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PROJECT TOPIC: AN ASSESSMENT OF GOVERNMENT TAX POLICIES ON THE PERFORMANCE OF THE MANUFACTURING SECTOR IN NIGERIA

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CHAPTER ONE

INTRODUCTION

            Nigeria the most populous nations in Africa are governed by federal system, hence her fiscal operation also adheres to his same principle. This has serious implication on how the tax policies are structured and operated in the country. The government fiscal power is based on a three-tier structure divided between the federal, state and local government each of which has different tax jurisdiction. As at 2002, about 40 different taxes and levies are shared by all three levels of government. Since the late 1980s tax policy (a fiscal policy instrument) has become a major tool in Nigeria. The reason for this not for fetched.

            First is the need for reconstruction after the civil war, the industrialization strategy adopted by then import substitution industrialization policy. Second reason for the rise in the role tax policy is the falls in the international price oil in the late 1980s this gave rise to the dominance of fiscal policy of which tax policy is major instrument in the management of the economy. Also the persistent budget deficit since the early 1970s and given the fall in oil revenue made way for the requirement of a new tax focus that saw the emergence of various reforms in tax policy.

            However, buy the sector was observed, that the formal private sector was going extinct, economic activities measured by aggregate output, industrial production non-oil exports etc. were all showing distress signs. Above all there were strong and wide evidence of pervasive and decline in the set up of the manufacturing sector leading to reduced  profitability in spite of increase incentives give to the sector by 1986, all socio-economic indicate were pointing toward the downward direction. In sum, there was severe in balance in the sector, it was apparent that the economy required major structural adjustment.

            The structural adjustment programme was introduced in 1986 to provide t he conceptual frame work for the government participation in the process of industrialization, tax and related policies fro influencing industrial development. It also desired to achieve high economic growth increase in the share of manufactures. Just immediately after the introduction of structural adjustment programme it was observed that the reform measure could not be sustained as the out put of the manufacturing sector was responding negatively.

            In the recent years, the present civil administration in Nigeria is giving a great deal of Allenton to the manufacturing sector in the eye of various tax policies. Through the manufacturing sector not an exclusively sub-sector in the industrial sector but it is a fact that is largely a major sector in the Nigerian economy. It comprises wide range of enterprise mostly producing consumer goods. In order to move from production of consumer goods. In order to move from production of consumer goods only to production of capital goods a number of incentives were put in place to boost capital stock. It is worthy of note that a number of amendments have been made to some of these tax policies. These include the company income tax act 1990, pioneer legislation, of our basic industries which are expected to promote is an appreciation of this, that government embarked on the development of a number of basic industries such as iron and steel, pulp and paper machine tools, petrol chemicals etc. Unfortunately, most of these are yet to operate effectively on account of the well known problems of inadequate supply of raw materials, spare parts, infrastructural constraints and weak managerial capacity.

Administrative and institutional bottle needs industrials have persistently complained above the unfavorable investment climate existing in the country, including bottle neck in the administration of various permits and approved for starting and operating business. This bureaucratic bottle neck coupled with economic indiscipline causes a lot inconveniences and administrative delays and all these business in the country. Also, the lack of clarity of government policy of payment of royalties of transferring industrial technology from abroad.


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