The impact or effect of tax incentives and its associated economic and industrial development is studied in this research project. The study specifically focused on three selected industries (small scale) : Industrial Promoter Nigeria Limited Aba, Spring Field Nigeria Limited, Deluz Paints Industrial Limited – Enugu.
The problem for this research work is to ascertain if the available tax incentives in Nigeria have achieved its objectives.
The purpose of the study is to establish the type of relationship that exist between tax incentives and growth and development of small scale industries in the state. To ascertain if really tax incentives stimulate small scale industries to improve on the level of their investments.
Questionnaires were distributed to the staff, interviews were used to extract information where questionnaire could not perfectly clarify. Firstly, frequency distribution tables and further, correlation coefficient and chi-square were used to test hypothesis one and hypothesis two respectively.
A number of findings were made, and it was discovered that small scale industries that benefited from tax incentives experienced an increase in their productive assets, capital investment and working capital formation. Also, tax incentives do not only play a stimulant role to the small scale industries but act as an indicator to the industries signaling them to the specific sector of the economy that should prioritize their investment decision. Among the findings in the effect of the incentives on the employment level. These incentives influences positively the investment development that leads to diversification thus increasing employment level.
The researcher further discovered that five year tax relief period for small scale industries is not enough for realization of the objectives of these schemes.

In view of these findings, the research recommends that the five year tax relief period to small scale industries be extended to ten year period. This is to ensure that they can favorably content with the competition from bigger firms. Finally, government should adjust the system of tax administration. The tax administrators should be adequately educated and more tax enlightenment programs be extended to the public to create enough awareness about the tax existence and objectives of the tax incentives scheme.

The year 1926 was a year of depression-slack in overall economic activities in Britain which led to decline of the total earnings of the economies, shortage of fund in the private sector and reduction in income per capita in Britain.

It was at this juncture that the economic world formulated various fiscal policies. The main and prime objective of these policies was to revive, rehabilitate and mobilize enough capital to provide for economic and social expenses and to raise the crunched standard of living of citizens. It was this period that the term, Fiscal Policy called TAXATION came into existence.

The direct taxation in its reformed pattern was introduced in Nigeria in 1904 by Lord Lugard, the then British High commissioner for Northern Nigeria with the issue of the land revenue proclamation for Northern Nigeria. In other words, income tax was introduced into Nigeria in 1904 and that was when community tax became very operative in Northern Nigeria.

It is important to realize that the present tax laws in Nigeria were developed or formulated from the Raisman’s commission of enquiry of 1957. Before now, there were the income tax ordinances for colonies and which was rather common in all the colonies and the provisions were similar. Raisman’s recommendation was the basis for providing in section 70; subsection 1 of the Nigerian constitution Order in council of 1960 which conferred an exclusive power on parliament to make for Nigeria or any part thereof with respect to personal income tax.

In exercise of these powers, the Federal Government enacted the Income Tax management Act, 1961 (ITMA) on April 1. But before ITMA, Lagos territory was being administered as a region and the personal income tax (Lagos) Act, 1961 was enacted for it separately. But when ITMA ’61 came into operation, all the other regional laws on taxation were amended to bring them into conformity with federal law.

As previously mentioned, the earliest trace of any form of direct taxation in Nigeria according to Ezejelue (1981:33) even before the British administration “was in Northern Nigeria” it was relatively easy to introduce the reformed system in the North because the tax-paying tradition had already been established there. Unlike the South, the North had a form of organized central administration under the Emirs. The spirit of Mohammedanism which made it possible for people to contribute towards charity, afforded a religious foundation for direct taxation in the North.

This tradition of direct taxation found expression in a number levies and forms of taxes existing in the North long before 1914.

These included in Zakat, Kurdin Kassa, Shukka Shukka, Jangeli and Kharat which according to Mrs. Iheduru were grain tax, agricultural tax, plantation tax, livestock, and community tax respectively.

According to Okigbo (1955:80) they were so varied, perplexing and complex that in the 1880’s the problem as seen by the Royal Niger Company (RNC) was not how to introduce new tax forms but how to simplify the existing forms.

All this time, southern Nigeria was separately administered until 1914 when North and South were amalgamated. It was not easy to impose direct taxation on the.....

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