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TABLE OF CONTENT

CHAPTER ONE

1. Introduction                                                                            1

1.1     Background of the study                                                         1

1. Statement of problem                                                    2
2. Purpose of the study                                                      4
3. Significance of the study                                                         4
4. Definition of terms                                                                  5

CHAPTER TWO

1. Review of related literature                                            8

2.1     The origin of corporate tax in Nigeria                                     8

1. Why the corporate tax                                                   10
2. Corporate tax as a tool of checking inflation and deflation.13
3. Government effort towards to check taxation                         14
4. Cannons of taxation                                                      16
5. The effect of taxation on economic activities                           18
6. The incidence of taxation                                                        19
7. The effect of corporate tax on the profitability of business organization.                                                            20

CHAPTER THREE

1. Findings                                                                         22
2. Conclusion                                                                     23
3. Recommendation                                                           23

Bibliography                                                                           25

Journals                                                                                   26

 

CHAPTER ONE

1. INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Prior to the colonial era in Nigeria, taxes were paid from produce, cowries, etc to the chiefs in the form of tribute. In the Northern region, cows were used to pay taxes.

The legal history of Nigeria tax system can be traced to Nigeria native custom and tradition, where in spite of the denial of the name law to customary by John Austin. Under the native customs and traditions, Nigerians cheerfully pay their taxes in kind by rendering free services to the community in which they lived, the few tax defaulters were punished by erecting community building, such as the manor house at Iseyin or by slaughtering their fattest cattle for the benefit of the community.

Customary law is based only on those traditions and customs of the people which can be enforced by the local community or the Oba. The three major tax laws were passed in the country in 1961 immediately after independence. They are the

1. Federal Income Tax Act (FITA)
2. Income Tax Management Act (ITMA) and
3. Company Income Tax

 

During this time, the state had the legal basis to impose and collect taxes in the areas of jurisdiction until 1979, when the Federal Government amended the company Income Tax Act (CITA). The imposition of tax is in the concurrent legislative list. Federal Government reversed the exclusive right to impose tax on both persons and companies. However, states are allowed to collect tax in the way they deemed appropriate.

 

1. STATEMENT OF PROBLEM

Corporate tax from the promulgation of company income tax act (1979) has been a thorn on the flesh of the government. This is because a reasonable percentage of the federal government revenue is derived from the company income tax.

 

Over the years, the Government had kept on adjusting the tax rates and capital allowances, all to make for an economy that can conveniently sustain its citizens. The company under review had taken the advantage made available by the board to make a reasonable impact in the economy. The government has all the while been busy designing and creating instrument to get more tax payers into the net. Question of the impact of corporate tax on the profitability of business organization revolves around the following questions:

1. Has corporate tax created any impact on the profitability of

     business organization?

1. Has corporate tax any impact on the capital base of the

      Company?

1. How has the tax rate adjustment affected the employment rate in the company?
2. What could be said to be the relationship beween the company’s output and tax rate?
3. Has corporate tax affected the social responsibility function of the company?
   1. PURPOSE OF THE STUDY

The objectives of this study are:

1. To balance the capital base of the company with the company income tax adjustment.
2. To weigh the impact of corporate tax on the profitability of business organization.
3. To find out what effect corporate tax posed on the company’s annual output.
4. To check how the company has faired on social functions, considering tax.

 

1. SIGNIFICANCE OF THE STUDY

The study has the following significance:

1. Serve as a guide to the company executives in proper management as regard to tax matters.
2. It also serves as a guide to people who are intending to incorporate companies.
3. It is also of great need to banks and finance business executives in the business of giving credit facilities to companies.
4. The study serves as a guide for future governmental policy formulation on the formation of companies in the society.
5. It reveals to the federal Board of inland Revenue the need to institute serious measures of checking avoidance and evasion among companies.

 

1. DEFINITION OF TERMS

1. TAX: this is a compulsory levy a government imposes on the income of the citizens of a state for which the government makes no direct benefits to the tax payer.
2. COMPANY OR CORPORATE: this is a legal person or entity created by the association of number of persons in accordance with the law, for the purpose of a defined objective.
3. PROFITABILITY: this is the total net profit or gain made by a company from its selling activities.
4. TAX EVASION: this is a deliberate attempt not to pay taxes and it is an illegal act.
5. TAX AVOIDANCE: this is an attempt to exploit the flaw or loopholes in the tax laws with a view to not paying the required tax.
6. PROPORTIONAL TAX: this is a tax system where by all tax payers pay the same percentage or proportion of their income in tax.
7. PROGRESSIVE TAX: this is the system of tax whereby tax is paid according to the income of the tax payer.
8. REGRSSIVE TAX: this is the tax system that allows the higher income earners to pay lower tax and the lower income earners to pay higher tax.
9. FISCAL POLICY: this is a deliberate government policy which is designed to change the level of government expenditure or varying the level of taxation or both, for the purpose achieving some desired economic objectives.
10. INFLATION: this is a continuous rise in prices of goods and services. That is a situation of persistent increase in the supply of the commodities.
11. DEFLATION: this is also a period of time when there is a continuous fall in the general process and costs of commodities.