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CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF STUDY

Tax can be defined as a leery, which government imposes on the income of the citizens of a state for which government makes no direct benefits to the taxpayers. It is also an impose by a state on persons who are resident or who earn income within the state. It may take the form of a direct or indirect tax.Generally speaking, a tax is said to be direct where the payment of the tax and the burden fall on the same person; it is indirect where the impact falls on one person and the incidence on another person. Most government in Nigeria depends on tax revenue generalization. The revenue generated is used for economical, political and cultural development.

Development according to dictionary meaning is the process of having many industries and a complicated economic system in the society. Development here is the instrument of positive change that enhances the standard of living of people in the state. Such changes as creation and utilization of serviceable social amenities, reduction in crime, increase in skill and capacity, better organization, good and efficiency and reduction of cost, to mention a few. When a state is label to manage its affairs as stated above, such a state is said to have achieved development. That is they have achieved all round source in its administration. Therefore, development means an increase in the real Gross National product (GNP) over periods in an economy of the state.

But more often, development is judge by the significant change in the provision of infrastructures like good roads, effective transport and communication system, public health, education, good water supply amenities. All these help to increase the standard of living of the people. So development is the capacity to deal with environment in order to provide all necessities that will enhance the standard of living of the people. Such things as good laws tax and monetary policies good and efficient management of the economy, provision of infrastructure and utilizes are all measures of development. Most states in Nigeria at present are under developed. It is even worst than in most states because it is newly formed and therefore needs a lot of money for its development. Before creation of state, governmental facilities were lacking. Like lacking of good road, efficient public health, good and effective communication system, and good education system. Some development have occurred and so the researcher wants to know the impact of tax on the government achievement as well as know the efficient use of tax is judged by the extent the entire people including private firms and house holds benefit from it.

Enhanced capital formation, which signifies development is achieved through tax. But recently the Nigerian government has introduced a lot of changes in the tax system that little or nothing is being paid as tax by a worker on a salary level of ten thousand naria per annum. In the pay as you earn system (PAYE) personal allowance is now three thousand naria Phi’s fifteen percent of earned income. There is also children allowance of one thousand five hundred naira per child for maximum of four children dependent relative allowance of one thousand naira and insurance allowance which is actual amount, paid as premium. Apart from the above, five thousand and naira of earned income is tax-free. From the above, one wonders if tax is the major source of government finding.

1.2   STATEMENT OF PROBLEM

In recent years there has been wide spread concern about the rate at which development has been taking place in some created states in Nigeria.

The major problem concerning this study is therefore to establish the linkage between tax as an internal source of find and the rate of development in some created states.

1.3   OBJECTIVE OF THE STUDY

The main objective e of the research work are to find out and educated:

i. How tax rates affects the rate of investment in the economy.

ii.The general desirability of firms to invest as result of tax incentive measures.

Also the researcher will look at the impact of tax on small-scale business in the state and whether the taxes are effectively and efficiently collected. The involves looking at the tax administration and collection systems. Generally the work is done to find out if tax constitutes the bulk of government revenue to erase the erroneous belief that tax is exploitation by government for their selfish interest.

1.4  SIGNIFICANCE OF THE STUDY

One of the most frequently discuss ed issue in Nigeria is how to solve the economic hardship in the country and how to create an industrial base that can guarantee self sustaining growth and development. Also one wonders why a country which is richly endowed with necessary  human and material resources and which the people, pay tax has been turned into a heavily indebted country. So the research is significant in the that it will reveal how much development is achieved through tax as well as expose the extent tax generated funds are used in providing the essential services to the people. The work will also reveal if there are other better sources of government finding apart from tax. The study will in addition help in the better understanding of the impact of tax on small-scale business in the state.

1.5  DEFINITION OF TERMS

Some of the words used are defined below:

TAX: This is a compulsory leery, which the government imposes on the income of the citizens of a state for which government makes no direct benefits to the taxpayers.

DEVELOPMENT: This is the capacity to deal with the environment in order to provide all necessities that will enhance the standard living of the people. Such things are creation and utilization of serviceable social amenities, reduction of unemployment, limiting the growth of population; increase efficiency and growth of population.

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