THE EFFECTS OF CORPORATE TAX ON THE PROFITABILITY OF BUSINESS ORGANIZATION

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THE EFFECTS OF CORPORATE TAX ON THE PROFITABILITY OF BUSINESS ORGANIZATION

ABSTRACT

Lucidly written and properly organized, this term paper/project work “THE EFFECT OF CORPORATE TAX ON THE PROFITABILITY OF BUSINESS ORGANISATION” affords the public, corporate bodies and individual opportunities to view and understand the importance and benefits of the effects of corporate tax on the profitability on business organization.

The first chapter provides relevant introduction that is the origin of corporate taxation in Nigeria.

However, the second chapter provides practical framework x-raying the effect of tax on company’s profitability, tax avoidance and tax evasion and revenue which government generate from tax.

Lastly, chapter three provides the summary, conclusion and recommendations.

The reader must realize that it is through the tax that Federal Government of Nigeria generate revenue to financing its expenditure and provision of infrastructural facilities and services, knowing fully well that reading it in detail will be greatly helpful to readers.

TABLE OF CONTENTS

CHAPTER ONE

1.0 Introduction

1.1 Objective of the study

1.2 Scope of the study

1.3 Definition of terms

CHAPTER TWO

2.0 Literature Review

2.1 Effects of tax on the company’s profitability

2.2 Effect in detail

2.3 Discourage company’s saving

2.4 Double taxation payment

2.5 Increase in prices of goods and commodities

2.6 Tax avoidance and tax evasion

2.7 Revenue which government generate from tax

CHAPTER THREE

3.0 Summary, Conclusion and Recommendation

3.1 Summary of Findings

3.2 Conclusion

3.3 Recommendation

Bibliography

CHAPTER ONE

3.0 INTRODUCTION

This topic “effect of corporate tax on the profitability of business organizations” reveals both the positive and negative ways in which tax payment has affected the profit structure of business organizations.

Meanwhile, it will do us good to briefly discuss the origin of corporate taxation in Nigeria. The universality of taxation account for its description as a popular way of raising revenue by Turner and Hunt (Okoye 1998:7). In that light, Benjamin Franklin is quoted to have argued that in this world, nothing certain but death and taxes. In Nigeria in context, income tax was first introduced in Nigeria in 1904 by Lord Luggard who enacted the first income tax statute when he was the high Commissioner for Northern Nigeria. The colonial government in Nigeria like in all other colonized government in Nigeria introduced various taxes in Nigeria in order to tap the financial resources for their operations from the people. In that situation, government taxation want an extension of the network of exploitation of the colonized people.

The post colonial states unavoidably inherited and sustained taxation as one of the government sources of revenue. The first tax on companies was known as the profit tax. This important step involves the taxation of companies at different rate from individuals and union corporate business was followed during the second world war by the introduction of a system of capital.

The corporate tax as we know was introduction in 1965 in Britain. The recent development of this tax is attributed to the fact that until well after the second world war, the corporate form of business was practically non-existing in Nigeria. Being recent it has therefore not received as much as attention from the populace as personal income tax has.

However, with the growth of the economy, the corporate sectors has expanded considerably, bringing more sharply into focus the problem of taxing corporate income, and at exploiting a potentially source of revenue.

Over one thousand (1000) companies were subjected to company’s income tax. In 1963, compared with only about three hundred and fifty (350) in 1960. Now, comparing these figures with the great number of corporate now in existence, presently, we have about three thousand companies, which are subject to company’s income tax. The manner of taxing corporate incomes has become crucial not only from the point of view of revenue but also from the point of view of stimulating rapid industrialization. This has answered one of the reasons why the government has so much interest in tax as a source of fund/revenue. The huge sum which the government generates from the corporate tax has made the government to put up several act/decrees in respect of corporate tax. In Nigeria, the company tax act was enacted in 1979, several amendments were made to the original ordinance in 1961 when separate laws were enacted for the tax of income and profit of both individuals and companies.

1.1 OBJECTIVE OF THE STUDY:

The term paper is aimed at identifying the positive and negative ways in which tax payment has affected the profit structure of business organizations.

1.2 SCOPE OF THE STUDY:

The term paper work titled “the effects of corporate tax on the profitability of business organization” is divided into three chapters.

Chapter 1 – Introduction

Chapter 2 – Literature Review

Chapter 3 – Summary of Findings, Recommendation and

Conclusion.

1.3 DEFINITION OF TERMS:

CORPORATE TAX: This is tax paid by the company.

PROFITABILITY: To increase profit.

INCOME TAX: This means a tax on income.

REVENUE: It means money/income coming into the government.

PROFIT STRUCTURE: It is a way in which profit is made.