University of Nigeria Research Publications

Aut

hor

MBIKA Florence N. PG/MPA/99/26894

Title

Tax and Taxation: Their Impact on the Standard of Living of Government Workers in Umuahia North Local Government Area, Abia State

Facu

lty

Social Sciences

Dep

artm

ent

Public Administration

Dat

e

July, 2001

Sign

atur

e

TITLE PAGE

TAX AND TAXATION: THEIR IMPACT ON T H E STANDARD O F 1,IVING O F GOVERNMENT WORKERS IN UMUAHIA NORTH

LOCAL GOVERNMENT, ABlA STATE

A 'I'HICSIS SUBMITTED T O b

DEI'ARTMENrT O F PUBLIC ADMINISTRA'TION AND LOCAL GOVERNMENT, UNIVERSITY O F NI(:EKIA, NSIJKKA

IN PAK'I'IAL FUL,FILLMENT O F T H E REQUIREMENTS FOR T H E AWARD O F ILIASTEH O F PUI3LIC' AI)MINISrI'ItATION (MAP)

MBIKA, FLORENCE, N PCIM PA199126894

TAX AND TAXATION: THElR IMPACT ON T H E STANDAKD OF LIVING: OF GOVERNMENT WORKERS

IN UMUAl I IA NO1iTI-i LOCAL C;OVEliNMENrI', AIHA STAT r{

MBIKA, FLORENCE .N. PG/MPA/99/26894

DEPARTMENT O F PIJRLIC ADMINISTRATION A N D LOCAL GOVERNMENT, UNIVEIISIrlY O F

NIGI?:IitA, NSUKKA.

V JULY, 2001

CERTI FICAIION

MBIKA, FLORENCE, N. A POST GRADUATE STUDENT IN T H E DEPARTMENT O F

PUBLIC ADMINISTRATION AND LOCAL GOVERNMENT !VITEI T H E REGISTRATION NUML3ER PGlMPAl99126894 HAS

SATISFACTORILY FULFILLED 'THE REQUIREMENTS O F COURSES AND RESEARCH WORK FOR T H E DEGREE O F

MASTER O F PUHL,IC AI~MINISTRATION.

THE WORK EMBODIED IN THIS RESEARCH PIiOJECT IS OKlGINAL AND HAS NOT BEFN SUBMITTED IN PART O R FULL FOR ANY OTHER HICHEII DEGREE O F THIS OK ANY OTHER UNIVERSITY.

EXTERNAL EXAMINER

T O ALMIGHTY GOD FOR THE LIFE GlVEN T O M E AND '1'0 MY BELOVED HUSBAND MR. EJlKli: F. UCHE 4

ACKNOWLEDGEMENT 'l'hc con~plction of thih work is as a result of the help rendered to me by (iod and different peoplu, sonic of who~il 1 will not fail to mention Ilcrc.

1 owe a duty to express my gratitudc to God who kept me alive tliroi~gho~t the duration of this course. ! Ie graciously gave me the ]ilk. good health, strength, intellect, patience and persevering sp~rit to gci through my carcer, to him be all glory, honour and praise, forever and ever- Anicn.

1 ;im deeply indcbtcd to my supervisor. Dr. F. ('. Okoli li)r taking the pains to ensure thorough supervision of this work cven in the l'ace of' ASUU strike action. I must acknowledge his amiable, unassuming and resourcehl dispositions in thc course of supervising this work. His guidance, hi~mant: character and excellent public relations spurred my determination to a succcssiid end.

My profound gratitude goes to all my respondents especially the junior staff of Umuahia South local government for ~heory various l'orms ol' assistance and co-operntion during diflicult stage of data gathering and collection. 1 am parliculu-ly appreciative ol' the assistance oflkred to me by the llcad 01' pcrsonucl Management (I 1.P.M) Mrs. Joy l

A B S T R A C T

CHAPTEl

Table 1 :

~ & l e 2:

Table 3 :

Table 4:

Table 5:

Table 6:

Table 7:

Table 8 :

Table 9:

Table 10

Table I I :

Table 12.

Table 13:

Table 14:

ix LIST 01; '1'A DLES

Respul~scs of the respo~ldents demograph 1 personal data

Qs a-d

Kespuues on Illcome Range Per month Q. I

Kespu~iscwon Proportion of Inconie that goes to Taxes 1

Rates Q. 2

I

CHAPTER ONE: INTRODUCTION

PREAMBLE

The most clcmcntary lesson of the study of tax incidence is that

there is not a correlation hc twcc~~ the individual who sends the

cheque to the government and thc pcrson who bears the tax burden

! ( s l ~ o m , 1087:6 10)

Tax is a very important source of pi~blic revenue. I t is a compulsory obligation of

the inhabitations of a given state to that country. Conceptually, taxation simply

means every programmed 01' the governmcnt that is ainlcd at the collection of fees

and revenues from bodies including thc piiblic and private lirnis cornpanic4 and

individuals. In other words, i t is tlic ~ x ~ y ~ i l c ~ i t l i )r goods 4 scrviccs proviclcd by

the government to her entirc citizen.

Accordin:: to (Touch, 1085:l) "'l'axation is thc price we pay li)r living in a

civilized society" I t is, this. important. I t is pi~rt ol'thc citimwhip "right".

Yet, taxation of individuals and companies is h r some purpose better seen in the

light of' well'ares. 'I'hc improvement ol' the living standard of' the avcragc ci tizcn

of the state is always very tnuch pronounced as a purposc ol'taxation. 'l'hc people.

tliiis, need infrastructurcs. social sccurity. hcttcr valued currency, and so on, which

are most ellkc lively organized by the government through the collection of funds

lyom the citizens. "It is noteworthy that this important part of tax purposes has

n~acle taxation a political niattcr which cannot be dc~?icd as any genenil election

leaflet nlakcs' clear." When considcrinp the term pmprcssivcly in taxation. a value

judgment is included and political prejiidicc is 01' thc populace that the uppermost

in the minds of the populace that the purpose of the systematic transl'er of income

1-rom individuals to the state is lor improvement of living standards.

I t is also important to ask how Ihr this purposc has been li~llillcd. I t can be very

easily to believed that the government has provided many essential amenities.

Yet, is there commensurate improvement in the living standards ol' the entire

citizcnry? Is a section of the populace bencliting liom government expenditure,

while others arc not?

A part of the population should be considered on the light 01' these (very seriously)

as their income arc fixed n nature. Any tax increase has an undesirable eff'ect on

thcir real income. So do price incrcnsc ancl general incrcascs in living standards.

'l'i~x, howcver, is normally categorized as direct and indirect taxes. Pcrson a1

income tax, however, is classified under direct tax and is reputed to be - . untransl'erablc, l o what extcnt this is triic, is still yct to be convincingly proved.

I'his is because somc theorists haw attcmptccl to show that in principle any tax

may be shified, in whole or in part, depending upon the conditions under which

the tax is levied. (Neumark, 1974: 1077)

Sincc the govcrnlncnt worker has only a souscc 01' incv~nc, hc cannot sill his tax.

Hut a businessman that has goods lix sale can clcvcrly includc his tax to costs and

sell his goods at a higher pricc, cspccially wherc the product is inelastic. . The

impact of' the tax (hen depends on "elasticity of "this" ccluilibrium level with

sespect to thc net rate of return to capital" (charlcy, IOX7:508). 'I'hc tux irrduccs a

decrease of' the level of capital, i l ' only the elasticity is positive

(Diamoncl,1970:211-224). It is, therefore, certain that the fixed income worker is

all'ected not only by his personal income tax but also by taxes on durables, non-

durable~. ' I le is also al'fccted but cluotas as wcll as levies (e.g. survival levy)

imposed by government on all citizens. Note also that thc civil servant cannot

evade payment ol'tax (unlike his private sector counterpart), as his tax is dedicated

art source. All these (directly or indirectly) reduce his real income and

consequently his living standard.

This rcscarch work is aimed at finding out the ncgativc impact of tax

administration and implementation i)n government workers in IJmuhia south local

government .

1.2 STATEMENT OF THIS I'NOBLEM

Since the "demise" of the economy of the county, governn~ent workcrs (especially

thc junior civil servants) have consistently been linding i t very dificult to survive.

'lhe cost 01' living is very Iiigh, prices of items i n the market like cars, building

materials, Sood item arc soaring senior civil sc~.vi~nts. 'l'hc rental cost of

accommodation is now very outragcous. Marriage costs is not left out. A general

classification and analysis show that tlic price index has tilted very signilicantly to

the disadvantage 01' any lixcd income earner. A civil scrvant cannot lkcd fine,

what more having car, building a house alid otlicr things that malte life worth

living

These, therefore, create concern n the minds of well-meaning citizens of,this

country. What is the fate ol'thc govcrnmcnt workcr'? I%pccially when he has to

pay tax, levy or ducs in~poscd by the govctm1cnr.

'I'he government worker alier he has paid his lax, survival levy or other levies as

well as rates, the qucstion then is what nest is IcSt Ibr him to take home and spend

on his needs'? One can then ask what inipac~ docs taxation have 011 tlic real income,

savings level, investment potentials us well as thc gencral living standards of the

average government workcr (with special relkrcnce to the junior civil servants)'?

We hope that by securing aflirniativc ans\vcrs to thcsc clucstions, we will be able to

find solutions to the principal problenis t h i ~ t are contained in tlie questions and

which lorn1 the core or the basis for our rcxarch sti~dy.

1.3 OBJECTlVES OF THE STUDY

Every research work must have a set of' ob.jectives so as to niaintai~i a nlcaningful

sense of direction and purpose. According to Agyci (1083:2) accomplishn~ent of

economic and social good through taxation is a case that should be examined much

morc closely. The Nigerian tax system has not f'avorcd a section of the population.

'I'he value of the naira is nothing to write home about. I'rice of products is far

much higher than the official 4.0% by the end 01'2000.

The question then is, what is the fate ul'tllc liscd income carncr? l'his research

work, therclorc, is aimed at

I lighlighting the incidence ol'tascs on lhc living standards ol'tlle

average Nigerian govcrnn~cnt workcr, with special emphasis an the

junior civil servants;

Showing the negativc impact ol'high tax ratcs on thc junior civil

servanls; . Showing the implication ot' the real income 01' the govcrnmcnt workers

(resulting from visible and invisible tax rcduchns) on social welfare

table;

Suggesting possible remedies to thosc very important and imposing b

problems associated with the Nigerian socio-economic environment.

SIGNIFICANCE OF THE STl1l)Y

l'his project is intended to servc as a guide to the government in a way to improve

the living standards of the workers through reduccd taxation. I t is further intended

lo appraise and criticize the system of' taxation in the local governments with

special tbcus on the systcn~ of taxation in IJmuaIiiu south local government area.

'I'hc third signilicancc is that the study will hclp the local govcrnlnent to have more

realistic tas system, 'l'his will Icssen lhc biwclcn ol'ti~.ution on the workcrs in a

way that workers will have meaningfill savi~igs.

Another essential aspect ol' the signilicnncc 01' this study is that any useful findings

in respect of the local government as a third-tier-govenln~ent will have, at least a

modified application at both state and Ikdcral govcrnmcnt. 'I'his will make a way

for uniform tax system amongst workers in the whole t'ccieration.

Above all, this research work will be usel'ul to Iuturc researchers in this area and

students in general. 'The finclings and rcconimcndations will be usefill to the

various tiers of governments, and wi 11 immcnscl y cnhrrncc cfiicicncy, effectiveness

and high rate of production of the workers.

SCOPE AND LIMII'A'IION OF I'HI5 S'I'UDY

(a) SCOPE:

'1'3~ilti011 is a broad and dynamic concept. I'rcvious budgets i n Nigeria (federal

and statc) reveal that hardly does any year pass wi~liout a~iicndnients in policies

and administration. The review of tax allowances in thc 1992 Federal budget is a

case in point.

I Iowever, this study is aimcd at the asscssmcnt ol'thc possiblc impact oftaxes on the living standards of govcrnmcnt workers in Nigeria with junior civil servaqs in Umuahia south local govcrnlnent is the sample location, the researcher considered i t very tedious to research on every workcr in IJmuahia south local government. 'Therefore, some junior civil servants were selected ti.0111 the establishment. The sample size is believed to be significantly enough to prcscnt a representation of the views ol'tlie average government woskcrs, s i ~ ~ c c their sulitry slructurc is the same.

'The work considered taxation in gencral and avoids unnecessary details as the individual types, methods .of assessment and collcction, allowance, etc. these, however can be touched upon where necessary.

(b) I ,IMI'I'ATIONS; (i) Ihancial 1,imitations: In:~clccluatc fund, due to the

rcccnt upsurgc: i n prices 01' goods in the market posed

sponsoring my travels and production of the research

work.

(ii) 'I'imc; Time allotted to t l~c 1wmc1i work is too short,

thereby limi~ing my niove~iicnt to other areas that

rcquire my investigation into thc systeni of taxation of

workers.

(iii) Accessibility limitations; Incomplete records found in

some files, made ii impossible li>r me to obtain

accurate data. Also due to the lack of openness found

in some 01' thc junior workers and the proper

undcsstanding of' rhc nccd ol' the stildy and

intcspretatiol~ as wcll as proper Iilling 01' thc

questionnaire presented a problem.

(iv) Acadcmic I ,imitation; l 'hc researcher combined

academic Icctirsc with thc rcscarch work. tlicscby

affected my movements to IJmuahia south local

govttrn~ncnt and other Libsans obtain information. ,

TWO RESEAKCH PROCEDURE

2.1 LITERATURE REVIEW

Acwrcling to Di;~mond (1975:38), there arc thrcc simple cli~cstions which arc

always asked when discussing any transaction involving money - who pays who

rcccivcs'? I low much: This, thus, calls li)r ~ c r i o i ~ ~ co~~sidcr;~tion. 13ut bccausc of thc

Sact that the topic ilntlcr cliscussion as i t relates to public finance has to do with the

qi~cstion " \vho pays" - wc shall li,cus O L I S attention o n that.

'I'he short answer to the cluestion, according to Diamond, is that everybody "does"

'I'llc moncy fill. public expenditure comes in the main taxes, including rates, and

liom direct contributions, including chargcs. Ilirect taxes, like income tax, #

corporate tax, capital gains tux; inclircct taxes. like valuc acldcd tax (or sales tax)

petsol tax, duty on spirits, beer and wine, and so on, rates raised by local

governments on houses and commercial propcrtics, "survival Icvics" and health

servict: charges - these are dl important examples of' the way in which the money

for public cxpendirure is collected lion1 the public as a whole according to a great

variety of critcria . At one estremc. the critesion is simple thc use of thc service

provided; at the other, the ability to pay. The total ol'onr public expcnditi~re and

thc goods wc choose ant1 ploviclc intlividually is in effect our standard of living

which is very important to each ol'us.

Taxation as a concept is not too rcccnt to tlw African society . Bef'ore the

introduction of the western Vcrsion 01' taxation, the practice had already existed in

most traditional Aliican socictics. lii~lcss w11o were l i ~ r t u ~ ~ a t c cnough to 11avc gold

deposits i n their territories sought cithcr to control production (Mining) or tax the

citizens on their respective gold mincs. The cxtent of the wealth which a

privileged minority acquired through this means is illustrated by the famous

pilgrimage ot' Mansa Musa, the ri11er 01' the Ancient Mali empire who made a

pilgrimage to Mecca in 1304, ( I lopkins, 1 OX2:47)

I3elim we can fully trace the history 01' tnxcs in Nigeria, it is good to tracc the

present system ol' taxation. The prcsent systcln 01' tasation w s imported from

Europe. As the L.:uropeans moved into Wcst Ali-ican (and Al'rican in general) they

moved in with the thcir general ways ol' life- politics, cconomic practices, culture,

religion, ctc.

According to tlic Ihcyclopcdin I3ritannic;1 Vol. 17, 1'. 1077. taxes played a

relatively minor role in the rrncicnt \vorld. Grccce and Komc had a way of levying

taxes on consumption tarrifs - taxes on imported goocls- were ofteh of

considerably more important than internal excrciscs so far as the production of

revenue went. War periods gave opportunities li)r taxcs on net worth to raise

additional Iunds. Greece had a dil'li.rent tax obligntioli li)r hcr frcc citizens fi-om

that of slaves. Also i n Ronx, the tax laws distinguished nationals from resideqts

ol'conqucrcd nations.

I:rom the "tributum" form oftaxation (in liome) paid by citizens and later levied

on head h x , Julius Ceasar later in~poscd 1% general sales tax (Centesina veruln

Venalium). Rome also had inheritance tax of live percent, later ten percent;

I~owe\~er close relntives ol' thc deceased were exempted. I;or a long time (within

this period) tax collection bias lcl't to middle men or " t ~ i x ~ ' ~ I S I I I ~ ~ S " who did i t for a

share ol' 1111' I ) ~ O C C C C I S , llvcn 1;gypt ani1 I'crsia hi~d land tases rcgardlcss 01' thc

return on h e land.

However, most of these ancient taxes later gave way (in the middle ages) to a

variety oS"Ob1igatory Services" and a system ol'"aids" (mostly gilis). During the

later part of the n~icldle ages, some German and Italian cities introduces several

direct taxcs. The use of land taxcs and tuxcs on houscs gcncrrtlly also spread.

Key & King (I 986:20) in their book l 'hc Ihitish tax system traced the introduction

of income tax in Britain to the Napoleonic war period, but that it only became a

permanent feature of the tax system in 1943. 'I'hey stated that:

..................... " as part of peel's economic rcli)rms, i t was introduced to replace

in large part the revenue previously derived liom tarill:.; and 1Lom various archaic

taxes.

According to Neumar1.r ( 1 974: 1077). taxcs have been a major subject 01' political

controversy througliout history, even bclbrc they constit~r~ccl a si~cablc share of the

national income. A famous instance is the great rebellion of the American

colonies against British tax system. 'I'hey relused the payment of taxcs imposed on

them by a parliament in which they wcrc not represented, and this caused a

continued series of revolts against taxation in many quarter.

Britain, therefore, on gaining political control over Nigeria introduced her own

system of taxes. 'I'his was made possiblc (in the North at least) by the fact the' b

Northern peoplc wcrc alrcacly conclitionccl li)r rhal . systcm 01' clircct taxation.

Ezejcluc (1978: 30) staled t l l d lhc liml 0 1 ' lasation alrcacly cxisting in Northern

Nigeria was " so varied, perplexing and con1plcs that in thc 1880.5 the problem as

seen by the Royal Niger Conlpany was not how to introduce new tax forms but

how to simplib the existing l'orms. With the amalgamation ot' the North and

South (1914) Lugard struggled to introduce the same form of direct tax that has

been a success in the Norlh to the to the South. Dul lhis mct a lot of resistant. This

is because, the Easterners, until then, had no form ol'ccntralizcd administration and

thus no recognized central authority through which the laws can be enforced.

The Rrilish recognized inability to st~ccesslillly collcct these tams without the aid

o f the traditional rulers as a result, thcy did not tiurnper with thc imposition and

collection of the taxes unlike Emirs in the North. 'l'hey only use them to ensure

cfliciency in the collection of their own taxes. And since the revenue of these

emirs wcrc not threatened thcy co-operated with the 13ritish Authority.

In 1906 - Nativc Revenue Proclamation Acts rcplaced that of' 1904 that had been

existing before then. This was aimed of unilj/ing all existing forms of taxation

and also reinforce the powers of the emirs. In 1917, the Native Revenue

Ordinance was promulgated to regulate the imposition and collection of taxes iiom

the natives. 'I'liis, thus, lookcd as if' there exist some relined principles of direct

taxation, t h ro~~gh there were still some practical problems in interpretation of the

principles.

'I'he Native Revenue ordinance of 1917 was grudging accepted in the Western

Nigeria in 191 8. The introduction however, proved very difficult in the Eastern

Region as the idea was vchcmently opposed.

Iliscussions wcrc hcld in 1924 and 1025 to lincl ways ol'modilying the ordinancc

in its application in "Igbo" - East. The only alternative then was to introduce the

position of' warrant chiefs in Igboland to do the work oi'nativc rulers. 'I'his proved

a costly mistake as i t lad to the Aba women's riot 01' 1929. There were also similar

outbursts in Owerri and C'alnbar, Ezejeluc. A.C. (1'.36), but the Aba riot took such + a dimension that Icd to probing the cause of the riot.

P

1,atcr in 1037, was proniulgi~tcd the Native 1)ircct 'Isaxation (C'olony ordinance)

and the Non-Native lncomc 'l'ax (I'rotectorate) ordinancc. I'hcsc were

discriminatory between natives and non-natives. In 1940. these were replaced by

the Direct 'l'axatiun ordinancc, and in 1043 cumc t l ~ Incomc I'ax osdinuncc. 'I'hc

1940 ordinance empowered native authorities to tax Al'ricans in their areas of'

Jurisdiction. With the 1943 Income Tax ordinance bcing Sor the non-A fricans and

Companies, both werc regarded as the foundation of'modcrn taxation.

However, because of the known lapses in these ordinances, such as variation in

basis of con~putation, and in rates, discrimination between native and non-native,

unscientific method and lack of uniformity, there was an outcry , But no

memorable changes occurred bctween 1943 and 1956. With the introduction of

the 1:ederal Systen~ of govcrnmcnt in thc carly 1950's taxation of non-Africans

was retained as a Federal Matter. Even the Adaptation 01' I,aws Ordinance in

1954 did not change things.

As for the 1940 Direct Taxation ordinance, i t was made a regional affair used in

the Eastern, Western and Northern regions. The Eastcrn Region's Finance Law

(No. I ) came up in 1056 to rcplacc tlic IIircct 'l'asation ordini~ncc . In 1957, the

Western Region fi)llowccl suit with thcir linancc I,aw (No. 16) These were thus

seen as the first l'osmal indigenous tax laws to be cnactccl. Accorcling to Prof.

L!zebjclue ( l078:30)

I t is curious that thc I

2.1.2 NATURE AND PURPOSE OF TAXATION

In modern economics taxes arc the 111ost important source of government income.

l'hcy arc co~npulsory levics that arc rcguliirly imposed and as :I rue not designated

l i~ r a special purpose; they ;IIX rcg;~rclccl as a contribution to the gcncral revenue

pool l-ro~n which most government expcncliturcs arc lini~ncccl, Nciumnrk ( 1 974:

1076), 'rhey provide the funds to tinance expenditures, but they also serve as tools

in their own right for a wide rangc of purposes including altering the distribution

ol'lncomc Lipsey (.lC)85: 478)

I'axation uas meant fbr dcl'cncc against external uttncli, the ~ldministration and

maintenance of' Law and Order but later i t covers the provision of amenities in the

society including roads, hospitals. schools, ctc. 1 ' 0 provide lbr thcse necessary b

services thc government must get money and taxation is about the best niethod for

governments to raise revenue (Nyemike, A. 1085:36).

Also, the existence (or lack ot) tax liability to the trcasury is utterly irrelevant to

dircct subsidy program dcvclopcd in other dcpartmcnts surrcy S.S. & McDaniel

(1985) whcrc i t exits.

At one time, governments imposed taxcs to raise revenue only to olTsct the cost

incurred in administrative process, the maintcnancc of law and order in the society

us well as defkncc against external aggrcssion. I la~lson, J (lC)86:361) it can, thus,

be seen as contributions f'or the provision 01' acsviccs that can be most efficiently

and cffectivcly provided by the state than by individual firms operating in the

society, National debt interests must also be paid and this is done primarily with

revenue generated through such sources as taxation.

'Tax legislation customary distinguishes between the tax object may consist of

goods, transactions (for exan~ple sales, purchases of' real estate, imports and so on)

or sums of mo

the physical LII

Current ideas suggest that governments should nut use the tux instru~nent as a

rcvcnuc raising dcvicc exclusively 'I'axes arc considered to have three li~nctions.

( 1 ) I'isciil or budgetary, to covcr --govcnment expcnditurcs in-so --far as they

itre not financial from othcr sources (lkcs. p ro l i~s lion) p h l i c enterprises,

t l i~~issuc of' pitblic dcbt the creation of money). 'I'hc government usc~ally

l\aJ to present interim budgets during crises moments either by taxation

increase or rc~li~ced ~xpcnditi~rc.

(2) 1:conomic to promote such general goals as full emplo!lments moneta~y

stability, a satisfactory rate ol'ccononlic growth within the framcwo~k of a

market economy and (3) Sociaj or rcclistributivc, to lesscn incclualitics i n

thc distribittion of income and wealth to thc extent they are considered

cxccssive aml u~!just. 'I'his brings the growth ol' progrcssivc taxation

(Ncunlark, 1974: 1077) 1;ncyclopedia Britannica Vol. 30 thus suggests that

since thcse three functions arc interrclatcd there are likely to be conflicts

irn~ong them. It, thcreforc, states that ----------- the Icvcl of or composition

or (both) ol' tuxes ccsrrsicicred ncccssary I'or budgetary reasons niay tend to

11o111 back t11c rate nS economic growth on thc othcr --hand highly

rcclistril~tivc taxcs wily also conllic~s wit11 clcsi~vil goiil of' ccono~nic

growth. (';in this also not s~~ggest tI1;1( 11 ~.cl;~tivc ly high imd S ~ C ~ I ~ Y rate of'

cconornic gl-owth ciln bring with i t higher tax rcvcnucs wliicli ;nay cnablc

thc government to pLmc othcr aims'.' . ,

She issue ol' wcalth distribution as 11 purposc ol' tasa t io~~ iillractcd Ulna 1.K

( 1990: 10) to write; By the inlpositio~l of taxes, govern~ncnt ~mlizes i1 good chunk of money for

redistribution within the "eco~~omic and social matrices". But the problem now i s that governments

currcnl tax policics are citller nluchiavellian in sotilc scctors or tolally nurtured in others.

'l'l~is is rnorc-so with thc applicaliun of equity in the distribution of wealth and

income. 'I'his, lhics, brings out the we1 thrc eco110111ists I'iircto optionali ~y concept

emphasizing that a philosophy ol' S~iilmcss imcl justice in a nations tax system will

Iwld only if'111c alloca~ion ofresourccs were l'air to all iund sundry.

Certain consumption goods attract taxcs on them as disinccntive to their continued

consumption. Such goods as alcoholic. bcvcragcs, and cigarette arc usually on

grounds ol' national health, though marc o h than not this justification has been

put forward to collceal a purely fiscal desire lor more revenue. The functions,

therefore, ol'taxation is greater than the purpose of'such.

2: 1 :3 CLASSES OF TAXES:

'I'he classification of taxcs in public linance had been based on who pays, who

bear, the ultimate burdens thereof, the extent of shi 11, etc. The two important

classification ot'taxes are between: 1

(a) I'rogressive and regressive taxcs, and

(b) Direct and indirect taxus. I:or thc purposc of this work. a brief

explanation 01' the l i m ~ c r will bc nmlc. while 11 niorc comprel~cnsivc

study will be i~ndcrtakcn ol'thc later.

2: 1 :4 PIIOCRESSIVE AND IIEGIIESSIVE TAXES

Thc concept of progrcssivc tax system is accn by lianson (1986: 3 15) as "a system

whcre the rate ol' taxation incrcascs as income incrcuscs".

tle stated that where great inequality 01' income exists, a progressive system of'

taxation is rcgardcd as bcing more equitable than a proportional system. I t can

thus be seen that the system of progrcssivity in taxation is made to ensure that tax

burdens are felt at the same rate by all and sundry.

William Vickcly (1987: 1021) also contended that characterizing taxes as

progressives or rcgressivc according to the relative degree to which the in~position r

of burdens on the w and on thc poor seen at iirst blush a fairly straight forward

matter. I4e maintained that such taxes are popularly as progressive, if only because

(hey are li)rmally progressive, if in terms by their rate schedules while flat rate

payroll taxes and sales taxcs are generally rcgartlcd as progressive.

"I lowevcr, many taxcs that urc ordinarily consiclcrcd regrcssivc can be modified to reduce tlic dcgrcc uf regressive ncss or even render (hc'm nlodcratcly progressive" .

I luwever, thc last assertion may not al\vays be (rut ilS 11i0st regrc~~ive taxes tend to

t)c found in thc class uf indirect taxcs, thrbury, C.D. (1976: 199) which are

~iormally duties imposed on products wliich (elid (o be thc same all round. Except

through a system uf price discrimination (which may not actually be all-round

possible) the rcgressivity ol'this typo ol'tax cannot be very easily reversed.

. - 1 he regressive tax froni the abovc can thcn be easily sccn as (he exact opposite of prog~~ctssivc tax. I lowevcr, Prof. Ncmmcr E.E. (1079:404), cxplain " a tax against

t income or property where thc rate of taxation diminishes with increases in the base

((Income on Property)" 'I'hc r~grcssivc tax systcni INI IS CIWS seem to hi~ve nay

dircctcd applicalion except i n such cases as '-straight line" rates and levies (such as

tllc Ikc Nwiwhukwu administration introduced survivul levy in thcn Imo State)

and in tax on goods which later rcllccts on the price of such products. The

payment is then cquul to all (not minding the various income levels) and this is

regressive. 'I'hoi~gh (his division is somewhat acccprcd, 1,ipscy (1985:481) had i t

divided into progressive and proportional taxes. I'roportioniil taxcs is seen by him

as the tax (hat is based on the same pcrccntagc ol' incxme. 111 other words, tithe

could be used as a very example of proportional tax. I t is not (he best system of

taxation. Isor a tax systeni then to bc equitable. i t should be progressive in order to

have the same eSSec( on all the payers. Nigeria tax system is however progressive,

as that of some countries - a1 lus t in principlc.

DIRECT AND INDIRECT TAXATION

'I'his is seen us the most common classilicalion which has as i t examples the

incomc tax (lor direct) and sdcs tax (liw indirect). I t is sccn by sumc people as

clcpcnding on whcther persons or things i~rc (oxcd and also as dcpcncting on how i t

is levied whcther directly on persons or not (I.ipscy. I

'I'hc direct tax then is seen as being Icvicd directly o n persons and very with the

status of' the tax payers. I

'I'hcrc is still much disagreement among economists as to thc criterion for

distinction betwccn the two; it is usually said that a direct tax is one that cannot be

shified by the tax payer to someone else. Sonic theorists have attempted to show

that in principle, any tax may be sliiliecl, in the whole or in part, dcpending upon

the conditions .under which the tax is levied. Nevcrthelcss, i t is conceded that some

taxes are more likely to be shifted than others (Ncurniwk, E, 1974: 1076).

In his own submission, J.S. Mill (1979: 14) maintqincd that direct taxes can also be

levied on cxpenditure as well as income. Also, indirect taxes can also be levied

on income as well as expenditure. A tax. such as an employer's social iisurance

contributed, paid by the employer, but based on the conditions of employment,

would presumably have to be treated as indirect.

'I'liis distinction as presented by Mills is logical enough, but lacks a nii~ch grcater

knowledge than we actually possess about various tuxcs, and as such is extremely

hard to apply.

'I'oday, the distinction between direct and indirect taxes is most commonly drawn

by rclkrence to the basis of' assessment rather than the point of' assessment. Those

taxes which are based on the receipt of income are termed direct, whcrcas those

levied on cxpenditure arc tcrn~cd indirect. Income tax, profit tax and capital gains

tax are direct. Customs duties, excise taxes, value added taxes and stamp duties

(based on capital cxpenditure) are indircct (J.S. Mills, 970: 1 4).

A little classification of taxes having as our model the indirect and direct tax

method now is desirable to be able to analyse some of the individual types of

taxes.

scrviccs and diminishes the buying powcs 01' its cilizcns. 11' thc rcvcni~c is r i l i ~ ~ d by

direct tax, the citizen in leli with lcss moncy, il'thc rcvcnuc is r a i d by indirect r

tax, he is left with the some amount of' money but has to pay higher prices for

some of his goods, (Morgan, E.V. 1 W3:3OO).

2.1:4:1 DIHECT TAXES

, . I he delinitions of direct taxes is bettcr seen as taxcs on pcrsons aimed at the individuals ability to pay as mcasured by his incomc ol'his nct wealth. Unlike the

indirect, direct taxes allkct the accounts in il diI'I'Crcnt wily; they are levied directly

upon incomc, and so they appear not as a rcdi~ction in thc income 01' private

citizens. +

'l'hc main types ol'clirect tnxcs includes:

(a) INDIVIDUAI, INCOME I'AXLIS: 'l'hesc i re taws levied on the total

personal net income in excess of solnc stipulatccl minimum - N3000- plus

overlay of 15 percent of earned incomes in the case of Nigeria,

(Uabangida, 1. 13, 1992) 'I'hcy arc adjusted to tukc into account the

individual, family status, numbcr and age of' children , financial burdens

resulting form illness (Neurnarks, I.', 1974: 1077), dcpendence, and so on,

for which additional allowances are approved (Sotinwa, G.A, 1988:93-

107). Personal income tax fall sometimes separately, on each number of the

household (Lipsey, KG, 1985: 478).

(b) 1'AXI-X ON NET WOli'l'11: 'I'hcsc arc Icvicct on the total net worth of a

person that is the value 01' his asscts minus his liabilities. As with the

incomc taxes, the personal circumstances of' the individual are taken into

considcration. V c ~ y often thcrc is double taxation whcn a net worth tax

falls upon both corporations and individuals.

Net worth taxation is a branch of taxcs on wcrzlth According to Alan J. Auerback,

(lC)X7:607), many countrics, ci~rrently, supplcn~cnt thcir rcvcnuc collections with

l)liA71 l l DU1'Ib;S: Taxes at dcatli take two lbr~iis: the inherit:lncc tax, wlwc

the tas object i n the bequest rcccivcd by the person il~hcriting; and tlie cstatc tax,

\\Iicsc thc object is the total leli by thc deceased. I t l h ~ r i t i l ~ i ~ ~ t;lxes i~suaIIy allow

lbr the personal circutnstanccs of' the tax payer, including his net w~)stli before

scceiving the bcclilest and his rchtion to the donor (Neumark, I:, 1974:1077)

Estate taxes arc gcncrally gratlua~cd according lo the s i ~ c of the estate, although in

some countries they nuke allowances Ibr the number 01' children involved. I t is

typically quite complicatccl and not particularly successful either of revenue # collection or wed t h reclistsibution. 11 hi~s bccn 10 some pcoplc as "Volun~ary '['ax"

bccai~sc,, thesc are sonic many tax- planning devices available to rcdnce or

eliminate tht: tux burden iniposcd on tsansl'er ol' wcalth (Aucrback, A.J. 1 O87:607)

111 order to prevent thesc dcatli duties, thcscl'orc Sorm being circumvented, any

rational and efficient system has to include a t u s on gills bclwccn living persons,

purtic~tlarly Iliosc i n anticipation ~ l ' death (Ncumurk I:., 1074: 1077). 'I'liese are

asscsscd only once and this diffcrcntiatcs i t liom propcsty taxes Auerback, A.J.

1087:607

(4) Cil:NI ,I

C O ~ S L I I I I C ~ 01' the goods, who presumably has the ability to pay. I t is sometimes

hnuwn as "outlay rnxcs". It is slrgiled that on grountls ol'cquity, indirect taxes tend

to bc regressive and should Ix replaced by higher incolnc taxcs which can be nladc

jxogressivc in character (1 ~;IIISC)II, J . L.. I O8O:? 1 1-2 17). Owing to the large revenue

ruluirccl by ~nodcrn states, incomc taxes would have to be very high if indirect

tmxs wcrc to be dispensed with, and high income taxcs havc the drawback that

tl~cy act as a disincentive and so might check the expansion of the real national

inconlu and cconi)mic growth.

I t is, thus, noteworthy that the anlount of' tas paid by a person (in respect to

indirect lases) is 1101 rclatcd to his income but to the quantities of goods and

services si~bjcct to swh taxcs which hc chooses to buy ( I larbury, C. D., 1976: 199).

I t Inily bc possible (in theory). to avoid paying such tases, only by refraining from

buying taxed goods. But as the range and number of' goods covered by

experlditurc taxes widen this is not a scriously practicable proposition. I t is in

general more regressive than progressive.

(a) CONSUMPTION I'AXES/CUS'I'OMS I)U'I'II

Ihcsc arc levicd on raw materials intcrmcdi:~tc goocls (e;g mineral oil,

alcohol) machines or labour; in thc last case. tlic tax base may be the

nu~iibcr 01' pcrsms cmp!oycci as In rhc l3ritisli "l\\cctivc 1;mploytncnt Tax

os the c~nployer's payroll, as i n thc (icrman "(~owcrbcstcuer".

'I'AXICS O N LEGAL 'I'I

I lowcver, some taxes cannot be said. with certuinly, tu bc either- disect or indirect.

l'his is because they may (under certain assun~ption) be shilied by the tax payer to

someone elsc. Such taxcs as corporation tax is scen as being partially or wholly

shilied. altlmlgh the scsults of' some cnipisical studies are not altogether

convi~~cing on this point. Others that arc ~ I I ~ I ~ ~ ~ L I O L I S include the so callcd real

taxcs on clcmcnts of income or nct-worth, including real estate business

c ~ ~ t c r p s i s ~ ' ~ , ;11it1 earnings on capitul investment.

'I'hcrc arc still other cl~~ssilici~tio~l. Sonic taxes arc specilic ie taxes levied on the

basis ol' weight, length volunic and other spccilic characteristics ol' the tax object.

Other taxcs arc ad-volorem-levied on tlic value 01' thc g o d s as measured by the

price. An A D VOI,ORL

mid-twentieth century revolulion 3.4.1 SM1'1'1 I'S CANNONS: 'l'liough the abovc

concepts are true, i t is good to highlight in bricl' an aspect 01' these cannons as

enunciated by Adam Smith ( lWB:3O 1-362)

(i) EQUI'I'Y: The subjects of' every state, according to h in~ , ought to contribute towards the support ol'the government, as nearly as possible in proportion to the revenuc which they rcspcctively elljoy under the protection of the statc. Ile compared the cxpcnse 01' the state to individuals with that of nianagenient to the joint tenants of an estate who are all obliged to contribute i n proportion to their respective interest's in the estate. (iii) CEKI'AINI'Y: 'I'lie tax which each individuals is to pay must not be arbitrary but certain. The time of payment, the manner of payment, thc quality to be paid, ought all to be clear and plain to the contributor and to every other person. Where it is otherwise. every person sihjcct to the tax is not more or less in the power of the 'I'as administrator who can either aggravate the tax upon any conrribution or cxcrt by the terror ol'sucli aggravate, some pr~sent or pre-requisite to hin~scll'.

This is to avoid insolent and corruption in the ol'uncertainty

country, they require intcsprerations which will take care of the environmental and

socit:~al ciscunst~nccs of ~ h c particulw economy. 'I'his will include interpretations

that are related to the "Structural, bcllavioural and cdtural idiosyncrasies of the

~ x o p l c conccrnccl"

Ile cstendccl the meaning to includc the pcoplc's bclicl's convictions or a body 01' te~rets acceptable to them.

2.1 ; 5 ; 1 CURRENT TAX PHINCII'LES

I t nlust be noted that present criteria ol' i t good tax system are wide-ranging and

complex. such criteria as revcnuc psoductivity considcrations ol' social justice,

cco~iomic goals and the Smithian criteria ol'easc of administration and compliance #

are listed out in the Ihcyclopcclici Rritannica, liegarding the category of revenue

procluc:tivi ty, two rquiremcnts should b Iillli llcd by a good tax system.

( i ) PLIINCIP1.I~ 01: A1)IQIJAC'Y: 'l'licsc. should be a guarantee of

aclcquatc in revenue by a tax s y s t m lo covc~:, the government

eupenditures ar all levels. A growth in public cxpcnditure (which is

customary) should be matched by corresponding growth in revenue

through taxes - some govcs~~mcnts may legitimately bc more concerned

with the adequacy 01' tlicir revcr~ues !ban with considcrations on equity or neutrality since revenues can be secured by borrowing or credit

creation within the limits that are set for control of inflation, national

governments do not see the issue 01' revenue adequacy as any problem

I lowever, in developed cco~iomics, i t is expcctcd that this criteria would give Iirst

place to income, sales turnover or net valuc added taxes.

( i i ) I'RINCIP1,E 01: AL)I\I''I'AI~~L,I'IY: A tax system is expected to be so

Ilcxible as to generate additional rcvenuc at short notice (to cover

cmcrgency and unforeseen cxpcnditurcs) wi tliout cl'6'iuY h&%Weoqpon$c+ - 9

disruption. This emergency situation can be caused b'pwg~ , an

,Also the Ilncyclopcclio Ijriiannica Vol. 20.1' 330 explained that the modem

concept ol' Social justicc rcqi~ircs t I i ; ~ t I;ISCS be L I ~ ~ ~ v c ~ s ~ I I , cqi1;11 i111i1 responsive to

the individual's ability to pay. in addition. In modern \velli~ris~n, taxes are

expected to be redistribi~te of income or wealth or both. I t is, thus, necessary to

add ~iu :lbovc in the principles.

( i i i ) PIIINCII'LES 01: UNIVI~IISAI.ITY: All persons i~ble to pay should be

taxed unii'ormly, and that cxcmplion l'rom ilny tax mi~st serve overall

cconomii, social u ~ c l other goals. 'I'his principlcs is not violated by the

basic allowa~lces li-on1 tllc ~ I ~ C O I I I C tax, the ~ L I I . I ) O S ~ of' which is to leave

some minimal level ol' income untoi~chcd,, nor by the exemption of

ncccssitics form a gcncral consun~prion tax. I low difircntiation based

on nationalily, social class, religion, or wee violates the principles

(Neunlark, F, 1974: lO7O) i t . tlii~s, inlplics universality in imposition without discrimination or distinction ~ C ~ \ Y C C I I individi~al similarly

placed (lizcjeluc, A.c. 1078: 5 3 5 )

(iv) PIIINCIPL,I3S 01: I.IC)lJAI,I'I'Y: 'Illis reiluises that persons in the same

or similar position (so far as tax purposes arc concerned) be subject to , .

thc same tax liability. I his principlcs in often clisrcgardeci in practice

both intentionally and i~nintcntionally. I'rol'. Jesse Burkhead

(1 980:3 18) of the Sycrocase University stated [hat this principle has so

f'ar rcccivecl the Iiottcst debate tl1a11 any other i n the field ol' taxation.

According to him, the 10"' Ccnti~ry economics gcllcrally contended tllut

the intcrpretaiion ol'equality derivctl li-om the statc. Since these benefit

were thought to bc proportional to income. i t followed that the

appropriate basis for taxation sI10~1ld be proportionality. 111 the later

par1 of the century with the rise f marginal utility economics i t came to

be argued that tliesc was il diminisl~ing marginal utility or satisfaction

trcrivctl lrom ndtlition,~l i~icrclnc.nt dccrcases. 'I'his juslilicd a

progressice tax systcm.

1 hc att;~in~ncnt 01' all :~ppropriate degrcc ol' progressively is seen in the tax system , . as a scarcl~ liw vcrticnl cqi~ity which is contr~\~crsi;~l. 111~1.c is a greater

controvcrsiul, Thcrc is a greater conccnsus on thc horimn~ul cquity of a tax system. -. I his is seen as an equal treatment ol' equals (Ru~kl~cad, J , 1 8 : 3 1 9 ) . Carl S. Shoup ( 1968) of' Columbia Ilniversity had it is as "almost c q i d treatment of those

dniost tx~urtl circumstanced" 'I'l~c cclunl treatment of cqiials is, thus, partiality

dctcrn~inccl by administrativc: nicthod.

(v) ABtLI'I'Y ' 1 ' 0 PAY PIZINCIIl'I,t:S: 'I'his was seen by I'rof. Lzejelue

A.C. (I978:534) as the most widcly acccpted ol' these standards. I t

rests on the premise of taxing peoplc on cqual and ability to pay b

principle.

I t requircs that thc total tax hurdcn bc distributed tlmong inclividuals according to

their capacity to bcar i t , taking into account all 01' the relevant personal

charactcristic in S L I C ~ a n a y that the relative loss in economic capacity resulting

fro111 the tax in equal. ?'he primary indici~tor is income, complcmcnted by the

subsidiary consideration of llet wealth Ncu~narli, I:, (1974: 1079) while according

to Ezejuluc, A.C. (1078:534) posits that in tlomest~c circunistances to include the

wealth criteriun s o ~ ~ n d s clesirablc not only because wculth producer income but

also it ownership implics some dcgrcc ol' tax capucity cvcn i l ' i t generates no . tangiblc incomc. 111c Nigeria "Pay -As -You I:w-n" (PAY!;) system is a good

cxamplc.

(vi) I'RINCIPIX 01' IZ1~DIS~1'121131l'l'ION: 'I'hcrc is curruntly a con~plete

Voltc-lice from the 10"' Century libcl-al view that the distribution o f

income ought to be left alone And tlli~s is thc gcncral reeling that the

distribution of tax burden shoulcl be a way of reducing the large

disparities of income and net wealth that result limn the functioning of

thc market economy.

( I ) 1 l l N C ' l l l . l 0 : ' O N O l l ' S'I'AI3II,I%A'l'lON: 'I'his objective

wl~ich states that taxes should contribute to economic stabilization is a

product of the key-nesian revolurion and niay be interpreted to nlcan

that taxation should be so ordered as to pron~otc 1'1111 employment, and

il' possible a stable level. A tax systcnl should help in the stablilization

of Icvcls of incomc and cmploylncnt. I t may be automatic. l'his occure

when tllere is a progrcssivc personal incomc tax and a corporation tax #

as signilic;lnr colnponcnts ol'Ihc ;~ggrcg;~tc \ystc~ii.

I ) I'I

Jeremy Benthams (1989:525) on the issue of' social welliire has it that welfare is

improve when the greatest good (is secured) for the greatest number. Implicit in

this assertion the contention that total welfare is sum of the utilities of individual

members of the society.

Llentham's dictum, thus, did not bring out very clearly the concept we have order

discussion but has brought closer to the living standards maximization through the

availability or distribution of goods and i t is however certain that the distribution

of goods and services is not complete until such goocis and serviccs are in the

hands of the linal consunlcr.

, - 1 he cartlinal criterion of diminishing marginal utility is criticized fbr having what b

is s e w by some welfare eccmomists as a scrious llaw. 'I'his tlaw is the assun~ption

of'the identical utility where there is a sys[~"nlatized control over in come. I t is

thcrehre most application to be the govcrnmcnt worl\cr. llis income is very

strictly monitored and his tax is paid at sourccs and on the year ol' assessnwnt

i~nlike the pcrson in the private sector. Such a situation howcvcr, proves very

unl~ealtl~ily to the economic lilk ol' a society. As a result Amadi Ikwegl~egu (1,t

('om.) 1i)rmcr Govcrnn~ent lmo state, (1088) 13i1dgct speech said " We would,

however, continue to sustain thc upwarel tscnd in thc revenue yields even from

other sources through improvement in the collection machincry and our

determination to stamp out malpractices in our tax ndministration generally".

. . lax malpractice is, a serious problcm. I t is mostly predominant in Nigeria and

othcr thing world countries. Yet i t is dil'licult li)r II civil servant to indulge in. If

Ile does, it is 011 il vet low scale of telling lies on his tax limn such as ~nalting

untrue claims of the dependents he has. But hc cannot "clodgc" the payment of tax

completely. But many t71-nis and pri\,atc indivicluals clo. Thanks to the

introduction of'tlic tax clearance ccrtilicate.

7 > I he case of tax evasion is seen by I-Ienry l'oeh (1 985: 13) as 'black econon~y' The

British Inland Revenue clelincd thc blacks econoniic as covcring activities which

2 8

arc concealed liom the re\~nuc-col lecting autlioritics \\ , i t11 tlic specilic intention of

evading tax. Toch however, looked at tax incidence as an act which consist in tlie

exploitation, sonietinies by artilicial arrangements, of tax rcliel'and loop holes in

the tax laws.

Functions 01' money, so that with an equal incomc distsibution all would have tlie

same marginal utility for money. 13ut I see tlic law as u wisc assun~ption for this

work as i t will help bring the government ncarer to the plight of the low income

earners. This is because a consideration ol'tlie citizcns on the utility basis will help

in undesstanding the impact ol'various tax incidences on the people.

'l'he Pareta-optiniality criterion is also ~ o r t h mentioning. 'l'his was called after the

famous Italian economist, Virfredo Pareto (1848 - 1923) I t state that any chnge

that takes makes at least one individual bcttcr off is an improvement in social

wcli'arcs. While any change that makes at leas1 one citizen worsc oll'and as one

better off is a decrease in social welfare.

! lowevcr, tlic criterion experience problcnis in the actual evaluation of such

changes. 'I'his criterion. not-withstanding. is n wisc and acccptable one for

implementation when used in analyzing thc cliangcs in the Nigeria socio-

economic environment. 'I'his could point to dccrcase and sometimes increase in

social wcllasc.

'l'he balance increase when compared with the dccrcuscs sccmcd to be tilted

towards the negative. The impact of taxes on the living standards of government

workers has not been favourable (Koutsoyinnis A, 1989:526)

In the view of Idika Kalu Uma, (1990:lO)

Tax for benefits in kinds has not bccn implcnlcntcd If clone, majority of civil servants will go without income each year. Especially bascd on the current ratable value of property, the highly inflated cost of cars, ok will draw a large chunk on wages.

'I'hus, i t is tlic poor Civil Servant who earns N 10.000 per annum (by 1990) and

below, according to Uma, that sufl'crs the incomc slaslics through government

taxation. 1-Ie also maintained that lor taxes to benelits the income ol'the average

Nigeria Workers, tlicy have to be redi~ccd to tlic barcst minimiini. 'This is because

marginal propensity to consume. (M.l'.('.) is usually high li)r workcrs in the lower

income brackct.

Dennis 0. Odife ( 1 990: 10). thc Managing 1)ircctor ancl Chief Ilxecutive of Centre

Point Merchant 13ank, observes that when thc personal income tax rates in the

country are matched with prevailing inflation rates, most public and corporate

executives suffer a higher ~narginal tax rate than before. I t is thus clear that since

people in such position are not comfortable, the fixed income earning civil servants

cannot bc.

b Odili: rcvcals that to be competitive. a Nigerian earning IJS 15 dollars per annum

abroad would need to earn approximately ovcr -N==100,00 - (by July 1990) in

Nigeria. I-!e said that a mcirgimrl govcrnmcnt tax rate of 55% (now 45%) meant

tliat most of tlic income will bc tnkcn away in tax.

His recomn~endation is that the liigliest marginal tax rate be reduced to between 39% and 45%.

Kcacting to thc currcnt tax reliel's of the 1:cderal government as contained in the

1992 Presidential budget specch, Dr. 1,ekon Edum.. of thc Accounting Department,

University of Lagos said,

Nothing in governnlent policics is cvcr permanent. In a few years, they will go back to the old graclcs and reduce all thc allowances. Even with the present levels, the impact is littlc. My own Salury is too small that I'd rather not pay anything.

I t is thus clear that (because of the impact ol' taxes 01' their incomes) no

government worker cver pays taxes chccrli~lly. ' lhe situation is compound further

by the fact that the average civil scrvant is a consumer and is advcrsely affected

during the distributive stage during which there are increases in prices of goods.

I3.N Buri (1 974: 1080) says: I r is Si~ndamcntal that tlic real; burdcn ol' taxation ~loes

not necessarily rcst upon the person who pays thc tax.

General sales taxcs are paid by retailers bur most ol' the birrclcn is ussun~ccl to rest

upon those who buy the goods that arc rased, In other words, thc tax is shilled.

From the retailer to thc consumer. The impact, thus, is clear. The Civil Servant

suf'fers unfavourably from taxes especially the incidence. This is more so as i t is

clcur that consumption determines the present lcvcl o f sarisfaction of human wants

(ic Societal Welfire), while investment dcrcrmincs the wcll being and health of

economy in the fi~ture (Adeosun, O.A.. 1 O89:6) 'I'ht: Civil Servant thus struggle

with poverty today and faces an unccrtain tomorrow.

From the literatures reviewed so far, thcrc arc evident o f how taxes should be

administered at the local governments, othcr tiers 01' government and other b

organizations, in ordcr not to be burden on the bearer.

Almost, all thc reviewers arc ol' thc same opinion, t h t ti~xcs shoi~ld be on ability to

pay principle and that the burdell ol' ta~i1tio11 S I I O L I I ~ 1101 bc I IC ; IVY on tI1c payer. ?. I his is in line with the topic under discussion. in which IJ~nuahia South 1,ocal tiovcrnmcnt will be used as a case stutly. I ~ l i l l cxiuninc how taxcs should be

administered to meet the opinion of vnriou:, litcraturc rcvicwctl.

I'his study is relevant in timcs like this, bccausc ol'taxation has some basic aims

which i t seeks to achieve but the aims have not bccn achieved clue to the ihct that

administrators have failed to Sollow the principles of taxation in their administrator

have failed to follow the principles of taxation in their administration. These

principlcs arc, tax collection must not be a high pcrccntage of the total amount

collected, taxes most not be so high that it leaves people with inadequate income,

the collection of taxes should be arranged at a time that is most convenient for the

tax paying etc. 'fhcsc principles have not be 1i)llowccl propcrly and this is in line

with the views of the reviewers. 'This gap is what this sti~dy seeks to fill and profer

s o l d o n s which if li)llowecl will nlrrkc the Civil Servant snlilc again.

the society including roads, hospitals, schools ctc. '1'0 provide lbr these

ncccssary services the government must get ~iioncy and taxation is about the

best method lbr govcrnmcnts to raise revenue. We map therefore regard taxes

as paymcnt I'or scrviccs rcnctcrcci to us by thc govcrnmcnt (Nyamikc E A ,

1985:36).

(c ) SAVINGS: Moncy saved, especially in a bank or building society, one's

savings are kept in a bank.

(d) 1,IVING STANDARD:- The Ievcl ol'wellhrc c~!joycd by the citizens of a country. (e) 'TAX: This is a conipulsory payment made by individuals and firms in a

society to the governnient (l'eri ba, 1 076:2) (t) INF1,ATION: Whenever tlierr: is disequilibrum between supply and clcniancl an inllationary situation maq arise.

b Inllation may thi~s be dcscribccl as a n incrcasc in volumc ol' moncy and credit

rclative to available goods and scrviccs resulting in a substantial and conlinuing

rise in thc gencral pricc Icvcl. Inllaticm occurs wlicn the volunie ol'nioney in - circulation is fils greater than the aviiililblc goods and scrviccs which the moncy

can buy so that prices becomes ~ini~si~ally high. F

In other to have inflation, the following must exist:- (i) An increase i n the volume

ol'money and credit

(ii) 'l'his increase should exceed available goods and services

(iii) l'his should lead to a sitbstantial pricc Icvcl; goods to meet the demands of the

people.

The focus of this sti~cly is Umuahia South 1,ocal Ciovcrnmcnt Area of Abia State. ,-

I he Local Government is made up of Six Si~nctional departments.

I:or the purpose of this study. the researcher i~seci simple random sampling

technique to select five (5) departments as sample Arcas. Since the researcher

focused attcntion on the impact ol' taxes and taxation on the living standard of

2.2 HYPO'I'HESIS A hypothesis, according to Osuala (1982: 44) is a conjectural statement of the

relationship between two or more variables. I t is the power beacon that lights the

path for the researcher. A related delinition has bccn ollixcd by Nwana (1981:37).

According to him a hypothesis is an intelligent gucss or hi1nc11 which is yet to be

subjected to veriiication.

In view of the enormous importance of hypothesis in any research endeavour, the

Sollowing con.jectura1 statements arc put Sorward l'or verification in the course of

this investigation. The Inability ol' the I'ollowing statcmcnts would be tested and

their correctness assessed in thc course ol'this rcscarch.

, . I he income of the average government workcr i n the local government

system is adversely al'fccted by high taxation. b

'The burden of taxation has hindcrcd thc government workers form making

morc savings to improvc thcir living stn~~ilurils.

Tixes play a part in reducing the living standards ol' governnient workers

through combined clkcts of'inllation and increasing tax burden. P

OI'ERATIONALIZATION OF KEY CONCEPTS

For the purpose ol'this study. thc 1i)llowing dclinitions shall hold l'or these words;

(a) INCIOME: Money rcceivcd during a givcn pcriod (as salary, receipts from

trrtdc, inlcresl from investments. ctc.)

( h ) 'I'AXATION: Taxation is the money raised by thc government in order to

provide the services and basic needs which the citizens of a country require

from the state. Taxation had existed from t h e immemorial and the history

ol'taxation shows that i t had been legalized by the people themselves. In

nwdern times governments collect all forms oS taxation, the consent of the

people is always implicit and no one can rcli~sc to pay his tax il'caught in

the net.

Taxation was meant for defence against external attack, the administration and

maintenance of law and order but later i t covered thc provision of amenities in

government workers, the researcher will i~sc judgmental technique in selecting at

least li l iy staff liom the Sampling Lkpartmcnts to be the I'opulation of study. The

researcher will now use simple random Sampling technique to select ten (10)

Stafl' from each of thc Population ol'study to be her ling unit. This means, in all fifty staff will represent the Sampling unit.

'rhe instruments used in gathering data !'or this research work include:- Firstly

personal observations . Secondly, sonic rclcvant documents such as official

documents, regulatory1 official materials, books eic were used. Thirdly, the

researcher used written questionnaires which was vicwcd to be necessary for the

test of the three hypothesis as stated in chapter two. The questionnaire which was

the instrument used as a checklist was divided into two sections. b

Section A and R which was strictly structured that only the staff of Umuahia South

Lmal Government can give the relevant information's it contained.

'I'he questionnaire contained 16 questions to enable the rescarchcr tcsl t11c proposed

hypothesis. l'herc are answers provided li)r cuch clucstion which the rcspondcnts

are required to choose from. Fifty copies of questionnaire were distributed to the

live departn~ents which was collected at the spot.

The responses collected from the respondents, were classified according to the

leading questions. The data collected were ranked and converted to percentages to

make the interpretations collected from documents and observations made by the

researcher were used in analyzing and interpreting the data.

A thcorctical liamewosk, Dye { 1 092:36-37) wri tcs, is a sin~pli fied representation

of' some aspects of the real world. it helps among othcr things, in discovery

hitl~crto unknown and un-obscrvccl phcnomcna, simplifying and clarifying

conceptualization of public policyldccision making and the isolation of important

f x t s l'rom the maze and medley of un-ordered and disjointed data, Osuala,

{ 1985: 15). As tlie rcsul t ol' the ovcs-bcasing importance 01' thcosctical 1i.anie work

in research activity 01' this nature, we sIia11 in this work, eniploy the systems

analysis theory propounded by David Easton as our franicwork of analysis.

'This theory is based on certain assumptions that; liltc the biological organic

system, thcre is also a social system which is madc up of other units or sub-

systems that are related. These units or sub-systcms function as a role player in co-

operation with one another to maintain a balance in the whole system in the

attainment of specilic goals. And that dysfunction in one u n i t ol'the system upsets

the general system (David Easton 1965)

A system is conccived as an organized purposefid whole composed of structurally

and functionally idcntiliablc boundaries l'soni tlic supra- systcm (environmegt) in

which it is embedded. In the words of David t'aston above one can see that a

'system' is a whole which cannot bc taken witllout tlic loss of' its essential

cl~aracteristics.

A 'Systcm' has some objectives which i t scclts to achicvc and with which i t cannot

exit, therc is hierarchy 01' inter-depcndcnt units among which the systems

objectives are divided l i ~ r inlplcmcntation, each sub-systcm has a defined and

specified role to play in the realization of the total purposes of a system, there is an

input transforniing technology which rcfers to thc process and techniques which

resource inputs extracted from within and outsiclc the system are transformed into

outputs which themselves have implications Ibr system persistence an

eff'cctiveness through feedback mechanism. thcre is an environment meaning the

larger context in which mi~tual transactions tlirougli tlie agency of inputs and

outputs.

The Federal government is a systcni 01' transaclion (bchaviour patterns among

managers of'a hierarchically stri~cturcd lcvcls ol'autliority). l'lic signillcant areas of

interaction includes; the cxccutivc, legislati~rc and judiciary. This is to say that

while the interacting units are partners in a conimon venture, they are not equal

nonetheless.

In this study, we shall use Umuahia South 1,ocal (~ovcrnment as the System. The

various functionnries as the sub-systems. The various policies, decisions and

strategies on t;lxiltio~i will constitute oi~tpi~t . We sl~iill cxiin~inc dillkrcnt variable ,

which includcs the nceds of the workers tased (Ikmands, Support) as input,

conversion process, output and feedback. As i t concerns Taxation in Umuahia

South Idoc'al Government, its effcctivcnuss depends on both the system and the P . sub-system ic the 1,ocal (;ovcrn~iicnt and the li~nctionarics . I he conversion in the

complex of thc activities of' the functionaries - the nianagcnvmt. The managers

make policies and take decisions as concern taxation. The workers are the

implementers of these policies/decisions, that go out as if the management of

Umuahia South L,ocal Government take into considcration the effect their

dependents adversely , workers will bc plcascd to WOA hard. It' workers are taxed

heavily they will tend to develop or non- challant attitude towards hidher work and

productivity will be invariably affected. When the workers are taxed in the way

that i t will not affect their living standard, they will be happy doing their work or

job and the 1,ocd Government as a systcm will survive bccausc ol'thcsc supports

from the government.

THE CONTEXT OF SYSTEMS FUNCTIONS

FEED BACK

SOURCE: Adopted from Lawrence C. Meyer, Comparative Political Inquiry : A Methodological Survey (HOMAN WOOD Ill: The Dorsay Press. 1972) P.130

2..4.2 METHOD OF DATA C O L L l X T l O N

7'0 enhance thorough knowledge ol'thc research procedures it is important to state

sources of data which are i~sually classilicd into two: Primary and Secondary data.

Primary data arc miide up oS inlonnation collcctcd by the sc~carc11~1' himself or his

assistants through field silrveys (Akaweb 1994:33) making use of the appropriate

instrun~eats(s) secondary sources are concerned with data generated li-om already

researcl~edll'itblished doculncnts such as books, journeys, monographs, official

documents, class lecture notes and so on. C'onscqucntly, this study was carried out

with the use of a combination 01' Primary and Seconclary data. The use of

questionnaire, and persona obscrvations was of high instrumental value to this b

researcher. Moreover, content analysis of' date li-om secondary sources such as

books, journeys, oflicial docun~ents. .monographs, newspapers, etc, was applied

where appropriate. The inl'ornintion gathered from secondary sources served as

con~plements to those gathered timi the primary sources.

In rehting data fioni the various classes 01' respondents and documentary sources,

to the obscrvcd facts, percentages, table. ligures and other relevant statistical

methods constituted my analytical tools ,eclectic approach employed i n this study

is clesigncd consciously to lhcilitatc i~nderstanding and ensure that findings are

valid ,reliable and repeatablc.

A Survey research design of'this naturc. no doubt, has its short comings. This

notwithstanding, the method remains popular among social scientists because it is

econoniical and allows for inlerences Sron~. and generalizations to populations that

would be too expensive to study as a whole.

2.4.2.1 SAMPLE POI'ULATION/SAMPLlN(; PIIOCEDUIIE

A sample popidation is a rcpresentative Sraction of the universe. A simple drawn

f'rom thc population of study (Ilnivcrsc) should not be biased so that it does not

produce spacious results. Samples ~naliu thc handing ol'data less tasking and more

manageable. It also reduces cost. Sampling psocedurc, on the other hand refers to

the step --by-stcp technique used in selecting a samplc that would be characteristic

of the univcsse. As L e d y ( 1 974:0.3) righ~ly points out. "thc san~plc should be sc

carel'ully chosen that through i t the rcscarchcr is ablc to scc all the characteristic 01'

the total population i n the same sclationship t h a ~ lie would see were he actually

will inspect the totality of the universe of data" The aim or purpose of Sampling is

to obtain from a population a manageable and yet ~neaningful number of responds

for one" research (Winton, 1974:43)

In conlpliance with Nwana's, (1981:72) admonition that the size of a sample

could be less that 5% ol'the universe of units, this researcher unable to get all the

workers in Umuahia South L,ocal Government, chose 10 s t a r each from the five #

departments making then1 50(lify) in numbcs. I t thcn became expedient that

inlkrence shoiild bc drawn from data collcc~cd liom ;I Salnplc sincc the population

is some how large for the time available. Also conncctcd with the time constraint

are the prohibitive cost 01' infbrmation as well as maintaining the currency of

inSormation by the period ol'complction and data psoccssing.

Qucstionnaires wcse therelore administcrcd among thc workers in such department

as I'ersonnel, Finance, Agriculture, Education and Health.

2.42.2 INSTRUMENTS OF DATA COLLECTION

The instrun~ents use for data gathering in this work arc clucstionnaire, Surveys and

Library research. 'I'he mode ol'dnta was not to wide. 'I'l~is was mainly due to the

nature of' Lhc rcse~~rch.

Questionnaires were specially designed and administcscd to the workers, to find

out their perceptions on the impact of taxes on their living standards . These are of

course 1I1c pcoplc that wear thc shoe anti should know whcre i t pinches.

The questions poscd in the clucstionniiirc were types that arc highly structured to

give the respondents a lin~ited range of' rcsponscs and (to an extent) open-ended

questions fix out of-the- limitation range answers. 'l'his combination stems from

thc fact that while adding the respondents in giving their vicws explicitly, personal

ideas that are out ol'thoughts ol'thc rcscurcher arc not ol' thoughts ol'the researcher

arc not completely thrown cwcrboard.

Llementary statistical technique such as Simplc pcrccnlage is employed in the

analysis of data lbr this research wosk.

Information collected with the questionnaire were presented in tabular form to

enable the researcher deter~nine what the respondents think about what their

conditions are as regards taxation burdens and living standards. b

1.113HAKY

Data collcctcd l'ron~ Secondary sources arc numerous and vast, They are both

public and privatc library materials which includc books, magazines, journals,

newspaper articles, periodicals, documents, published and unpublished works,

encyclopedia and other information limn scholars of repute.

Among the public libraries consulted were the following-

University of' Nigeria Nsukka Library, Abia State University Library. The

researcher considered i t unwise to go Sor li~rthcr since she was able to get enough

n~aterials from the libraries consultctl.

2.4.2.3 PIIE-TEST OR 1'1 LOT STIJIIY

Uclbre the proper ;idministretioli 01' the data cullcction instruments (ic

questionnaire itcms) on thc respondents carlies iclentilied in the sample, a pilot r

study was carsied out to test the reliabilily and validity 01' the instruments. The

questionnaire were administered on 10 respondents out ol'the sample popi~lation to

enable this scscarchcr "gauge the likely scsponse rate and to idcntilji the likely

sources of non-response (Akawch, 1004:4X).

First, the instruments were rcvicwcd by some cxpcrts and collcagucs on the

phrasing, structuring and other technical dctails. The instruments received very

strong Ihvourablc rating by the cxpcrts about 75% on the basis of this high rating,

the items wwe selected and modified, where necessary f'or the questionnaire.

To determine the psychometric properties (ie validity and reliability indices) this

researchers were' ahead to administer the questionnaires on the 10 respondents.

'I'he purpose was to facilitate the identification llaws and ambiguities in the

questions.

I'he pre-test results showed that some of the questions were ambiguous, redundant, #

overloaded or out rightly out ol' place. Also, omissions inconsistencies, high

proportion of undecided, answers were recorded. Ilowever, i t must be noted that 9

out of' the I0 quc,stionnairc administcrcd were returned. In other-words, 96.7% of

the rcspondents were willingly and favoul~hly disposed towards filling the

questionnaires and returning same to this researcher.

I~ollo\ving the results of' the pilot study, this researcher quickly took actions to

remedy the llaws and improved upon the instruments thsougl~ a combination of

steps involving removal of redundant questions changing the order of questions,

simplifying con~plex questions and shortening very long ones, among others.

2.4.3 METHOD OF DATA ANALYSIS

In this research work, elen~entary statistical techniques such as simple percentage

is employed in the analysis of data.

l 'hc cluestionnairc was divided into two broad sections, namely, A, and 13, section

A asked gucstions about respondent's demographic dctails such as age, level of

education, rank ctc. section ll dwelt ~nainly on close cnclccl cli~cstions dcsigncd to

elicit respondents' feelings on the effect ol'taxation o n the living standards of the

government workers.

CIIA137'ER TI 1ItEE - KESLJ

3.1 A brief Historical Government.

Background of Umuahia South Local

Uniuahia local go\wnment arca was among thc local govcsnlncnt created on I "

Oc~ober, 1996 by late head of state, General Sani Abacha. I t was created out of

uniuahia local government area. The local government has boundaries with

Ilniuahia north local government area in the nosth, lsiala Ngwa local government

in the south, lkwano in the east and Obowo local government area of lnio state in

the west central point of Abia Statc, covering an are;) of about 250 square

kilometers with a projected population ol'about I20,42O based on 199 1 provisional ?

census figures.

'I'licrc arc live aulonomous communilics L I I ~ I nuhe- up tlic local govcrnmcnt area,

and thesc arc Ubakala, old Umuahia, Olokoro, Umuopara and Omacgwu and

including Oliiya conimunity.

CULTURE/TOURIST ATTRACTIONS: 'I'hc peoplc ol' Umuahia south local

government arca are predominantly l'armcrs and they p rod~~cc both food and cash

crops. The people respect the Igbo culture and l'eature prominently in festivals like

Ekpe, Newyam, New Yani and Okonko l'estivals.

IXONOMY: C'onlmcrcial and economic activities lakc place in Umuahia south

local govcrnnient area in form of'trading and marketing ol'goods and scrvices,

through the use ol'niarket banking institutions and other available comniercial

houses. 'l'hc major market in the arca include - Api~miri market, Ahia Ukwu

Olokuro, Nkwoha, cattle rnarhct ISkcdi and Al'or lbeji markct. 'l'hcrc is no

conventional banking institution, But thcrc arc few comlnunity baks within thc I

autonomous of the local government area. Umuahia South local government also

provide social scrvices to its people, this evident fiom the number of schools and

health centcrs in the local government arcu. I'rcciscly, others arc 10 health centres,

39 primary schools and 18 post primary schools

3.2 DATA PRESENTATION AN11 ANALYSIS

A l'O'I'AIJ NUMBER 01- 50 identical qucstionnairc: wcre administered to the

sample ol' tlic stnl'l' lium thc live department in I!muahia south Local Governnient

area. 'l'he researchcr collccted thc whole Iiliy copics 01' tlie cluestionnairc, 'file

analyses of tlie data presented below arc bascd on rcsponses ti-on1 48 respondents

duc to the lhct that two out of the filiy clnestionnairc wcrc incorrectly lilled. l'he

figure represents high response rate of' 96Yo wl~ich falls within the range

recommended by most research experts and intellecti~als. ,. . 1 hc demographic cliaractcristics o f thc rcspondcnts arc prcscntcd and summarized below-

TABLE I RESPONDENTS DEMOGRAPHIC/ PERSONAL DA TA 1

AGE (YEARS) 1 QUALIFICA TIONS I GRADE LEVEL i

SOI II

range of' 30 - 4 l (yrs) represented by 20 or 4 1.7'%. 'l'hc least group are thosc from

54 year old and above - 2(4.2%) I4 (29.2%) ol' the population liill within the age range of' 18 -29, Ihosc who are

within the age bracket of 42 -53 constitute (25%) and arc 12 in number out of the

study sample. The exclusion of marital status in the construction of' questionnaire

was deliberate and based on the ground of its irrclevant to the investigation.

I'hc concl~~sion l'rom the above analysis is si~nplc. I'hc rcspondcnts arc fairly

literate and are composed ol'civil servants (.jimior civil servants). Majorities of the

rcspondcnts arc i n their most active years. 'I'his adds to the reliability and

clependabili~y ol' ~ h c respondents. 'I'he data collected in response to the earlier

advance hypothetical statement are analyzed as Ibllows.

HYPOTHESIS I 6

'I'hc income of the averagc government worker in the local government system is

adversely affected by high taxation.

'1'0 test this conjectural statement. this researcher analyzed responses from item

questions number 1,2,9,4 &7.

DISTRIBUTION OF IIESPONDENTS ACCORDING TO INCOME RANGE PER MONTH

0.1

1,000 - 5,000 0,000 - 10,000 1 1,000 - 15,000 16,000 - 20,000 ABOVE 20,000

TOTAL

SOURCE: Computed from the Qucstionnairc

PERCENTAGE

Responses to Q. 1 show that the views of the respondents were sought as shown on

the table above. Those who fall within the income range per month of' N 1 1,000

to N 15.000 to N 15,000 arc 30 in number which is 62.5% of' the population,

l'ollowcd by thosc within N6,000 - N 10.000 who are 18 in number and are 37.5% of thc sample population. 'I'hc rcsponse as to what proportion of their income goes

to taxes arc as shown in the table below.

TABLE 3 Q* 2

Proportion of income that goes to taxes Irate

6 -10% 1 1 - 15% 16 - 20% ABOVE 20%

1 TOTAL 1

f SOURCE: Computed from the questionnaire

Answer to 0 . 2 as analyscd in the rtbovc table show thut thc mrijority ol'the

response pay 1 -5% of the incomc as taxeslrate monthly. thcy are 30 in number

about 62.5% of the samplc population 20.8% pay between 6 - 10% proportion of

their inco~ne as taxes1 rate 12.5% pay 1 1 - 15% proportion of'their income

As taxes /~-atc monthly. It t1~1s mcnns that about 83.3'!4 ol'thc samplc population

taxes/raterranging between 1 - 10% proportion 01' their incomc, while 16.66% pay

above that. the dircct tax t1icscli)sc. is clcarly cnormous on its own not counting thc

indirect tax.

A question on whcthcr they arc happy to pay tax uttractcd thc rcsponscs contained

in the able below.

TABLE 4 ASSESSMENT O N WILLINGNESS OF CIVIL SERVANTS T O PAY

TAXES Q.9

RESPONSE YES

-

NUMBER -- - - . - 32

- PERCENTA - - - GE 66.6

SOURCE: Computed from the Questionnaire

In cinswrr to Q. 9

67% are happy to pay tax since its their statutory obligation and contribution to

provisi& of goods and services, while thc 33% arc not resulting hom high

taxation which invariable bring negative impact on their

living standards and hinders ability to save, hencc the 33% negative response.

'T'licir responses as to other source of income are as shown in the table below:

TABLE 5

REASONS FOR NON- INVESTMICNT IN OTIIER BUSINESS Q.4

-- RZ'PONSES NUMBER -- - A - Government rcstriction Lack of' interest Lack of capital I x k of skill Others - - . . - - - - - - I O'I'AI, 4 X

- - - - - . -

PERCENTAGE 3 1.25 1

56.25 2.08 10.42 .

100

SOURCE: Computed from the qucstionnairc

Answers to Q.4 as analyzed in the above table show that 3 1.25%, or 15

respondents of the sample Population are not involved in other businesses because

01' government restrictions, 27 respondents (56.25%) due to lack of capita1,2.08%

due to lack of skill and the remaining 10.42% said due to other reasons best known

to them. 1 t is however, interesting to notc that 50.25'% that 1i)rmed the n~ajority are

still intcrcsted despite the scstriction but arc prcventcd due to lack 01' adequate

Sund.

TABLE 6 CATEGOIIY T H A T ARE WOIIST HIT BY TAX INCREASE Q.7

13usinessmen Farmers Pensioners Others

PERCEN TA C E 72.9%

I TOTAL 1 48

I I -3, ' I ( ; , < SOURCK: Cornputcd from the qucstionnairc

I , \

l:rom thc table above table 72.9% of. thc rcspoodo~ts ;we of the view ' t k h civil scrvants are thc worst hit by tax increase, 14.6% consider businessmen the worst

hit, 4.2% think of Sarmcrs and 8 .3% consider thc worst hit to be pensioner. The

civil scrvants thus consider themselves the worst hit by tax increases.

IIY POTHESIS 1.1 : 'The burdcn ol'taxation has hindered government workers

fro111 making more savings to improve their living standards. '1'0 test this

hypothesis, this researcher analyzed responses from item questions at numbers " ' " I

15,8,9& 10. , ,

I I

TABLE 7 @ , , ASSESSMENT O N T H E AVERAGE SAVINGS PER MONTH Q.15

- - KESPONS~S -- -- Below N I00 100 - 500 600 - 1,000 1,000 - 1,500 ABOVE '1,500 -- - TOTAL

SOUHCIS: Computed from thc yucstionnairc

- -- NUMBER - 15 24 8 I

-- 4 8

A look at the table above show that majority of the rcspondcnts save between

N1,000 - N5,000 a month ie 50% of the population. Total number of 15

respondents siad that the save below N 1,000 per month forming about 3 1.2% of

-- PERCENTAGE 13.2% 5 0% 16.7% 2.1% - 100

the sample population, 16.7% saves bctwccn N6.000 - N 10,000 per month, while

just 2.1 % saves between N 10.000 - N 15.000 per month. 'I'liis shows that greater

number ie about 39 (81.2%) of the san~plc save little due to tax burden. When ask

what proportion of that savings tbrnm their income, the respondents gave the views

analysed in the table below.

TABLE 8

ASSESSMENT ON THE PROPOII'I'ION OF SAVINGS THAT FORM THEIR INCOME 0 . 1 6

Below 5% I3elow 10% Below 15% Below 20% Above 20% -. TO'I'AI,

SOIJIICE: Computed fi.om the qucstionnairc

'l'hc highest percentage ol' 83.3'%resprcsc1~ti11g the total ol' 40 respondents saves

between 1 to 10% of the nlonthly income. l'his is in line with the assertion that, the b

burden of taxation has I~indescd thc government workers tiom making more

savings to improve thcir living standard. About 17% ol'thc sample respondents

Said they savc bctwccn 15 and 20'% ol'thc incomc.

RESPONSES WHETHER TAX UIJRDEN HAS ANY IIELATION O N SAVINGS 0 . 1 7

YES 3 8 79.2% 10 20.8%

- ~ U I - A I ~ 48 . 100 -

SOURCE: Computed from the questionnaire

The table below shows the answer as indicating that 38 respondent or 79.2% said

that their tax b~rdcn has relation on thcis savings. Only I O or 20.8% out of ~ h c total

number of respondents arc of ~ h c opinion that thcis tax burden has no relation on

their savings. A look at the table below sSho\vs thtis response as what their real

income is like as a result thcis tax burden.

TABLE 10

ASSESSMENT OF CIVIL SERVANT REAL INCOME DUE TO THEIR TAX BURDENS Q.18

RESPONSE 1 NUMBER 1 PERCENTAGE Excellent Good Fair Poor No Kesnonse .

SOURCE: Computed from the questionnaire The table above shows the answers as indicating that 20 respondents or

41.6%consider their real income as fair, 25 or 52.1% consider it poor while 3 or 1

7% gave no answer. It is thus clear that the real income of' civil Servants due to

their tax burdens are not enough for them.

HY POTHESlS 11 1 : Taxes play a part in reducing the living standard of

government workers through combined effects of inflation and increasing tax

burden. To test this hypothesis, this researcher analyzed responses from questions

number 11,12,13 & 14.

TABLE I I

RESPONSES AS TO WHETHER INCOME RISES WITH INFLATION 0.1 1

[ TOTAL 1 48 I 100 _I

RESPON.SES YES

SOURCE: Computed from the questionnaire

Answers to question 11 as shown above reveal that those who said yes their

income rises with inflation is just 2 or 4.16% of the total respondents, while the

largest number said no because they are fixed incon~e earners. The number is 48 or

NUMBER 2

PERCENTAGE 4.16%

95.8% of the total sample population. When asked what they think is the effect of

taxes on the prices of commodities, their response and as shown in table 12 below.

TABLE 12

,RESPONSES ON EFFECT