THE EFFECT OF TAXATION ON MANUFACTURING FIRMS

CHAPTER ONE

INTRODUCTION

1.1 STATEMENT OF THE PROBLEMS AND PURPOSE OF THE STUDY

It is really a statement of fact that a manufacturing industries fail to reach their objective as a result of their inability to meet up with their tax payment.

The study was set up to find the problems that tax have created on manufacturing industries. The researcher also intends to find out the effects of tax on manufacturing companies especially on profit.

The effects of tax on the firms line of business. The study aims at helping manufacturing industries to realize how important taxation is the purpose of the study is to investigate among other things the followings;

v The effect of indirect tax on manufacturing industries in their ability to procure equipments and also raw materials.

v The effort government has done to ensure maximum efficiency in production and no dissatisfaction on the part of the manufacturing industries with respect to taxes.

1.2 RATIONAL OF THE STUDY

The rational of the study is, to identify and explain how effort government has done to ensure maximum efficiency to words in production and no dissatisfaction on the part of the manufacturing industries with respect to tax.

Every government with good intention normally focus on hoe to carry out an effective fiscal policy, that is a process to check public expenditure and shaping of the tax system in order to centre upon.

v Maintenance of a growing high employment in the case of the manufacturing sector, the nature of the effect of the taxation policy will depend on the objective the government hopes to achieve. It might be on the manufacturing industries advantage or not. An example is where the government design to protect infant industries by granting tax holidays to them.

1.3 SIGNIFICANCE OF THE STUDY

The significance of this study “the effect of taxation on manufacturing firms” a case study of Ikeji pastic company LTD is that it helps to educate manufacturing firms on the importance of taxation with regards to the growth of the economy as it effects the manufacturing firms.

It will also highlights on the performance of manufacturing industries on the result they create in the economy. The study will also stress a way to make the manufacturing industries take appropriate steps to improve their business and creating satisfaction at the same time.

The study will also be of help or importance to the following peoples.

v The business community for the purpose of the companies’ income taxes.

v Local and small manufacturing industries

v The government and those responsible for fiscal policies.

v Student and other researchers who wish to expand this study.

1.4 BACKGROUND OF THE STUDY

For many years even before the colonial era, taxation has been in existence in Nigeria. the local communities then usually tax themselves to promote some of their community project and defense against any attack. It has been a general belief that civilized economic have been able to develop because of taxation.

Taxation is one of the fiscal policies instrument. Here in Nigeria, we have all withnessed different administration and government, the fiscal policy seems to always change, thereby causing flotation in the system.

Taxation is generally seen as a compulsory levy by government through its agencies generate, income, consumption and capital of its subjects.

These levies are made up of personal income, company’s profit and os on. It can be noted that taxation is very vital for the economic development of a country. Its fluctuation will thereby cause an effect (whether favourable or unfavorable) in economy.

Every government with good intentions normally focus an hoe to carry out an effective fiscal policies, that is a process to check public expenditure and shaping of the tax system in order to centre upon.

v Maintenance of a growing high employment

v Increase in business cycle

v Reduction of inflation

v Avoidance of excess demand.

Any taxation policy that hopes to achieve these above named objectives usually have a general effect in the economy i.e. manufacturing and the consuming sector. Taxes are classified in to two categories: direct and indirect taxes.

Direct taxes: this is tax levied directly on individual and companies. Direct tax is made up of personal income tax, company tax and capital gain tax.

Indirect taxes: this is a tax on goods and services example are import and export duties, excise duties.

1.5 DEFINITION OF TERMS

Infant industry: a newly established industry

Tax system: this is a way which government collects tax and utilization of the tax

Taxation: the compulsory contribution to the support of the government levied on persons, income, property, commodity transaction etc. at fixed rates, mostly proportional to the amount on which the contribution is levied.

Manufacturing firms: an independent administered unit of the manufacturing industry.