COMPANIES INCOME TAX AND THE NIGERIA ECONOMY: CHALLENGES AND PROSPECTS

ABSTRACT

The major objective of this research is to explore the relationship between company income tax in Nigeria and economic development of the Nation. The researcher proposed three hypotheses towards addressing the study’s objectives and both primary and secondary sources of data are used in generating the necessary data for that purpose. These data are presented and analyzed by the use of tables, chi-square and regression model of analysis. The findings reveal that there is a significant relationship between companies’ income tax in Nigeria and economic development of the Nation and that tax evasion, tax avoidance and corruption are major hindrances to revenue generation. The study also reveal that perceived government failure to effectively provide basic infrastructural facilities discourages companies from willingly complying with their tax obligations. In furtherance to the above findings, the researcher recommends that government should provide conducive business environment for the  revamping of businesses in the various industries of the economy to further increase companies’ income tax revenue generation. Government should make judicious use of tax revenue for economic development of the Nation, provide infrastructural facilities that will improve the welfare of the general populace and alleviate companies extra expenditure on such facilities.

CHAPTER ONE

1.1 BACKGROUND OF STUDY

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1.2     STATEMENT OF PROBLEM
Companies’ Income tax is an essential structure in the Nigerian tax system. It also contributes astronomically to the total revenue generated by the government. Tax revenue mobilization as a source for financing development activities in Nigeria has been a difficult issue primarily due to the indulgence by companies and individuals in various forms of resistance such as pronounced tax invasion, Tax avoidance and other corrupt practices. Other problems militating against the efficient and effective revenue generation through company income taxation include;

• Non compliance by companies to relevant tax laws.
• In efficient poor tax administration in Nigeria company income tax structure. (Adegbie and Fakile, 2011).

More so, companies and individual see companies income tax as an undesirable imposition which bears no relationship on the service provided by the state.
About 80% of companies in Nigeria provides their electricity, security and other amenities needed. Lastly, the tax administration is full of loopholes that even the people in charge of tax administration cannot be trusted any more, (Adegbie and Fakile, 2011).

1.3     OBJECTIVE OF STUDY
The main aim of this study is to;

• explore the relationship between companies income tax in Nigeria and economic development of the nation.
• determine the relationship between tax administration and revenue generation in the system with a view to addressing tax invasion and avoidance.
• identify the administrative loopholes in the machinery of company income tax.
• examine if governments ineffectiveness in providing basic infrastructural facilities discourages companies from complying willingly with their tax obligation.

1.4     RESEARCH QUESTIONS

• Is there a positive relationship between companies’ income tax and economic development in Nigeria?
• To what extent does tax evasion and tax avoidance affect revenue generation in the system?
• Are there administrative loopholes in the machinery of companies’ income tax in Nigeria?
• Does government’s ineffectiveness in the provision basic infrastructural facilities affect companies’ willingness to comply with their tax obligations

1.5     RESEARCH HYPOTHESIS
For the purpose of this research work, the following hypothesis has been developed:
1.       Ho:   Companies income tax has no positive impact on the economic
Development of Nigeria.
Hi:    Companies income tax has a positive impact on the economic
Development of Nigeria.
2.       Ho:   Tax avoidance and tax evasion does not affect the quantum of
revenue generated in Nigeria.
Hi:    Tax avoidance and tax evasion affects the quantum of revenue generated in Nigeria.
3.       Ho:   Government’s effectiveness in the provision of basic infrastructural
Facilities do not affect companies’ willingness to comply with their tax obligations.
Hi:    Government’s ineffectiveness in the provision of basic infrastructural Facilities affects companies’ willingness to comply with their tax obligations.