is high
1 Tax revenue generation in Nigeria is low
0 challenges to tax revenue generation in Nigeria is low
1 Challenges to tax revenue generation in Nigeria is high
0 The impact of tax reform on revenue generation is low
1 The impact of tax reform on revenue generation is high
SCOPE OF THE STUDY
DEFINITION OF TERMS.
According to the report of the presidential committee on National Tax policy (2008), Tax policy formulation in Nigeria is the responsibility of the Federal inland Revenue Services (FIRS), Customs, Nigerian National Petroleum Corporation (NNPC), National Population Commission (NPC), and other agencies but under the guidance of the National Assembly i.e. the law making body in Nigeria (Presidential committee on National tax policy, 2008). Suffice it to say that if there must be any effective implementation of the Nigerian tax system or attainment of its goal, the use of the national tax policy document remain absolutely essential. According to the Presidential Committee on tax policy (2008), “Nigeria needs a tax policy which does not only describe the set of guiding rules and principles, but also provide a stable point of reference for all the stakeholders in the country and upon which they can be held accountable.
Taxation has been defined as a general concept for devices used by government to extract money or other valuables from members of the community and organization by use of law. It is a levy charged by government either central, state,or local government on income, property,commodities and services. |
