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According to Okpe (2005), in every country, there are certain services, which the government must provide to the citizens because of their essential nature. That services are so indispensable in life that individuals or corporate bodies are not allowed to provide them or where they are allowed, they are not allowed to monopolize the supplies or the production. Government does this to ensure that the supply of such goods and services are evenly distributed in any given society so that the rich and the poor alike may benefit.

Based on my opinion, the provision of such essential goods and services involve huge expenditure. One may ask, how does government get such huge amounts to finance such essential goods and services to her citizens? It is true that government mints money but there are other important economic factors that should be considered so that excessive money is not in circulation in an economy. For an economic balance to be maintained in an economy, government must find ways of financing her activities. One source of such finance is the contribution made by the private sector to government coffers in form of fees, levies or taxes.

The primary source of government revenue is tax.

Taxes which loyal citizens pay, account for more than seventy percent of government revenue in Nigeria according to Okpo Ikechukwu 2005.

Even in the Holy Bible, in the book of mark, chapter 12 vs. 14 to 17, on arrival these said to him.

“Teacher, we know you are truthful and you do not care for anybody, for you do not look upon men’s outward appearances, but you teach the way of God in line with truth: Is it lawful to pay head tax to Caesar or not?….. Jesus then Said: “Pay back Caesar’s things to Caesar, but God’s things to God. And they began to marvel at him. Lead-

Mt 22:16, Lu 20:21, Mt 22:17, Lu 20:23, Mt 22:18, Ro

13:7, Tit 3:1, 1Pet 2:13 and so forth.

People may like to know, who is that Caesar we are talking about? Caesar today is no other person except Government, pay tax to government and tilt to church.

The concept of taxation gained sharp impetus after the world economic depression in 1926. it was immediately this depression that various nations started implementing various fiscal policies with the sole aim of mobilizing enough to provide for social overhead expenses and at the same, embarking on several ways to lift the standard of living of citizens in generals, and in Nigeria the story was the same, there are so many forms of taxation, dating back to the days of fore-fathers, whereby communities taxed themselves through communal labour to execute community projects or to help the community supplies external aggression, which is same in the modern day taxation.

According to Buhari (1993) tax is defined as “a Compulsory contribution from individuals and / or business organization for purpose of financing government expenditure”. According to him, government of almost every country engages in a number of activities, which requires the expenditure of funds.

In order for the government to be able to undertake most of these activities, it raises funds through taxation. This is why it often referred to as a civic responsibility. During the past eight years the national expenditure has been extended to a wide of social services, which include:

Education, housing, health, pensions, national assistance, family allowance, etc. More recently the government has subsidized farming and other industries. Revenue too has to be raised to pay the interest on the national debt. In all these cases, taxes are imposed to provide revenue to cover government expenditure.

It is important to note that the present tax laws in Nigeria were borne out of the Raisemans commission of inquiry of 1957. Before then, we only had what was called the income tax ordinance for the colonies and which was rather common in all the colonies and the provision were very similar. Raisemans recommendation was the basis for providing in section 70, sub

Section (I) of the Nigeria (Constitution) order in council of 1960, conferred an exclusive power upon parliament to make law for Nigeria or any part thereof with respect to personal income tax.

In exercise of these powers, the Federal Government enacted the income tax management Act 1961 and because territory was being administered as a region, it enacted the personal income tax (Lagos) Act, 1961; all the other regional on taxation had to be amended to bring in to conformity with the federal Law. The position under the 1963 republication was that the regions assumed jurisdiction over the income tax of persons other than companies- According to Okpe Ikechukwu.

Taxation can be divided in to two basic profiles. We have direct taxation and indirect taxation according to Okpe Ikechuwku (2005:2). A direct tax is a tax that affects a person directly. The person pays direct to the relevant revenue authority, usually after his tax liability has been separately assessed by the revenue authority. The principal direct taxes in Nigeria are the income tax, company tax, and capital gains tax. Indirect tax is a tax levied upon a person who, as far as possible, shifts the burden to other people. These other people then pay the tax indirectly. Examples of indirect taxes are custom duties, Tariffs (Import & Export), exercise duties, Expenditure tax Entertainment tax and so on. In indirect tax, payment is according to the level and rate of consumption, that is to say, indirect taxation is levied on consumption of goods and services.

More importantly, the following are the various legislations imposing tax on individuals and cooperate bodies in the country.

The income tax management Act, 1961 as amended up to 1993. Referred to as personal income tax Degree 1993. Company income Tax Act (CITA) 1961 Superseded by1979 Act as Amended.

The industrial Development (Income Tax Relief) Act, 1971.

The petroleum Profit Tax Act (PPTA), 1959 as amended up to 1993.

The stamp Duties Ordinance 1958 as amended.

Capital Transfer Act, 1979

Capital Gains Tax Act (CGTA) 1967

Value Added Tax (VAT) Degree 102 of 1993, which repeated

Sales tax in the country.

Education Tax Degree No. 107 of 1993.

It is imperative to note that there have been recorded cases in which individuals engaged in tax evasion and avoidance.

Companies falsify their profit and loss account statement. They all had to do this in order to pay less tax. It is often said that nobody pays tax with a simile. It is in view of these problems that government creates tax incentives in order that taxpayers should pay promptly and effectively. These incentives are usually in form of relieves and exemptions. Though this may not be the primary objectives in granting tax concessions but on a second thought one is inclined to believe that with less tax to pay, incidences of the tax avoidances and evasion will be reduce tax sharp practices to a certain degree.

In developing countries, various government rely heavily on

taxation as an aid to encouraging capital formation for economic and industrial development.

In certain cases, the tax policy may be geared towards

mobilizing adequate fund to finance needed investment both in manufacturing sectors of the economy and increasing social services on the other hand. However, there are couplets attended with capital formation policy. In a developing economy, tax policy

may be structural in such a way that high tax may be collected this raise enough revenue for the government own expenditure in social utilities and infrastructures which are enable for industrialization. While on the alternative, it be may structured to keep tax rates low enough to be able to encourage the movement of investment in the private sectors.

In order to integrate these conflicting demands, the roach has always been to combine high rates of tax with preferential treatment on the desired development industries, penalty taxes for undesired activities.

The manufacturing sub-sector of the economy is always expected to play the most significant and pivotal role in the generation of expected economic growth normally associated with industrial development. Development models and strategies have expounded to emphasize the risk of tax incentives as an engine for industrial and economic development. Nigerians, like many other developing countries, has been utilizing a lot of tax incentives to help direct the investment activities in the private sector.

These   incentives or relieves are as claimable under:

The income tax management Act, 1961 as amended up to 1993.

Companies  Income Tax Act 1979 as amended.

Industrial  Development Tax (Income Tax Relies) Act, 1971.

The Petroleum Profit Tax, Act 1959.

Capital Gains Tax Act, 1967

Value Added Tax (VAT) Degree 102 of 1993

Capital Transfer Tax Act, 1979

Education Tax Degree No. 107 of 1993



People (Tax payers) would like to know the reason why they must pay tax. Why is it that their companies or goods are been taxed? Answering these basic questions will assist the company and taxpayers to know what the money is for. Once tax payers started seen the incentives that comes out of tax, they pay their tax when due.

Even companies, it protects indigenous companies to not exploit by foreign goods and services. A lot of benefit comes out of tax, some of these benefits shall be treated strictly in the project work.


The study entitled “The impact of tax incentives on the economic development in Nigeria” seeks to understand and determine the extent tax incentives as a fiscal policy will be used to address the investment pattern of individual and companies (i.e. cooperate bodies) and how this has contributed to economic and industrial development in Nigeria


Double taxation has been a serious threat on investments of individuals and cooperate bodies. It adversely affects expected proceeds of the investment. High taxation also, has been a factor that has reduced the investment pattern on the individuals and cooperate bodies.

In-appropriate application of tax incentives to the economic development in Nigeria.

1gnorance of the tax payers (i.e. individuals and cooperate bodies) as problems facing the economic and industrial development in Nigeria.

In-adequate tax incentives to industries.

Low foreign investment in Nigeria as a result of high taxation.


In deciding whether companies and individuals are incentive stimulated to Invest,

The following objectives are formulated by the study.

Whether individuals and companies actually embark on Subsequent investment decision as a result of subsidy provided by these tax incentives.

  1. To determine the existing tax incentives.
  2. To access hoe adequate are the tax incentives
  • To evaluate the extent of some selected existing industries adopted vigorous policy of expansion through tax incentives.