ABSTRACT
This study examined the Effectiveness of Taxation As An Instrument For
the Control of Money in Circulation. Taxation which is an instrument used
by the government to levy individuals and corporations directly or indirectly
as a source of getting money for the maintenance of the state, maintaining
economy stability, boasting aggregate investment, reduce inflation amongst
others is adjudged to be the major source of public revenue. The problem of
the study is that people see taxation as a tool for the exploitation of the
ordinary man by the government and has generated a great deal of
sentiments among taxpayers, some of who argue that the government
unjustifiably rid them of investments and consumption income. The main
objectives of the study are to examine the important role of taxation in an
economy, to evaluate the various types and classes of taxation, to identify
the major problems of taxation, and to determine the impact of taxation on
money in circulation. The research questions and hypotheses are structured
in line with the objectives of the study. The research is survey and empirical
in nature. The main source of data for the study is secondary data. The
instrument used for data collection include data on petroleum profit tax
(PPT) and company income tax (CIT), paid by quoted companies in Nigeria
spanning the period of 1999 to 2007 which was available. The average
money in circulation (AMC) are also obtained for each year, and are
classified according to the total tax collected (PPT + CIT) = Total tax
collected (TTC). Data were analysed through the statistical tools of simple
Linear regression and correlation analysis. Therefore, the correlation
coefficient between the Total Tax Collected (TTC) and the Average
Money in Circulation (AMC) shows that there is a positive linear
relationship.
The study found that the chief source of revenue for most
industrialized countries is the income tax. The income tax is levied on both
individual personal incomes and corporations profit. The work concludes
that taxation is a veritable instrument used by government authorities to
regulate and collect sums of money from both natural and legal persons for
the benefit of the whole citizens. On the other hand, taxes reduces a tax
payers wealth (money) and this causes the individuals to re-arrange his/her
economic priorities. The study recommends that more generalized rates
should be enforced to reduce tax avoidance and tax evasion. This will
broaden the base and reduce the tax burden on a few individuals and firms.
The study suggests that further work be carried out on this particular topic
with emphasis on the areas which are not covered by this work.
