THE ROLE OF PERSONAL INCOME TAX ON THE ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study examines the role of personal income tax on the economic growth of Nigeria. the objective of the study was to determine how tax income affects economic growth in Nigeria. To achieve this objective, relevant secondary data from the period of 2000-2012 on personal income tax were collected from the Central Bank of Nigeria (CBN) statistical bulletin. The data collected for the study  were analyzed using the ordinary least square (OLS) method of regression using SPSS to explore the relationship between the GDP (the dependent variable) and the PIT, TTR and TGOv Exp (the independent variables) head over the period, which where considered as the model.

The result shows that there is a significant positively relationship between the dependent variable (GDP) and the independent variable (PIT, TTR, GovExp). The model indicates that the variables as a group explains economic growth and development of Nigeria. It was gathered that personal income tax is generally effective in the growth and development of Nigeria as it is one of the source of revenue to the federal, state and local government. It is recommended that well equipped database on tax payers should be established by the federal state and local government with the aim of identifying all possible source of income to tax payer for tax purposes.

1.1         STATEMENT OF PROBLEM

It is the duty of the government of any country to provide its citizens with those basic amenities that will make life enjoyable to them. This is because individual cannot single handedly provides amenities themselves. The provision of these basic amenities can only be possible through payment of taxes by the citizen.

There have been a heart provoking outary by various state government in Nigeria over their poor financial base. This situation is becoming even more compounded  by the obvious dividing feature of our oil economy. Inspite of the broadness and the comprehensive nature of our tax system, tax avoidance and evasion are on the increase. The ugly development has placed most state government in a situation where they cannot cope with their civic responsibilities to their citizens, hence a compelling need to put an end to this unwhole some circumstance in Nigeria through proper problem identification.

1. Due to lack of fund arising from low revenue receive from personal income tax. It has not contributed some basic amenities to the economic growth and development of Nigeria.
2. Problem regarding poor method of collections of income tax which have reduce a part of revenue of income tax for economic growth.
3. Citizen do not enjoy some basic amenities benefit because of not payment of income tax.

1.2         OBJECTIVES OF THE STUDY

The specific objective of this study are stated below:

1. To examine the extent at which personal income tax has contributed to the economic growth of Nigeria. 
2. To examine how total tax revenue has contributed to the economic growth of Nigeria. 
3. To determine how total tax revenue affects government expenditure on social amenities. 

1.3         RESEARCH QUESTION

For the purpose of this study the following research questions have been formulated.

1. 1.             How can personal income tax contribute to the economic growth of Nigeria?
2. 2.             Will total tax revenue contribute to total economic growth of Nigeria? 
3. 3.             Will total tax revenue affect government expenditure on social amenities.

1.4         HYPOTHESIS

For the purpose of this study the following hypothesis have been formulated:

1. Ho: There is no significant  relationship between personal income tax and economic growth in Nigeria.

H1: There is significance relationship between personal income tax and economic growth in Nigeria.

1. H0: There is no significant relationship between total tax revenue and economic growth in Nigeria.

H1: There is significant relationship between total tax revenue and economic growth in Nigeria.

1. H0: There is no significant relationship between total tax revenue and government expenditure in Nigeria.

H1: There is significant relationship between total tax revenue and government expenditure in Nigeria.

1.5          SCOPE OF THE STUDY

It is the intention of the researcher to investigate into the extent our tax system with emphasis on personal income tax has affected the economic growth of Nigeria. Also the personal income tax Amendment Act 2011 will also be attempted by the researcher.

This research work is to look into the period from 2000-2012. Also the research work would cover forms on taxes and the personal income tax administration in Nigeria.

1.6         SIGNIFICANCE OF THE STUDY

The importance of the study is throwing more light on the role of personal income tax on the economic growth in Nigeria. Findings from the research will enable the following group of people benefit the following:

1. CITIZEN: The result of this study will help to create an awareness to the citizens on benefit that can be derive from payment of taxes. 
2. GOVERNMENT: It will help the government aware of the benefit provided by them through payment of taxes.
3. SOCIETY: It will help provide meaningful recommendation to the society on the way taxes should be handled and administered. 
4. STUDENT: It will help researchers especially student to be educated on the roles of personal income tax on the economic growth in Nigeria.