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TRANSCRIPT
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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
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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
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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
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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.
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EXTERNAL EXAMINER
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T O ALMIGHTY GOD FOR THE LIFE GlVEN T O M E AND '1'0 MY BELOVED HUSBAND MR. EJlKli: F. UCHE 4
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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
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A B S T R A C T
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CHAPTEl
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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
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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.
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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 .
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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.
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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.
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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.
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(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. ,
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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)
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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:
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..................... " 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
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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
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(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
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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
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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
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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
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(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
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'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.
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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
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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
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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
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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
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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
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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
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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
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,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
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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.
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( 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
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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
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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
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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.
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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.
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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
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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
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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
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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.
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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.
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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
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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
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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
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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
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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