ABSTRACT
This study
examined the Effectiveness of Taxation As An Instrument For the Control of
Money in Circulation. Taxation which is an instrument used by the government to
levy individuals and corporations directly or indirectly as a source of getting
money for the maintenance of the state, maintaining economy stability, boasting
aggregate investment, reduce inflation amongst others is adjudged to be the
major source of public revenue. The problem of the study is that people see
taxation as a tool for the exploitation of the ordinary man by the government
and has generated a great deal of sentiments among taxpayers, some of who argue
that the government unjustifiably rid them of investments and consumption
income. The main objectives of the study are to examine the important role of
taxation in an economy, to evaluate the various types and classes of taxation,
to identify the major problems of taxation, and to determine the impact of
taxation on money in circulation. The research questions and hypotheses are
structured in line with the objectives of the study. The research is survey and
empirical in nature. The main source of data for the study is secondary data.
The instrument used for data collection include data on petroleum profit tax
(PPT) and company income tax (CIT), paid by quoted companies in Nigeria
spanning the period of 1999 to 2007 which was available. The average money in
circulation (AMC) are also obtained for each year, and are classified according
to the total tax collected (PPT + CIT) = Total tax collected (TTC). Data were
analysed through the statistical tools of simple Linear regression and
correlation analysis.
Therefore,
the correlation coefficient between the Total Tax Collected (TTC) and the
Average Money in Circulation (AMC) shows that there is a positive linear
relationship. The study found that the chief source of revenue for most
industrialized countries is the income tax. The income tax is levied on both
individual personal incomes and corporations profit. The work concludes that
taxation is a veritable instrument used by government authorities to regulate and
collect sums of money from both natural and legal persons for the benefit of
the whole citizens. On the other hand, taxes reduces a tax payers wealth
(money) and this causes the individuals to re-arrange his/her economic
priorities. The study recommends that more generalized rates should be enforced
to reduce tax avoidance and tax evasion. This will broaden the base and reduce
the tax burden on a few individuals and firms. The study suggests that further
work be carried out on this particular topic with emphasis on the areas which
are not covered by this work.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Taxation which is a major source
of public revenue has been variously defined to include an obligatory transfer of
money from the taxpayer to a public authority (government). Odinge (2003:18)
notes that the payment of tax unlike payment of price for acquisition of
something of a material value implies the settlement of tax payer’s civic
liability to the government.
Other definition of taxation
include, a non-punitive but yet compulsory levy imposed by government on the
property and incomes of individuals and corporations. According to Ajakaiye
(1999:56) a tax is a form of levy imposed by the state on people, corporate
bodies or goods and services.
Government action in tax
collection is however justifiable in the sense that government performs at
least the following functions for the welfare of its citizens.
§ Provision of education, water supply, Postal and
transportation services.
§ Internal security which includes the prohibition of
secessional tendencies.
§ Prevention of external aggression e.g. protection of
the country’s boarders.
§ Set and maintain public infrastructure.
§ Organize and execute state projects etc.
Ajayi (2002:18), notes that
taxation is an instrument of fiscal policy by the government. In this regard,
taxation may be defined as an instrument through which government achieves its
desired goals by the variation of taxes in its fiscal policy. In other words,
taxation can be defined as an instrument used by the government to levy
individuals and corporations directly or indirectly as a source of getting
money for the maintenance of the state, maintaining economy stability, boasting
aggregate investment, reduce inflation amongst others.
As an instrument of fiscal policy,
the government uses taxation to check the quantity of money in circulation.
Apart from using the imposition of taxes to cover its expenditure, the
government also uses it to reduce inflation and/or stimulate economic growth
(Anyanwuocha, 2001:30)....
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Item Type: Postgraduate Material | Attribute: 71 pages | Chapters: 1-5
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