Empirical Analysis of the Buoyancy and Elasticity of Tax System in Nigeria

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Tax is a major source of government revenue all over the world. Governments use tax proceeds to render their traditional functions such as the provision of public goods, maintenance of law and order, defense against external aggression, regulation of trade and business to ensure social and economic maintenance (Azubike, 2009). The economic effects of tax include micro effects on the distribution of income and efficiency of resources use as well as macro effect on the level of capacity output, employment, prices and growth (Musgrave and Musgrave, 2004). Among all the sources of revenue to government, taxation is the most important one. Owing to the inherent power of government to impose taxes, the government is assured at all times of its tax revenue no matter the circumstances. With modifications as a result of different manifestos of opposing political parties, the government’s ability to impose tax is unlimited. It is in this light of the significance of this source of government revenue that its assessment, effectiveness and collectivity are paramount for optimum benefit (Effiok, 2006).