This study examined the impact of Tax incentives on economic development in Nigeria that is seen in terms of industrial growth in the nation with evidence from years 2004 to 2014. The population of this study includes 51 respondents drawn from taxpayers, management and members of staff of some selected manufacturing companies in the South-South geo-political zone of Nigeria and Federal Inland Revenue Services. Using probability method, a sample size of 45 respondents were used whilst Thirty (30) companies were studied. The classes of personnel included in the research were administrative managers, accounts managers, internal auditors, and marketing and production staff. Survey method including the use of questionnaire and interview was adopted, whilst correlation method of analysis was adopted. Twenty eight

(28) correctly responded copies of questionnaire out of 30 administered were obtained for the analysis, Spearman’s Rank Correlation Coefficient (rho) statistical tool was used in testing the hypothesis using Statistical Package for Social Sciences software (SPSS). The findings reveal that sufficient tax incentives enhances industrial growth and economy whilst in conclusion, it was recommended among others that, government should waive certain taxes on corporate bodies to help them develop and mature especially at their early stage. Government should not focus on the revenue that may be lost at this point because in the long-run the benefit surpasses what is lost at the initial time.

Keywords: Development, Industrial growth, Manufacturing firms, Nigeria, Tax Incentives

• Background of study
The administration and payment of tax by taxable adults in Nigeria dates back to pre-colonial era. Both the administration and collection of taxes were carried out by the Emirs, Chiefs, and their appointed agents. The system as it was though functional for that time was extremely croaked and arbitrary. It is important to note that tax collection developed from the Northern states of the country and gradually percolated to the Southern states.

On the advent of the British in about 1900, the administration of tax effected through several ordinances (now acts and decrees), which principally entrusted the responsibility of collection of taxes on local authorities. In 1940, the direct taxation ordinances were introduced to Nigeria through the administration and collection of taxes was still shared between the British administration and the local authorities.

When Nigeria became a federation in 1952, the regional governments (Northern, Western, and Eastern regions and the Federal Territory of Lagos) took full responsibility for assessment and collection of taxes in their regions. Thus each of the regions including the federal territory of Lagos made their respective personal income law.

However, income tax Management Act 1961 failed to unify the rates of taxes, relief and allowance through the country. The defects of ITMA 1961 were rectified by(income tax management Uniform Taxation Provision Act,1957).Subsequent amendment took place before the enactment of personal income Tax Decree No.104 of 1993, which was later amended.

Ezejelue and Ihendinihu (2006) defined taxation as the demand made by the government of a country for a compulsory payment of money by the citizens of the country with the objectives of raising revenue to finance government expenditures, satisfy collective wants of the people and regulate economic and social policies.

Black’s dictionary describes a tax as a rateable portion of the produce of the property and labour of the individual citizens taken by the nation in exercise of its sovereign right for the support of government, for the administration of the laws and as a means for continuing in operation, the various legitimate functions of the state.

Taxation is a civil responsibility which its assessment is in accordance with all established cannon; the principle of equity, convenience and productivity. The Nigeria tax system features a wide and mixed range of statutes by which various governments in the country seek to change and collect for public expenditure. Of these, the most widely used was based on income and are personal income tax and company’s income tax. Whilst, in the Oil rich nations, petroleum profit tax is used as well (Ordu, 2015). Taxation is divided into two namely: - Direct and indirect taxes. Direct tax in Nigeria consists of personal income tax and company’s income tax. Indirect taxes are levied against goods and services e.g. stamp duties, entertainment, pool and casino taxes, industrial training funds, custom duties and exercise duties. Assessment and collection of direct taxes is by the State Board of internal Revenue on resident individuals while companies incomes tax is by Federal Board of Inland Revenue on corporate bodies.

In a wider sense, there are three (3) main methods open to most developing countries such as ours in financing economic expenditure namely, tax’s on other currency receipts, loans and grants. Taxation perhaps is the most important of all these because revenue generated by the system determines expenditure. The objectives which taxation might be used to accomplish are mostly social and economic and among others include the following:

• Provision of additional revenue for government.

• Encouragement of saving and regulation of expenditures on luxuries.

• Provision of investment incentives in industries.

• Protection of new industries from foreign completion and

• Adjustment of trade – imbalance through imposition of discriminatory tariffs.

• Provision of free social services e.g. health care, education etc. g .Correction of balance of payment disequilibrium.

Taxation has encouraged some activities in the private sector depending on how favourable the policy is on the company’s return on investment and balance available for private saving only payment to the state Internal Revenue Services.

The Nigeria law of companies and Allies Mather Act of 1990 as amended incorporating all legal provision have made provision for certain tax incentives for corporate bodies and individuals.

Basically, tax incentives are designed to encourage investment in certain preferred sectors of the economy and sometimes they are geared towards attracting in-flow of foreign exchange to compliment domestic suppliers for rapid economic development. Generally, these incentives are in the areas of manufacturing, export, agriculture and solid mineral, VAT, individuals and other areas. These incentives include: Personal allowance, Capital allowance, Investment allowance, Loss relief, Roll over relief, Annual allowance, Pioneer relief, Tax free dividend, Export Processing Zones Relief, Research and development and Tax free holiday.

It is good to note that the incentives are to ease off the burden of tax on tax payers. Tax evasion and avoidance encourage investors, which in turn will enhance economic growth and development for purposes of influencing the structure and character of private investment. As the Nigeria market become more responsive, potential competitors are at an advantage For example, if within the textile industry, a firm that import yarn for weaving is denied a tax holiday which a similar firm that undertake both spinning and weaving is granted, the former is likely to seek to maintain its competitive positions by carrying its backward integration further to spinning stage.

Thus incentives to industries act like a catalyst to industrial development by reducing the import content of domestic manufacture improve the balance of payment and enhance the total impact of industrialization on income and employment within the Nigerian economy. This research therefore intends to evaluate the impact of tax incentives on economic development that is seen in terms of industrial growth in Nigeria.

1.2 Statement of Problem
Over the years, the economies of different nations have had significant changes structurally and this has consequently resulted to the classification of nations by experts as developed, developing and underdeveloped or third world country. According to the UN, a developing country is a country with a relatively low standard of living, undeveloped industrial base, and moderate to low Human Development Index (HDI) (Educational Pathway International, 2010). Since the introduction of the structural adjustment programme in September, 1996, Nigeria economy has experienced instability and dwindling growth rate. This was traceable to inadequacy of tax incentives available to our industries. Consequent upon this, many firms were put out of business and some strictly confined to growth and retardation thereby worsening income inequalities through reduced tax savings.

It has also been found that most of the owners of the companies (potential owners inclusive) have great difficulty in obtaining fund for business to the extent that some even resort to informal financial institution with high rate of interest, and this is inimical to growth. The establishment of Nigeria Bank for Commerce and Industry (NIDB) in 1964 by Decree No.22 of 1973 are bold steps to encourage industrial development. Fund is required to start, maintain and expand a business but lack of it.

The question has been to what extent and how effective has the established institutions contributed to alleviate this fund problem. It is not uncommon to find many prospective businessmen who feel very frustrated and complain of long delays in their dealings with bank executives, who after a lengthy discussion with the manager only get denied the requested funds. Related to this problem is the address of certain government policies on corporate development especially in Nigeria where the relationship between government and business is principally that of regulation and control. For instance, protectionist policies and controlled / highly regulated economic system are to a great extent anti-development. Whereas developed countries made it easier to trade among themselves, tariffs among them fall from 40% to 5% by 1990, efforts are still being made to reduce them further, African countries e.g. Nigeria tried to protect their industries from international competition.

Another very important angle to this is the activities / effects of such international finance organization as the IMF, and the World Bank, Paris Club, London Club and many others on the assumption that they are agents of economic and technological development. Using IMF as a case study, its conditions amongst are which are inimical to developing countries include:

• Currency devaluation

• Wage freeze / retrenchment of workers.

• Reduction in government social and welfare expenditure-removal of subsides.

• Trade liberation to allow free flow of capital, labour technology.

• Privatization and commercialization of public enterprises (Economic

These objectives have left developing countries with almost no discretion in determining their own economic policies. The report of South Commission, (1993) explains that counter IMF policies can hardly point to success stories among recipient countries of its loan conditions. Government should only embrace appropriate macro-economic policies, and from ideological basics. Lastly corruption among the human machinery is not without notice. No matter how efficient the policies and the incentive policies, if implementation and execution machinery are not effective, the system will crumble.

In view of the aforementioned developments, it has become expedient to encourage firms and industrial growth through various concessions these can lead to economic growth and development as the output from increased industries can be seen, hence this study, to highlight the critical and pivotal roles tax incentives play among other factors in economic and industrial growth of Nigeria.

1.3 Objectives of the Study
Tax incentives is fiscal policy from government to corporate bodies as means of motivating their engagement into manufacturing ,investing or even trading and other business activities that can help develop the economy.

It is therefore the objectives of this research, in specific terms to:

• Examine how the existence of tax incentives has encouraged corporate growth.

• Determine to what extent lack of awareness of available tax incentives has relationship with the level of development seen in investments in the economy.

• Ascertain the level of tax incentives that motivate people to go into business enterprise

1.4 Research Questions
• To what extent does sufficient or insufficient tax incentives encourage corporate and industrial growth?

• To what extent does lack of awareness of available tax incentives affect the level of investment in the economy?

• To what extent do available tax incentives motivate people to go into business enterprises?

1.5 Research Hypotheses
Ho1: Sufficient tax incentives do not enhance industrial growth and economy.

Ho2: Lack of awareness of the available incentives does not have any significant negative effect on the level of investment.

Ho3: Availability of tax incentives do not motivate people into business enterprises.

1.6 Significance of the Study
The importance of tax incentives in corporate growth and development in Nigeria as a developing country cannot be over emphasized. This research is therefore of immense significance to the industrialist, entrepreneur, (potential inclusive). It will help to keep Nigerians informed on the available packages provided by government. To the government, it will help to uncover the problems encountered by the businessmen and how to curb them. As regards to prospective entrepreneurs, it will serve as an encouragement for them to engage into their own businesses.

With regards to the general public, it is a welcomed study because if there is improvement in the business sector, it will help create more favourable economic environment and a better standard of living. Finally, the academia can use this work as a reference material on this issue of tax incentives and economic development.

1.7 Limitations of the Study
This research work is encompassed with many limitations and restrictions and encumbrances: The researcher was initially faced with the problem of relevant research materials but this was overcome by searching the website and other hard copies far and wide for these literatures. There was also the issue of non-disclosure of information by the organisations approached. Attitude of Nigerian managers and their constraints to disclose the desired information needed in spite of their academic levels and exposure, however, tenacity was applied to prod them to divulge relevant information.

1.8 Scope of the Study
This study is of the tax incentives and economic growth measured in terms of industrial growth. The scope of this study consists of tax-payers, management and staff of some selected companies in the South-South geo-political zone of Nigeria. The researcher intends to particularize this study to some companies in this region because they serve as simples representing other growing firms in Nigeria. The classes of personnel included in the research were administrative manager, accounts, internal auditor, and marketing and production staff. The staff level was covered because they are all involved in one way or the other in the benefits accruing from government tax incentives.

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