The Impact of Tax Incentives on Growth and Development of Small and Medium Scale Industries in Nigeria

The Impact of Tax Incentives on Growth and Development of Small and Medium Scale Industries in Nigeria.

ABSTRACT

The impact or effect of tax incentives and their 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 their objectives. The purpose of the study is to establish the type of relationship that exists between tax incentives and the 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 the questionnaire could not perfectly clear. 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 influence positively the investment development that leads to diversification thus increasing employment level. The researcher further discovered that a five-year tax relief period for small-scale industries is not enough for the realization of the objectives of these schemes.

TABLE OF CONTENT

TITLE PAGE……………… i

APPROVAL PAGE             ii

DECLARATION…… iii

DEDICATION………iv

ACKNOWLEDGEMENT………v

ABSTRACT………vi

TABLE OF CONTENT……… vii

CHAPTER ONE

1.0     INTRODUCTION……………………………………    1

• BACKGROUND OF STUDY………………………. 1
• STATEMENT OF PROBLEM……………………… 5
• OBJECTIVE OF STUDY…………………………… 6
• RESEARCH QUESTIONS………………………….. 7
• RESEARCH HYPOTHESES……………………….. 7

1.6     SCOPE OF STUDY………………………………….    8

• SIGNIFICANCE OF STUDY……………………….. 8
• LIMITATIONS OF STUDY………………………………….. 9
• DEFINITION OF TERM………………………………………. 9
• ORGANISATION OF STUDY……………………………… 11
• REFERENCES

CHAPTER TWO

• REVIEW OF RELATED LITERATURE………………….. 14
• THEORY AND ADMINISTRATION OF TAX………….. 14
• IMPACT OF TAX INCENTIVES IN ECONOMICAND INDUSTRIAL DEVELOPMENT….. 24

• TYPES OF TAX INCENTIVE SCHEMES…………………. 28
• OBJECTIVES OF TAX INCENTIVE SCHEMES………. 29
• CRITICISMS OF TAX INCENTIVE SCHEMES…………. 30
• TAX INCENTIVES AND INDUSTRIAL DEVELOPMENT…………. 33
• TAX INCENTIVES AND PETROLEUM PROFIT TAX.. 34
• COMPANY INCOME TAX ACT 1979 AND INCENTIVES………….. 35
• INCOME TAX MANAGEMENT ACT 1961 AND INCENTIVES….. 36
• REFERENCES

CHAPTER THREE

• RESEARCH METHODOLOGY……………………………….. 42
• SELECTION OF DATA…………………………………………. 43
• COLLECTION OF DATA………………………………………. 44
• DESIGN AND ADMINISTRATION OF QUESTIONNAIRE…….. 45
• SAMPLE SIZE DETERMINATION………………………. 45
• SAMPLING TECHNIQUE……………………………………. 45
• OPERATIONAL MEASURE OF VARIABLES……….. 46
• DATA ANALYSIS TECHNIQUE…………………………. 47
• REFERENCES

CHAPTER FOUR

• PRESENTATION AND ANALYSIS OF DATA………. 51
• PRESENTATION OF DATA………………………………… 51
• ANALYSIS OF DATA…………………………………………. 52
• TESTING OF HYPOTHESES……………………………….. 64

CHAPTER FIVE:SUMMARY, CONCLUSION AND RECOMMENDATIONS

• RESEARCH FINDINGS…………………………………….. 72
• SUMMARY…………………………………………………….. 73
• CONCLUSION…………………………………………………. 75
• RECOMMENDATIONS…………………………………… 76

References

INTRODUCTION

Background Of Study

The year 1926 was a year of depression-slack in overall economic activities in Britain which led to the decline in the total earnings of the economies, shortage of funds 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 during this period that the term, Fiscal Policy called TAXATION came into existence. 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.

REFERENCES

Adam Smith (1937), An Inquiry into the Nature and causes of wealth of Nations.New York (The modern Library).
Carter Wilson, (1992), International bureau of Fiscal documentation. London, University Press Ltd.
Chen-Young P.C. (1989), A survey of fifty-five Jamaican Firms, Kingston, Felica press.
Dickson P.C. (1976), Business Statistics for Beginners, Heineman Educational Books.
Donald Johnson (1980), Corporate Taxation, London, Oxford press Ltd.
Ezejelue A.C. (1981), Criteria for Improving the System of Direct Taxation in Nigeria. (April/June), The Nigerian Accountant.