CHAPTER ONE

INTRODUCTION

1.1            Background Of the study

Ademolekun (2005) noted that one of the recurrent problems facing local government development in Nigeria is dwindling revenue generation as characterized by annual budget deficits and insufficient funds for meaningful growth and viable projects development. This statement implies that local government has ineffective taxation policies which to a large extent affect the revenue base.  Thus, they so much depend on revenue from the federal statutory account. This background brings us to the study if taxation and local government development in Nigeria.

          Tax has been defined by various authorities and professionals in various ways. Webster’s dictionary of the English language defines tax as a charge imposed by government authority on property, individuals or transactions, to raise money for public purpose. Black’s law Dictionary describe tax as a ratable portion of the produce property and labour of the individual citizen taken by a nation. Tax is a compulsory levy which a government imposes on its citizens to enable it to obtain the required revenue to finance its activities (Adesola, 2008).

          Examining the various definitions of tax, one observes taxation is very important for any government if it has to make any meaningful economic development. Thus, this study is concerned with development at the grassroot as being the goals of the local government administration. Thus, in an attempt to carryout development at all nooks and crannies of the society, the local government as the tier of government that is nearest to the people is saddled with the responsibility if direct development of the people to a certain level.

          Development is highly associated with fund, much revenue is needed to plan, execute and maintain infrastructures and facilities at the local government level (Okoli, 2000). The needed revenue generated for such developmental projects like construction of accessible roads, building of public centres, construction of bridges among others are soles generated 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 taxation. This is the basic reason why development is skeletal at some local government councils in Nigeria. The issue of poor taxation is not exceptional to local government in particular. This, however pronouncedly affect development negatively in local government councils. In the project, the issue to address is how far this poor taxation can affect development especially in Uyo local government.

1.2     Statement of the problem

The local government council takes direct care of the grassroot people that is the problem in the rural areas. These groups of people sometimes lack essential facilities and condition of the modern civilization (Udeh, 2008). They lack pipe borne water to drink, do not have electricity, accessible roads, poor educational infrastructure and facilities to mention but a few.

          This is one of the major reasons of rural-urban migration of movement. This has made our cities to be congested and increase in many criminal activities. Based on the above and foregoing assertions, it is seen that the impact of the poor taxation on the development of the rural area is a serious problem. This might be as a result of poor taxation. If Nigeria is to achieve her desired goal of vision 2020 and possibly meet the millennium development goals (MDGs) targets, the issue of taxation must be addressed squarely. Hence, the researcher is bothered to find out the impact of taxation on the lives of the people at the rural area and how it has affected development in government especially in Uyo local government areas.

1.3            Objectives of the Study

The broad objective of the research is to evaluate the impact created by taxation on the development of Uyo in Akwa Ibom State.

The other objective of this study includes:

1. To determine the impact of taxation on the development of Uyo  local government area.
2. To find out the major revenue sources of Uyo local government area.
3. To examine the methods adopted for prompt collection of tax in Uyo local government.
4. To ascertain if there are problems of taxation in Uyo.

5.   To examine the lineup of problems to taxation in Uyo local government area.

1.4            Research Questions

• What are the impacts of taxation on the development of Uyo?
• What are the sources of revenue in Uyo local government area?
• Are there methods adopted for prompt collection of data in Uyo local government area?
• Are there problems of taxation in Uyo local government area?
• What are the problems of taxation in Uyo local government area?

1.5            Significance of the Study

The significance of any human endeavour is measured by its relevance to solving human problems. The findings of this study would help Uyo local government to identify the problems associated with taxation and its consequences on development.

1.6            Scope of the Study

The study is focused on taxation and local government development. The study also looks at the various tax administrations and especially on how revenue generated from taxes are managed for developmental purpose of Uyo local government.

The study will cover a period of five (5) years (i.e between 2015 and 2020).

1.7            Limitation of the Study

          The study is focused on the impact of poor taxation and how it affects development of the local government areas. It will also involve the analysis of problems associated with taxation and its impact on the development of Uyo local government.

1.8 Literature Review

There are reasonable number of existing literature on local government finance and internal revenue generation in Uyo local government. Some scholars have made one or two contributions in this area. The aim of this literature review was to familiarize ourselves with what other scholars have said about the subject matter, see how they approached the issue and determine whether the scholars have answered the question(s) we intend to answer satisfactorily. The literature review was specifically aimed at discovering the gap in the existing literatures. It was to know what other scholars have either said or not said.

For instance, L Rowland (1977:77), made some comments on the desirability for local governments to have their own sources of revenue. He state’s that “an effective local government system cannot exist where the local authority has no power to improve and collect its own taxes”. Certainly, in many developing countries such as Netherland, local authorities have fewer sources for revenue generation”.

Orewa (1986:180), in his book titled “Local Government Finance in Nigeria”, described and discussed various sources of revenue open to local governments and problems in the collection and management of their finance. Such problems are-shortage of trained manpower, ignorance of the councilors over their duties and non-commitment to duty on the part of the staff and councilors alike.

Adediji (1979:87), blames poor internal revenue generation of local government on the following reasons

a. Lack of proper structure

b. Low quality of staff and

c. Lack of mission and comprehensive functional role.

According to him, these problems lead the local government into vicious circle of poverty. This is due to the fact that inadequate funding results in employment of low skilled and poorly paid staff.

Bello- Iman (1990:134), in the same vein states that “the major constraint to internal revenue generation in local government is the shortage of well trained and qualified personnel which supposed to serve as tool for collection of taxes and rates at the local level”. According to him, even the few available are not properly trained in efficient budgetary and financial management systems. Also most of the local governments are short-stuffed to carryout their duties”.

Nkala (1985:60), talking about the problem of personnel in internal generation of local governments states that “at the inception of democratic local government system in the former Eastern region of Nigeria in 1950, early recruits into the local government service were mainly ‘sons of the soil’, party stalwarts, relations of councilors”. He blamed shortage of trained staff in local government on politicization of recruitment, selection and placement.

Mugrave, R.A (1959:89), noted that “poor auditing has contributed immensely to problem of internal revenue generation of local governments”. According to him, “local governments should have a means of ascertaining whether it’s financial operation is properly conducted, this can only be done through audit”.

In a more recent study, Ebo (2000:123), did a thorough work on how to enhance internal revenue of local government, using Nsukka as a test case.

He corroborated the evidence of other scholars to the effect that there is great loss of council’s revenue due largely to the loopholes in the management of revenue sources. He noted that collection procedure of the council could be streamlined in many areas especially where their facilities were used. Citing motor parks for instance, he observed “motor parks fees paid by taxis can be good money earned for local government councils if properly managed But as of now (2000) each of these taxis pays #10 a day to the local government no matter how many loads they made. In contrast to this, each taxi pays touts up to #30 per load and there may be several loads per day. Thus, the local council receives #10 per taxi daily. What a flagrant case of robbing peter to pay paul”.

As Ikejiani-Clark (1995:53) pointed out that, the growing prominence of corruption and fraud in local government as evidenced from massive data from the various parts of the federation has coincided with increased academic interest in corruption and fraud in our public life.