CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

A tax could be defined as the transfer of resource from the private to the public sector in order to accomplish some of a  nation’s economic and social goals.

The primary economic goal of developing countries a is to increase the rate  of economic growth and hence the per capital income which will lead to pre capital income which will lead  to higher standard of living. If due recognize two major accomplishment as requirement for the attainment of this goals.

Provision of additional basic government services, particularly in education, public health and transport, which are important for the growth of remainder of the economy.

A higher rate of capital formation in production facilities, whether understand in the  government or private sector.   The  specific goal, is of course , not the highest rate  that will permit the maximum  rate  of growth  in GNP regarded as feasible under the circumstance. Broadly, it could be said that there are three main method of financing expenditure open to most developing countries: –

1. Taxes and other current receipts such as the profit of public enterprises.
2. Loans and

• grants

of these source, taxation is perhaps the  most important since that level of government expenditure is to a great dependent on  the ability  of the tax  system to place  the requirement revenue at the disposal  of government.

Thus, Chelliah (1960) asset, taxation might be used to accomplished the following objectives:

1. Increasing the incentive to save and invest
2. Transferring resources from hand of public to the hand of the state to make possible public investment.
3. Modifying the pattern of investment
4. Mitigating economic inequalities
5. Restraining or curtailing consumption and transferring resources from consumption of investment.

These objectives are relates to the ultimate goals of increase in national income and of the direction of economic development.

The various form of taxation could be classified under two headings – indirect and direct.

Indirect taxes are those types of taxes are levied against goods and services e.g of indirect in Nigeria are custom duties and excise duties.

Direct taxes are those types of  taxes levied on factors  of production. In Nigeria, direct taxes consists of personal income tax, company income tax, petroleum profit, capital gains tax and capital transfer  tax.

The administration of the income tax laws in each of the federation is vested in the state board of interval revenue services. Prior to 1993 the composition of the board could vary from state to state effective fraud 1993, the composition is now uniform throughout the country.