THE IMPACT OF TAX INCENTIVES ON ECONOMIC AND INDUSTRIAL DEVELOPMENT

                                                 ABSTRACT

          The impact of Tax incentives on Economic and industrial development of Enugu state Intends to examine the extent individuals and companies have been responding to the incentives scheme.  How these incentive have been stimulating and motivating these bodies on employment opportunities.  The research intends to examine also how these incentives have been helping existing industries and companies in expanding their areas of operations in Enugu and to know if the expected result of these incentives are achieved by the firms who benefit from these relives.

Some of the factors which have motivated the research in this study include: weakness of the firm to respond to the desired objective, lack of awareness and the aims for granting the relief in adequacy of incentives to sustain the desired development.

In this work, the researcher looked into textbooks, journals, articles and administered questionnaires to practicing personalities which includes tables that were used in analyzing the data collected, it was resolved that more than 50% of the firms and individuals studied are aware  of the incentive.  A good number of them did not go into production, because of the incentives and more than 50% suggested that more incentives should be granted.

 

 

 

                         TABLE OF CONTENTS

Title page                                                                                I

Approval page                                                                        ii

Dedication                                                                               iii

Acknowledge

Abstract

List of tables

 

                                           

 

 

 

 

 

 

 

 

 

 

                                                CHAPTER ONE

• Introduction

1.1     Statement of problem

• Purpose of the study
• Research questions
• Significance of the study
• Scope and limitation of the study
• Definition of terms

 

                                              CHAPTER TWO

REVIEW OF LITERATURE

• Introduction

2.1     Criticism of the Tax and incentives scheme

• Argument for tax incentives
• Petroleum profit tax act 1959

 

                                          

 

 

                                              CHAPTER THREE

RESEARCH METHODOLOGY

• Introduction

3.1     Primary source of data

• Secondary source of data
• Population studies
• Sample use and size
• Methods of data analysis

 

                                                CHAPTER FOUR

• Data presentation and analysis
  • Research questions analysis

 

                                                CHAPTER FIVE

Discussion of findings, conclusion and recommendation

• Summary of findings

5.1     Conclusion

• Recommendation

Bibliography

Appendix I

Appendix II

 

 

 

 

 

 

 

 

 

 

 

 

                                                          PROPOSAL

This research intends to highlight tax incentives on economic and industrial development of Enugu State.  It also seeks to examine the extent to which individuals and companies have been responding to the incentive scheme.

The research will also show how these incentives have been helping existing industries and companies in expanding their areas of operations in Enugu state, and to know if the expected results of these incentives are achieved by firms who benefit from these relieves.

In pursuance of this research study, the research will gather data through text books, journals, articles and questionnaires which will be administered to practicing personalities. Data gathered will then be analyzed using tables.

Some recommendations will be made which if implemented by tax experts,  consultants, individuals and economic analysts will enhance a better  tax incentives scheme.

 

 

 

CHAPTER ONE

INTRODUCTION

          The mode by which the economy and industries are effectively and efficiently developed has a problem.  As a result, government charges less tax in order to encourage investments and activities in those areas which helps to improve the production capabilities, active economic growth as well as allocation of resources in a socially desirable manner.

Tax incentive is the use of government spending and tax policies to influence the level of national income.  Taxation itself is the process or means by which communities or groups are made to contribute part of their income for purpose of administration of the society.

This measure will encourage new enterprises to spring up.  Thereby reducing profit tax which encourages production to curb unemployment.  Government should provide employment opportunities, to improve our economy.

The government’s infrastructural facilities such as roads, water supply, electricity, hospital etc., must re-allocate resources to the public sector charging mix input.  By borrowing, rather than taxing, the federal government has a better chance of expanding investment spending which is essential to enlarge our production possibilities and attaining increase in standard of living.

On the other hand, these incentives can be targeted on low income earners. This will normally increase their savings which is necessary for higher investment.

Tax incentive also create employment opportunities for people, which helps to fight depression and inflation, thereby helping to increase distribution of income and wealth.

 

1.1     STATEMENT OF THE PROBLEM

          This impact of tax incentive on economic and industrial development using Enugu state as a case study,  although there are many advantages, got most tax experts, consultants, individuals and economic analysts to ignore  or criticize tax incentives  because of the following.

1. The impact of incentives are not effective in the economy
2. The exemption privilege not granted to all firms in an industry which places some companies at a competitive disadvantage
3. Many management of firms, companies lack awareness of the incentive
4. The incentives granted are not adequate to the development and growth of industries
5. Unwillingness of some companies and individuals to claim the incentive. This is because they do not understand their roles.

 

PURPOSE OF THE STUDY

Tax incentive is a strong fiscal measure or policy which can stimulate investment and savings leading to capital information.  This  capital acquisition can be used productively in economic and industrial development of companies and individuals can use them effectively in deciding if these incentives can stimulate the companies and individuals to invest in economy.  One basic fact is that whether the company or individuals concerned decide to go into business because of tax incentives offered.  In this study the research intends to see how companies have been responding to incentive scheme, how these incentives have been stimulating and motivating these bodies to establish industries, which will create employment opportunities.

Moreover,  the research intends to examine how these scheme has been helping existing industries and companies in expanding their areas of operation in Enugu

 

RESEARCH HYPOTHESES

H₀:  tax incentives does not attract foreign investors in Nigeria via – Enugu state

H₁: tax incentives does attract foreign investors in Nigeria via – Enugu state

H₀²: the existing tax incentives are not adequate for development

H₂: the existing tax incentives are adequate for development

H₀³: these incentives does not stimulate individuals to establish new enterprises

H₃: these incentives does stimulate individuals to establish new enterprises

1.3     SIGNIFICANCE OF THE STUDY

Tax incentive scheme is an economic policy, which exists among many other competing alternatives.  The scheme may be an inducement towards rightful investment, securing proposal that private investors lay behind, it then follows that if the scheme is a pale shadow for pilling stock of profit, then the benefits expected from these incentives should be able to justify the cost.

1. As a result of creating many industries and subsequent expansion of existing ones, the standard of living of the populace will be increased.
2. Tax incentives will helps in small scale industries which will subsequent expansion of existing one’s the standard of living of the populance will be increased.
3. Tax incentive scheme leading to diversification will be also result in increasing Urban and rural development. It is the intention of the researcher to look into ways and extent the existing tax incentives are being used by entrepreneurs in setting up industries establishment in Enugu State.

 

1.4     SCOPE AND LIMITATION OF STUDY

          The study covers the impact of tax incentives in economic and industrial development, it is limited to some tax offices in Enugu state limitation.  To this work includes:

Time: the writer was face with appropriation her time between writing this project and performing her academic function as well as meeting her social needs.

Responses: some people; I will  met may not be ready to given an answer to the question I ask and some see me as a spy as a result of this work.  Consequently, a great deal of emphasis was placed on questionnaires and oral interview that cost  consideration time and money.

DEFINITION OF TERMS

1. Tax incentive: tax incentives are relief granted to tax payers or industries in the form of set off from total in comer or gain before tax liability is determined. In the case of industries ore companies is inform of tax holiday it is established by the legislation authority such payment of taxes.
2. Disposal income: is that personal incomes available for consumer spending saving and investment consisting of all income minus taxes and other payment to the government.
3. Jurisdiction: it is the authority of courts or tax officer to hear and determine assessment of tax payer or cases.
4. Pension fund: it is any society fund contact or scheme.

The assets which are held under irrevocable trust and any scheme established by law in Nigerian or other places, the main objectives of which and the provision of non-assignable and non commitable retirement  pension

5. Tax Evastion: It is the deliberate attempt to defraud tax authorities by an individual or company by giving false information of his or her revenue.
6. Dependent Relative Allowance: The relative must be old and closely related to the tax payer or his spouse.  His income must not exceed N900.  This allowance of N2,000.00 is also distributable between among those who contributed in maintaining the relative.
7. Children Allowance: The children must below 16 years but if above must be receiving full-time education or is articles or indentured in a trade or profession in that year. The child’s allowance of (N) 2,500 is distributable between two or more people who maintain a child.
8. Capital allowance: capital allowance is granted to a qualifying capital expenditure incurred wholly and exclusively for the purpose of the trade or business.
9. Initial allowance: (Section 7 (1) of PTD 1993) is granted only one in the life A an asset the year the asset is first used. It is allowed fully on the cash value regardless of the number of month, weeks or days the assets is used in the first year.
10. Annual allowance: this is provided in section (1) of the decree.  Annual allowance is granted each year of assessment in respect of any asset used wholly, exclusively, necessarily and reasonably till the end of the accounting year for the purpose of the trade
11. Depreciation: The lose of usefulness or value of fixed asset of group of asset they cannot be restored by repair because of wear obsolescence or inadequacy. Some of the ways of calculating depreciation include the appraised method, unit method and working hours method.
12. Exploration incentives: All expenditure which exclusively, necessarily and reasonably incurred for the purpose of petroleum operations are dimmable as reflection from some of that period.
13. Investment tax credit: Investment tax credit replaced the old initial allowance granted in respect of qualified capital  expenditures.

14      Loss relief: A company under the act may elect to defer the set off or a less incurred to another accounting period.

15. Tax off-set: section (17) of the act provides that custom duties on essential plants, royalties on domestic sale of crude oil and investment tax credit should be deducted in full before arriving at the chargeable tax to be paid by such company.
16. Roll over relief: Capital giant act grants a roll over relief to a disposer or an owner of an assets which is destroyed or provided that the capital sum received is applied within three years to purchase another asset in order to replace the one destroyer or lose.

 

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