Tag Archives: Revenue Generation

THE PROBLEMS OF REVENUE GENERATION AT THE GRASSROOTS GOVERNMENT IN RELATION TO DEVELOPMENT

THE PROBLEMS OF REVENUE GENERATION AT THE GRASSROOTS GOVERNMENT IN RELATION TO DEVELOPMENT

CHAPTER ONE

GENERAL INTRODUCTION

1.1     Introduction

The Local Government is the third tier of government which is the tier of government closest to the citizens. Local Government occupies a strategic position in the administrative and developmental processes of every state, especially the rural areas. Since it is practically impossible for the central government to control every detail of the state’s functions, it is necessary that local governments are established to attend to the details of local administration, giving full weight to local preferences and prejudices on every issue. Thus, this study will focus on the problem of revenue generation in the Abeokuta-North Local Government area. Besides, it will articulate the introductory aspects of study which includes background, statement of the problem and the scope of the study.

1.2     Background of the Study

Bello-Imam(1986) asserts that “countries all over the world have appreciated the fact that it is cumbersome to administer and manage the affairs of the state by central government authority”. Consequently, they have established local government or structures of subsidiarity at the local levels. The United Nations in its conception of Local Government asserted that “it is a political division of a Nation (or in a federal system) which is constituted by law and has sustained control of local affairs, including powers to impose taxes or exact labour for prescribed purposes. The governing of such an entity is elected or otherwise locally selected” (Abubakar, 1993). According to Ojofeitimi (2000), the word “local” suggests that councils are meant for small communities and “government” means that they have certain attributes of government. Agbakogba and Ogbonna (2004) define the local government from a legal perspective. They see it as a “political administrative unit that is empowered by law to administer a specific locality”.

The practice of local government in Nigeria is traceable to the pre-colonial era which was characterised by local authorities managing the affairs of their localities and communities independently. The local authorities included the Obas, Emirs, Council of Elders and other such traditional arrangement. This was met with gradual transformation upon the emergence of the colonial period. Based on available record, the first local administration ordinance was the Native Administration Ordinance No 4 of 1916 which was designed to evolve from Nigeria’s old institutions, the best suited form of rule based on the people’s habit of thought, prestige and custom.(Bello-Imam 1990). While the colonial government managed the affairs of the Nigerian state at the centre, they introduced native authorities under the policy of association/indirect rule to see to local administrations at the grassroots. Macpherson constitution of 1946 initiated some remarkable changes; the regions introduced some reforms in their local administrations in the 1950s which aimed at enhancing performance.

From Independence and through the period prior to 1976 reforms, local government in Nigeria varied in form and structure from various regions of the country. Also, there was decline in the responsibilities and effectiveness of the existing local governments. This was not unconnected with and yet not limited to the heated political climate and excessive politicking with struggle for power and dominance. The regional governments were not left out as they took upon themselves most of the responsibilities of the local government through deliberate encroachment on their activities. It is in this sense that Aworawo and Akpan noted that before the introduction of the 1976 Local Government Reforms, the local governments in Nigeria were quite deficient in structure, size, staffing and finance- a development which inhibited their effectiveness as agents of national integration and grassroots development.

Local government administration in the country experienced fundamental changes in 1976. Local government reform created for the first time, a single-tier structure of local government in place of the different structure in the various states. The main focus of the 1976 reforms is the restructuring of the financial system and revenue of local government. Statutory allocation from the federation account and states revenue was made mandatory and was entrenched in the recommendations of the Aboyade revenue commissions of 1977.

With the entrenchment of 1976 reforms in to the 1999 Constitution, the efforts of reviving the local government system in the country proved quite productive as the constitution formally recognised the local government. Nonetheless, the potential ability of the 1976 reform to fully transform the local government system was cut short. Despite the constitutional force and unified system feature of local government with respect to 1976 reform, the constitutional procedure of voting in at least 75% of local council representatives was neglected and sole-administrators were appointed to manage the various existing local governments between 1979 and 1983. Awofeso in his book “Issues in Local Government Administration” revealed that by the time General Buhari ascended political power, local government authorities were begging for urgent attention. The local government existent in the country were financially handicapped and were virtually under-functioning. The new local government created between 1979 and 1983 were later dissolved and subsequently, a 21-man committee was set up under the chairmanship of Alhaji Ibrahim Dasuki by the Federal Military Government on the 28th of May, 1984 to look into the problems of the local governments which include; re-examining the existing structures, functions and financial resources available to local governments for the performance of those functions; look into the accounting/management of local government, including the standardization of various departments off the councils; propose how best to manage inter-governmental relations between federal, state and local governments and also between local governments and ministries for local governments, local service commissions among others.

The 1988 local government reform takes its bearing from the 1988 Civil Service Reform and since the inception of the fourth republic up till the present administration, local governments in Nigeria is continually faced with difficulties of allocation/revenue generation and administration of overall finance of the local governments. It is therefore necessary to address the challenges of revenue generation, local spending and overall management of the affairs of the government at the grassroots. This study will at such seek to address these issues and seek prospects to ensuring increasing stability in local government avenues for revenue generation.

1.3     Statement of Problem

In recent years, it has become increasingly difficult for local governments to fulfil their statutory obligations because of the costs involved. The general concern over the seemingly slow development of the rural areas in Nigeria has created a doubt as to the relevance of local governments in Nigeria whose primary function is to effect a representative government faster and closer to all the areas of state land. Inadequacy of funds for various developmental projects stands as the cause for these shortcoming despite the increasing revenue allocation from the federation account to the local governments. Hence, the reasons for the various avenues granted the local governments to generate revenues themselves. The most severe problem facing public institutions is a fiscal one, particularly in the local government. The fiscal problem is often birthed by factors including over-dependence on statutory allocations from the state and federal governments, deliberate tax evasion by the local citizenry, creation of non-viable local government areas that is not self-sustaining and cannot cater for its local populace, differences in the status of local governments in terms of rural-urban dimension leading to variation in internal revenue, inadequate revenue and fiscal jurisdiction.

For financially healthy local governments to exist, responsibilities and functions must be allocated in accordance with their taxing power and ability to generate funds internally. The constitutional provision that recognizes local government’s power in this regard must give them full freedom to operate and this must be well granted and adequately protected. These measures, coupled with a review of the revenue sharing formula, the granting of fiscal autonomy and fiscal discipline as well as making local governments responsive, responsible and accountable to the people will set local governments free from fiscal stress promoted and strengthened by the 1999 constitution.

 The local government is faced with myriads of problems ranging from corruption and embezzlement, poor financing, mismanagement of funds to poor leadership. This obviously has deterred the development of local government in Nigeria. However, the most important problem of local government is the revenue generation. Hence, the problem statement of this study. The major issues to be considered are; what factors have contributed to non-performance of local governments; is it because of total dependence on federal and state statutory allocation? Is it as a result of poor internally generated revenue drive? Is it because of ineffective utilization of the available resources or mismanagement by public office holders? Certain percentage of the statutory allocation has always been deducted by the state government thereby causing the local governments to underperform. Noteworthy is the fact that;

  1. Without revenue independence, the goal of local government cannot be achieved.
  2. Absence of resource mobilization is by far the greatest problem of local government administration.

Based on the above slated problems, it has become necessary to conduct a research analysis on the problem of revenue generation in Nigeria of which Abeokuta North Local Government will be a case study.

1.4     Objectives of the Study

The broad objective of this research is to evaluate the problems of revenue generation at the grassroots government in relation to development.

The specific objectives are:

  1. To examine the relationship between the statutory allocation to the local government and internally generated revenue (IGR) of the local government.
  2. To ascertain the extent to which the restriction of local government fiscal autonomy has affected the effective functioning of the local government.
  3. To ascertain factors responsible for ineffective implementation of local government projects.
  4. To evaluate the reasons for low internally generated revenue and how it has contributed negatively to local government developmental efforts.

1.5     Research Questions

The Research Questions are;

  1. What are the critical issues in revenue generation in local government in Nigeria?
  2. How has the total dependence on federal and state statutory revenue contributed to the dearth of internally generated revenue (IGR)?
  3. How has the deficit on revenue generation affected the developmental efforts in Abeokuta North Local Government?

1.6     Significance of the Study

From historical precedence, it is obvious that there is underperformance of the local government and there is need for the local government to improve their performance. However, this research will significantly consider the actions and inactions of the government at the grassroots as regards question of revenue generation and the need to utilize substantial revenue from its various sources in addition to federal and state statutory allocation for developmental purpose. The study will also help in identifying some means of generating revenue that has been neglected over the years. It will also be beneficial to grassroots because improved revenue generation means improved standard of living in form of provision of social services and amenities such as roads, hospitals and primary health centres, local parks, drinkable water, rural electrification, etc. The study will most importantly take into consideration the fiscal issues, deficiencies and challenges of generating and utilizing revenue in the Abeokuta North Local Government of Ogun State, analyse facts and figures about revenue status of the local government and make recommendations which will be invaluable for educationists, researchers and political office holders.

1.7     Theoretical Framework

Ola and Tonwe(2009) stated that in attempting to formulate theories about the performance of local governments, one can evolve a well distilled list of criteria of what local governments ought to be functionally concerned with and what it theoretically ought to be engaged in.

There are three major theories of local government. These are the democratic participatory, efficient-services, and developmental schools of thought.

Democratic participatory School

The democratic participatory school of thought holds the view that local governments exist solely for the purpose of promoting democracy and participation at the grassroots level thereby bringing government nearer to the people (Adamolekun, et al 1988).

This theory holds that local governments function to bring about democracy and to afford opportunities for political participation to the citizens as well as to educate and socialize them politically. This viewpoint has been corroborated by Keith-Lucas, David Bulfer and William Machenzei. This school asserts that the local government is a prime element of democracy and demonstrates the intrinsic values of democracy, insisting that, irrespective of the service it offers, the local government offer the closest thing to the widespread consultation and participation. A very important part of this democratic role is the opportunity it creates for political activity and social interaction. The crux of this theory is that local government must continue to uphold democracy through the provision of political education, participation and political socialization for its citizens.

Efficiency Services School

The opinion of this theory is that the main purpose of the local government is to provide services to the local people. The efficiency services theorists believe that the local government occupies the best position for the efficient performance of certain functions. This is made possible because of the nearness of the council to the people and because of the smallness of the population.

According to this school, the local government is to be more efficient than the state in providing these services since it is closer to the people (Livingstone, 2008).

The Developmental School

 The developmental school emphasizes how local governments in the developing world can be an effective agent of a better life, an improved means of living, socially and economically and a means to have a better share in the national wealth. The proponents of this school contend that far more than in developed western countries, the local government in developing nations can and should have the function of helping to reduce the congestion at the centre.

If the local government is well articulated to stimulate initiatives, it can more easily identify available local skills, interests and capitalize on developing them (Olojede and Afegbua, 2011).

1.8     Methodology

This research work is approached through empirical and  descriptive approaches. However, because of the peculiar nature of the Nigerian local government system, the research method is restricted to empirical and descriptive research, through personal inspection, observation, personal interviews of civil servants and political office holders in the Abeokuta North Local Government. Secondary sources such as library study, articles, records, and statistics relating to fiscal revenue including LGA reports will be subjected to descriptive and empirical analysis.

1.9     Scope and Structure of the Study

The study is focused on revenue generation and how it affects development of the local government areas. It will also involve the analysis of problems associated with revenue generation and its impact on the development of Abeokuta North Local Government. The Structure of the study is stated below;

CHAPTER 1

1.1      Introduction

1.2      Background of the Study

1.3      Statement of Problem

1.4      Objectives of Study

1.5      Research Question

1.6      Significance of the Study

1.7      Theoretical Framework

1.8      Methodology

1.9      Scope and Structure of the Study

1.10   Summary

CHAPTER 2

2.1      Introduction

2.2      Review of Related Literature

2.3      Strengths and Weaknesses

2.4      Conclusion

CHAPTER 3

3.1      Introduction

3.2      Revenue Allocation Process in Nigeria

3.3      Issues in Revenue Allocation

3.4      Conclusion

CHAPTER 4

4.1      Introduction

4.2      Local Government and the Constitution

4.3      Local Government and Revenue Allocation

4.4      Abeokuta-North Local Government and Resource Question

4.5      Abeokuta-North and the State Government

4.6      IGR in Abeokuta-North Local Government

4.7      Revenue Generation and Development in Abeokuta-North Local Government

4.8      Conclusion

CHAPTER 5

5.1      Introduction

5.2      Summary of the Study

5.3      Summary of Findings

5.4      Implications for Policy

5.5      Further Research  

5.6      Limitations of Study

5.7      Concluding Remarks

            Bibliography

1.10   Summary

This chapter has looked at the background and historicity of local governments in Nigeria. Also, it has provided frame work of research, articulated the research problem, research question, objectives of study and methodology. In what follows, the literature on the subject of study will be reviewed.

 

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EFFECT OF TAX PLANNING, EVASION AND AVOIDANCE ON THE REVENUE GENERATION OF ENUGU STATE

 EFFECT OF TAX PLANNING, EVASION AND AVOIDANCE ON THE REVENUE GENERATION OF ENUGU STATE

 

CHAPTER ONE

INTRODUCTION

1.1  Background of the Study

A tax is a compulsory exaction of money by a public authority for public purposes. Aguolu, (2000) is of the view that taxation is raising money for the purpose of government by means of contribution from individual persons. Dandago and Alabade (2002) define tax as a compulsory contribution made by individuals and organizations towards defraying the expenditure of the government.

According to Ndekwu (2000) tax was first introduced in Nigeria in 1904 by late Lord Lugard where tax became operative in the Northern Nigeria.  At this time, taxes were paid in kind. The first ordinance on tax was in 1992 and this applied to both the Northern region in 1928. In 1929, 2 percent flat rate income tax was imposed for both salary and wages earned. This continued until 1939 when the companies income tax ordinance (CITO) was enacted. As result of the Lapses in (CITO) the Nigerian income tax ordinance was enacted in 1940.

In 1961, a major landmark was reached in tax development in Nigeria.  They are

  1. Income tax management act (ITMA)
  2. Companies income tax act (CITA). A petroleum profit ordinance was passed in 1959 for the purpose of regulating the taxation of companies engaged in petroleum exploration and mining in Nigeria.

Tax according to Ola (2010) is defined as: Non punitive yet compulsory levy on the income and properties of individuals and organizations by government and which it does not account for, the proceeds from the levy on trade the government uses to pursue the accomplishment of some social, economic and political objective in interest of its citizens”

However, another school of thought maintain that since tax is non-punitive but compulsory, an effort should be made to pay as little as possible with the frame work of the law thus engaging in legal tax evasion.

Anyafo (1996) posited that tax is an imposed levy by the government against the income, profits, property, wealth and or consumption of individuals and corporate organizations to enable her obtain the required revenue to provide basic amenities, security and well-being of the citizens.

The importance of these issues to tax administration in the developing countries such as Nigeria, can be seen from the following extract from tax administration in under developed countries.

It is perceived that tax evasion and avoidance are linked with shadow economy, Schneider and Enste (2001) as cited by Faseun (2002) reported that shadow economy is that economy in which people do not show their real income. Ojo (2009) distinguished between tax evasion and tax avoidance. He defined tax evasion as a phenomenon where the taxpayer practically neglects to pay tax either by not declaring the correct position or does not file any return at all. While tax avoidance is a phenomenon that occurs when a taxpayer utilizes the provisions of the tax laws, identify the loopholes in the tax laws and use such for his own advantage.

Tax evasion is an attempt to escape tax liability (wholly or partially) by breaking the law; therefore, it’s a criminal Act while tax avoidance is an attempt to escape tax liability by circumventing the law. Thus both the tax evader and tax avoider have similar end; reduce their tax liability, but their means to that end differs (Ayua, 1996).

Sharm and Dang (2011) was of the view that tax avoidance is the legal utilization of tax regime to one’s own advantage, to reduce the amount that is payable by means that are within the law

Tax planning is the exercise undertaken to minimize tax liability through the best use of all available allowances, deductions, exclusion, exemption etc. to reduce income and or capital grant.

1.2  Statement of the Problem

The problem of tax planning, evasion and avoidance in revenue generation in Enugu State economy has resulted to a less poor revenue generation in Enugu State Board of internal revenue.

The problem associated with tax compliance, planning, evasion and avoidance in revenue generation in Enugu State will drastically reduce the revenue generated and this will consequently lead to budget deficit, where government expenditure will be more than it’s income. Although tax is not the only sources of revenue generation in Enugu State but it is the major source.

It is also viewed that the various taxes by the government which may be income tax, road tax, entertainment tax, pool belting tax, property tax, value added tax etc. have not yielded enough revenue for government projections made in Enugu State.

1.3  Objective of the Study

The general objective of the study is to ascertain the effect of tax planning, evasion and avoidance on revenue generation in Enugu State, using Board of internal revenue as a study.

To achieve this, the following specific objectives of the study are as follows:

  1. To ascertain the effectiveness and efficiency of tax by Enugu State Board of Internal Revenue
  2. To examine the use of mechanical and outdated method of tax in the revenue generation in Enugu State.
  3. To examine the effect of tax planning, evasion and avoidance on income generation and distribution in the revenue of Enugu State.
  4. To investigate the effect of tax evasion in the growth and development of Enugu state.

1.4  Research Questions

The study is set out to answer the following question

  1. To what extent has the effectiveness and efficiency of tax by Enugu State Board of Internal Revenue?
  2. To what extent has it to do with the use of mechanical and outdated method of tax in revenue generation in Enugu State?
  3. To what extent has tax planning, evasion and avoidance affected income distribution of Enugu State?
  4. To what extent has the effect of tax evasion affected the growth and      development of Enugu State?

1.5  Statement of Hypotheses

Ho1: Tax collection and administration in Enugu State is not effective and efficiently managed

Hoi: Tax collection and administration in Enugu state is effective and efficiently managed

Ho2: The use of mechanical and outdated system affect tax administration and collection in Enugu State board of internal revenue.

Ho2: The use of mechanical and outdated system does not affect tax administration and collection in Enugu State board of internal revenue

Ho3: Tax planning, evasion and avoidance of income does not help in the distribution of revenue generation of Enugu State.

H03: Tax planning evasion and avoidance of income help in the distribution of revenue generation of Enugu State.

Ho4: Tax evasion does not have effect in the growth and development of Enugu State.

Ho4: Tax evasion has effect in the growth and development of Enugu State.

1.5  Significance of the Study

This study will contribute immensely both theoretically and practically to the field of accounting and taxation in Nigeria. It will enhance the quality of literature on tax planning, evasion and avoidance. The operational significance of this study therefore lies in the fact that: Tax authorities will tend to be more oriented toward seeking result, through cooperation rather than by coercion alone, and prefer to see themselves as services providers rather than as strict law enforcers.

The study will also expose problems affecting tax effectiveness, in the state which if appropriate corrective measures are taken will go a long way in improving the state internally generated revenue machineries of the government.

Lastly, the general public at large will benefit immensely from this work as the revenue generated will be redistributed for the benefit of the entire citizens.

1.6  Scope of the Study

Tax planning and evading, avoidance are problems faced by every tax system. Hence one cannot possibly undertake a study on tax planning evasion and avoidance concerning every tax paper. This research will therefore, be restricted to why people avoid and evade tax in Nigeria specifically in Enugu State. The study will cover and rate of revenue generation, and the manner of sourcing for tax in Enugu State government for the past few years.

1.7   Limitations of Study

It must be stated here that, this work are limited by;

Sourcing of related materials or document posed a serious problem to the researcher. This was abated by the diligence and prudence of the researcher in sourcing the materials from internet, libraries of various institutions in Nigeria.

Poor attitude of respondents pose its own challenges. Success of research depends on the availability of information or data. In this research, staffs of Board of Internal Revenue, Enugu State are afraid of release certain information which contributed in limiting the scope of the research work. It affected the study in the sense that it delays the completion of the work on time.

1.8  Definition of Terms

Tax word that is used in this work is short listed and briefly discussed below:

Tax: This can be said as a compulsory transfer of resources and income from the private sector in order to achieve some of the nation “economic goals” Okpe (1998.109).

Tax evasion: This is where the tax payer adopts illegal means so as to pay less than he should ordinarily pay Nwadialor (2009:352).

Tax avoidance: This is where the tax payer arrange his affairs legally so that he pay less than he should otherwise pay.

Tax planning: Is the act of arranging your affair in ways that postpone or avoid taxes.

Revenue: This is the income accruable to a person or organization or government.

Revenue generation: It is the systematic way of collecting income.

Taxation: is the raising of money for the purpose of government by means of contribution from individual persons.

P.A.Y.E: (Pay as You Earn) is the personal income tax based on the proportion of the income usually dedicated at source.

Board of Internal Revenue: this is government department charged with the responsibility of assessing, collecting of taxes and other fees accruing to the state.

Tax administration: This refers to all managerial arrangement to collect state revenue from citizens.

Tax system: This is the means by which taxes are raised and collected in accordance with the tax legislation.

 

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REVENUE GENERATION AND DEVELOPMENT OF LOCAL GOVERNMENT AREAS

REVENUE GENERATION AND DEVELOPMENT OF LOCAL GOVERNMENT AREAS

ABSTRACT

The study examined Revenue Generation and the Development of Local Government Areas with reference to Umuahia North Local Government Area as a Case Study. Objectively, three research questions and hypotheses were formulated. The survey design was used in the study. The sample size was 133 out of 200 staffs of Umuahia North Local Government Area of Abia State. 133 questionnaires were administered to the respondents. The data gathered were analyzed using SPSS Package Version 17. The findings revealed that there is a significant relationship between statutory allocation to local government and the government developmental effort; Revenue from Value Added Tax has significant impact on government capital projects … . Based on the findings, conclusion was drawn and recommendations given that machinery should be set to draft bye – laws with expediency for possibly legislation; the local government chairman should ensure that machinery be in place to generate more revenue internally to enable them do more development projects; the local government authorities should not be over dependent on statutory allocation from the federal government; training and re-training programmes for the revenue officials should be organized to enable them meets the challenge of the new millennium … . 

CHAPTER ONE

INTRODUCTION

1.1     Background of the Study

Revenue generation in Nigeria local governments is principally derived from tax. Tax is a compulsory levy imposed by government on individuals and companies for the various legitimate function of the state (Olaoye, 2008).

Tax is a necessary ingredient for civilization. The history of man has shown that man has to pay tax in one form or the other that is either in cash or in kind, initially to his chieftain and later on a form of organized government (Ojo, 2003).

No system or rules can be effective whether foreign or nature unless it enjoys some measures of financial independence. Local governments in Nigeria have developed over a number of years. Historically, the development of direct taxation in local government in Nigeria can be traced to the British pre-colonial period under this period, community taxes were levied on communities (Rabiu, 2004).

Recently the revenue that accrues to local government is derived from two broad sources, via the external sources and the internal source.

An effective Local Government system rests majorly on the availability of human and material resources which the nation could mobilize and harness for local governments development. In 1976, the Federal Military Government then issued guidelines on local governments reforms. The reforms which gave recognition to local governments as the third tier of government whereby government activities at the local level were taken care of. In 1988, another reform of local government was established. This gave a substantial and unprecedented reform of autonomy to the local governments in the country. With this autonomy, greater responsibilities devolved on the local government therefore, became a common knowledge that most of the local government are finding it difficult to cope with the present level of responsibilities.

The principal aims of creating local governments were as follows:

  1. To serve as the third tier of government through which appropriate services and development are made in response to the wishes of local community through their representatives.
  2. To serve as an intermediary between government at the center and local communities.
  3. To mobilize and utilize both human and material resources by engaging the people at the local level in the government activities.
  4. To facilitate the exercise of democratic self – government closer to the grass root of the society and to exchange initiative and leadership potential.

Mostly, all local governments in Nigeria do no longer perform their responsibilities simply because of poor finances arising from adequate revenue generation drive. The bad financial situation is further aggravated by the prevailing inflationary situation in this country which erodes the value of funds available to render essential social services to the people. Development is highly associated with fund, much revenue is needed to plan, execute and maintain infrastructures and facilities at the local government level. The needed revenue generated for such developmental projects like construction of accessible roads, building of public schools, health care centers, construction of bridges among others are sources generated from taxes, royalties, haulages, fines and grants from states, national and international governments. Thus, the Local government cannot embark, execute and possibly carryout the maintenance of these projects and other responsibilities without adequate revenue generation.

This is the basic reason why development is skeletal at some Local Government councils in Nigeria. The revenue generation is not exceptional to Umuahia North Local Government area in Abia state

1.2     Statement of the Problem

The local government is faced with myriads of problems ranging from corruption and embezzlement, poor financing, mismanagement of funds to poor leadership. This has deterred the development of local government in Nigeria.

The major issues are; what has contributed to the non-performance; is it because of total dependence on federal and state statutory allocation? Is it as a result of poor internally generated revenue drive? Is it because of ineffective utilization of available scarce resources or mismanagement by public office holder? Among others, certain percentage of the statutory allocation has always been deducted by the state government thereby causing the local government to underperform which includes; Dilapidated infrastructural facilities, Unavailability of social services to rural populace and Underdevelopment of local communities.

Based on the above stated problems, it has become necessary to conduct an analysis on revenue generation in Umuahia North Local Government area of Abia state.

1.3     Objectives of the Study

The broad objective of this research is to evaluate revenue generation and development of Local Government Areas with particular reference in Umuahia North Local Government Area of Abia State.

The specific objectives are;

  1. To examine the relationship between statutory allocation to the local government and government developed effort.
  2. To ascertain the extent which value added tax has contributed to government developmental effort.
  3. To evaluate the extent to which internally generated revenue has contributed to Local government development and it various sources.

1.4     Research Questions

The following research questions were formulated for this study.

  1. What is the relationship between statutory allocation to Local Government and Government developed effort?
  2. How has value added tax (VAT) contributed to Government developmental effort?
  3. To what extent has internal generated revenue contributed to Local Government development and its sources?

1.5     Research Hypothesis

A hypothesis is a theoretical conceptualization or an idea or guest regarding how the researcher thinks the result of his study will look. It consists of a set of assumptions accepted previously as a basis of investigation. It is a proposition that is yet to be tested for its validity.

For the purpose of this research study, three null hypotheses were formulated.

H01:There is no relationship between statutory allocation to Local Government and Government developed effort.

H02: Value added tax has not contributed to Government developmental effort

H03: Internal Generated revenue has not contributed to Local Government development and its sources.

1.6     Significance of the Study

From the outlook, there is need for the local government to improve their performance. However, the research is significantly considering the closeness of local government to the grassroots’ people and the need to utilize substantial revenue for its various sources in addition to federal and state statutory allocation for developmental purpose.

The study will help to identify some means of generating revenue that has been neglected over years.

It will also be beneficial to the grassroots because improved revenue generation means improved standard of living in form of provision of social amenities such as road, hospital, park, drinkable water, rural electrification etc.

The study will be educative as it will be a reference point for researchers.

1.7     Scope and Limitation of the Study

The study would appraise the revenue generation for the period of five years (2006-2010) in Umuahia North Local Government Area.

This study has some limitations most especially in the area of data collection which is to be covered and has time duration of five years (i.e. 2006–2010).

Financial constraints as well as time available for the completion of the study are among other factors that would limit the scope of the study.

1.8     Definition of Terms

Local Government: is a form of public administration which in a majority of contexts, exists as the lowest tier of administration within a given state. The term is used to contrast with offices at state level, which are referred to as the central government, national government, or (where appropriate) federal government and also to supranational government which deals with governing institutions between states. Local governments generally act within powers delegated to them by legislation or directives of the higher level of government. In federal states, local government generally comprises the third (or sometimes fourth) tier of government, whereas in unitary states, local government usually occupies the second or third tier of government, often with greater powers than higher-level administrative divisions.

Revenue: The amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the “top line” or “gross income” figure from which costs are subtracted to determine net income. Revenue is calculated by multiplying the price at which goods or services are sold by the number of units or amount sold. Revenue is the amount of money that is brought into a company by its business activities. In the case of government, revenue is the money received from taxation, fees, fines, inter-governmental grants or transfers, securities sales, mineral rights and resource rights, as well as any sales that are made.

Income Generation: Money that an individual or business receives in exchange for providing a good or service or through investing capital. Income is consumed to fuel day-to-day expenditures. Most people age 65 and under receive the majority of their income from a salary or wages earned from a job. Investments, pensions and Social Security are primary sources of income for retirees. In businesses, income can refer to a company’s remaining revenues after all expenses and taxes have been paid. In this case, it is also known as “earnings”. Most forms of income are subject to taxation.

Expenditure: Payment of cash or cash-equivalent for goods or services, or a charge against available funds in settlement of an obligation as evidenced by an invoice, receipt, voucher, or other such document. See also revenue expenditure, capital expenditure.

Tax: An involuntary fee levied on corporations or individuals that is enforced by a level of government in order to finance government activities. In the investing world, this is one of the most important types of taxes and, therefore, one of the most highly debated types of tax is capital gains tax. Capital gains tax represents the tax paid on the increase in value made on an investment.

Tax Evasion: An illegal practice where a person, organization or corporation intentionally avoids paying his/her/it’s true tax liability. Those caught evading taxes are generally subject to criminal charges and substantial penalties. There is a difference between tax minimization/avoidance and tax evasion. All citizens have the right to reduce the amount of taxes they pay as long as it is by legal means.

Tax Avoidance: The use of legal methods to modify an individual’s financial situation in order to lower the amount of income tax owed. This is generally accomplished by claiming the permissible deductions and credits. This practice differs from tax evasion, which is illegal. Most taxpayers use some forms of tax avoidance. For example, individuals who contribute to employer-sponsored retirement plans with pre-tax funds are engaging in tax avoidance because the amount of taxes paid on the funds when they are withdrawn is usually less than the amount that the individual would owe today. Furthermore, retirement plans allow taxpayers to defer paying taxes until a much later date, which allows their savings to grow at a faster rate.

Development: The process by which people create and recreate themselves and their life circumstances to realize higher level of civilization in accordance with their own choice and values.

 

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