ABSTRACT
The impact or effect of tax
incentives and its associated economic and industrial development is studied in
this research project. The study specifically focused on three selected
industries (small scale) : Industrial Promoter Nigeria Limited Aba, Spring
Field Nigeria Limited, Deluz Paints Industrial Limited – Enugu.
The problem for this research work
is to ascertain if the available tax incentives in Nigeria have achieved its
objectives.
The purpose of the study is to
establish the type of relationship that exist between tax incentives and growth
and development of small scale industries in the state. To ascertain if really
tax incentives stimulate small scale industries to improve on the level of
their investments.
Questionnaires were distributed to
the staff, interviews were used to extract information where questionnaire
could not perfectly clarify. Firstly, frequency distribution tables and
further, correlation coefficient and chi-square were used to test hypothesis
one and hypothesis two respectively.
A number of findings were made,
and it was discovered that small scale industries that benefited from tax
incentives experienced an increase in their productive assets, capital
investment and working capital formation. Also, tax incentives do not only play
a stimulant role to the small scale industries but act as an indicator to the
industries signaling them to the specific sector of the economy that should
prioritize their investment decision. Among the findings in the effect of the
incentives on the employment level. These incentives influences positively the
investment development that leads to diversification thus increasing employment
level.
The researcher further discovered
that five year tax relief period for small scale industries is not enough for
realization of the objectives of these schemes.
In view of these findings, the
research recommends that the five year tax relief period to small scale
industries be extended to ten year period. This is to ensure that they can
favorably content with the competition from bigger firms. Finally, government
should adjust the system of tax administration. The tax administrators should
be adequately educated and more tax enlightenment programs be extended to the
public to create enough awareness about the tax existence and objectives of the
tax incentives scheme.
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The year 1926 was a year of
depression-slack in overall economic activities in Britain which led to decline
of the total earnings of the economies, shortage of fund in the private sector
and reduction in income per capita in Britain.
It was at this juncture that the
economic world formulated various fiscal policies. The main and prime objective
of these policies was to revive, rehabilitate and mobilize enough capital to
provide for economic and social expenses and to raise the crunched standard of
living of citizens. It was this period that the term, Fiscal Policy called
TAXATION came into existence.
The direct taxation in its
reformed pattern was introduced in Nigeria in 1904 by Lord Lugard, the then
British High commissioner for Northern Nigeria with the issue of the land
revenue proclamation for Northern Nigeria. In other words, income tax was
introduced into Nigeria in 1904 and that was when community tax became very
operative in Northern Nigeria.
It is important to realize that
the present tax laws in Nigeria were developed or formulated from the Raisman’s
commission of enquiry of 1957. Before now, there were the income tax ordinances
for colonies and which was rather common in all the colonies and the provisions
were similar. Raisman’s recommendation was the basis for providing in section
70; subsection 1 of the Nigerian constitution Order in council of 1960 which
conferred an exclusive power on parliament to make for Nigeria or any part
thereof with respect to personal income tax.
In exercise of these powers, the
Federal Government enacted the Income Tax management Act, 1961 (ITMA) on April
1. But before ITMA, Lagos territory was being administered as a region and the
personal income tax (Lagos) Act, 1961 was enacted for it separately. But when
ITMA ’61 came into operation, all the other regional laws on taxation were
amended to bring them into conformity with federal law.
As previously mentioned, the
earliest trace of any form of direct taxation in Nigeria according to Ezejelue
(1981:33) even before the British administration “was in Northern Nigeria” it
was relatively easy to introduce the reformed system in the North because the
tax-paying tradition had already been established there. Unlike the South, the
North had a form of organized central administration under the Emirs. The
spirit of Mohammedanism which made it possible for people to contribute towards
charity, afforded a religious foundation for direct taxation in the North.
This tradition of direct taxation
found expression in a number levies and forms of taxes existing in the North
long before 1914.
These included in Zakat, Kurdin Kassa,
Shukka Shukka, Jangeli and Kharat which according to Mrs. Iheduru were grain
tax, agricultural tax, plantation tax, livestock, and community tax
respectively.
According to Okigbo (1955:80) they
were so varied, perplexing and complex that in the 1880’s the problem as seen
by the Royal Niger Company (RNC) was not how to introduce new tax forms but how
to simplify the existing forms.
All this time, southern Nigeria
was separately administered until 1914 when North and South were amalgamated.
It was not easy to impose direct taxation on the.....
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