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Tax Revenue and Infrastructural Development in Osun



2 & Lawal Ayofe BAKARE


1Dept. of Accountancy, Federal Polytechnic, Ede


2Dept. of Accountancy, Federal Polytechnic, Ede


& 3PhD student, Dept. of Public Administration, O.A.U., Ile-Ife

Corresponding: 08065162622,


This study examined the relationship between tax revenue and infrastructural development in Osun State.

The study adopted survey research design with the population involving the government officials at the

ministry of finance of Osun state as well as the people of the state. A purposive sampling technique was

used to select a total of 102 respondents for questionnaire administration. The questionnaires were

analysed using descriptive statistics. It was found that tax revenue is a very strong tool for infrastructural

development in the State. Additionally, it was found that the people are not well informed about the

importance of tax; the government is not effectively and efficiently utilizing the tax revenue; there is low

economic situation in the state which influences the level at which people willingly pay tax; people lack

trust in the government of the State; there is lack of accountability and transparency in the government

and that there is lack of adequate data about the taxable people and businesses in the State. In the same

vein, where taxes are not adequately paid by the citizens, the government will depend on only a single

source which is the statutory allocation, there will be low level of infrastructures which will lead to low

economic situation in the State, there will be lack of continuity by succeeding Governments and finally

there will be lack of maintenance of the government properties. The study thus concluded that there was

nexus tax revenue and infrastructural development in Osun State. Government should show some degree

of accountability and honest on the revenue collected to make citizen understand the connection between

tax revenue and infrastructural development. This can be achieved when tax laws, regulation, procedures

and administrative guideline are made public.

Keywords: Tax, Infrastructure, transparency, accountability, development


States are created to among other things, ensure the welfarism of its people as enshrined in the

Constitution of the Federal Republic of Nigeria. Most importantly, the State needs to address issues

relating to social justice, poverty alleviation, housing, health, education and guarantees the fundamental

human rights of its people. At the peak of all these responsibilities is the provision of infrastructures that

will bring the dividend of governance to the people. In an attempt to meet all these provisions, the

constitution stipulates the various sources of revenue to the government; at the centre, states and local

government. Among these sources are the generation of taxes.

Tax revenue is the receipt from tax structures. However, tax revenue mobilization as a source of financing

developmental activities in less developed economies has been a difficult issue primarily because of

International Journal of Innovative Finance and Economics Research 6(2):50-61, April-June, 2018




various forms of resistance, such as evasion, avoidance corrupt practices attending to it (Oluba 2008).

These activities are considered as sabotaging the economy and are readily presented as reasons for the

underdevelopment of the country. Government collects taxes in order to provide an efficient and steadily

expanding non-revenue yielding services, such as infrastructure-education, health, communications

system etc, employment opportunities and essential public services (such as the maintenance of laws and

order) irrespective of the prevailing ideology or the political system of a particular nation (Salami, 2011).

The main aim of this study is to examine the relationship between tax and infrastructural development in

Osun State. The specific objectives are to examine effects of tax revenue on infrastructural development

in the State; examine the factors affecting the tax revenue generation; and analyze the impacts of poor

revenue generation on the development of Osun State.

Statement of Problem

The increasing cost of running government coupled with dwindling revenue has led various State

governments in Nigeria with formulating strategies to improve the revenue base. Despite the numerous

sources of revenue available to the various tiers of government as specified in the Nigeria 1999

constitution, since the 1970s till now, over 80% of the annual revenue of the three tiers of government

come from petroleum. However, the serious decline in the price of oil in recent years has led to a decrease

in the funds available for distribution to the states. The need for state and local government to generate

adequate revenue from internal sources has therefore become a matter of extreme urgency and

importance. Development is a sine qua non for modern civilization. In order to carryout development at

all nooks and crannies of the society, it is the responsibility of the State Government to provide direct

development to people to a certain level. Development is associated with funds and much revenue is

needed to plan, execute and maintain infrastructures at the state level. The needed revenue generated for

such developmental projects like construction of accessible roads, building of public schools, health care

centres, construction of bridges are generated from taxes, royalties, haulages ,fines, and grants from the

states, national and international governments. These funds could either be obtained internally or

externally. Thus, the Osun State Government cannot embark, execute and possibly carryout the

maintenance of these projects without adequate revenue generation.

However, the tax system in Osun State is characterized by evasion and avoidance; both which

significantly reduce the supposed income to the government through tax and as such, the financial

capacity of the State to embark on the infrastructural development could be hindered. Also, there is

widespread false declaration of profit by the few available tax payers in an attempt to reduce their tax

payment. Many petty traders do not maintain adequate record that could assist in establishing accurately,

their incomes for the purpose of determining tax. All these myriad of problems have implications on the

infrastructural development in the State. Thus, this study will attempt to examine the tax revenue vis--vis

the infrastructural development in the State of Osun.

Most of the previous studies in Nigeria such as Adedoku (2006), Oriakhi (2013), Baghedo (2012) and

Nebo and Chgbo (2015) have focused largely on the revenue generation and utilization at federal level

and in few instances on the Local Government level. These studies did not relate tax revenue generation

and utilization to infrastructural development at the state level. In the same vein, most of the studies used

explorative research design and relied solely on quantitate data. However, it has been argued that, since,

many government agencies are usually skeptical of revealing the actual data on the finances, then, it

becomes necessary to think of qualitative data on research of this nature since the people will have

opportunity to freely express their view while their identity is confidentially guaranteed.

Thus, this study is premised on the deficiency of empirical researches on State tax revenue generation and

infrastructural development. Considering the economic situation of Nigeria which has resulted to the

reduction in the supposed federal allocation to the states of the federation, there is a dare need to look

inward and strengthen the tax revenue generation as an alternative to financing infrastructural

development, especially, for a state that solely depend on the federal allocation with few industries like

Osun State; hence, this study.

Ajiteru et al. .. Int. J. Innovative Finance and Economics Res. 6(2):50-61, 2018



Tax and Taxation

Taxation is a compulsory levy imposed on a subject of a state or upon his properly, corporate bodies,

Institutions , etc in order to defray expenses inquired by the government to provide security, social

amenities and create conditions for the economic well being of the society.(Okoi and Edame, 2013).

Taxes are imposed to regulate the production of certain goods and services, protection of infant industries,

control business and curb inflation, reduce income inequalities etc. Tosun and Abizadeh (2005) says taxes

are used as proxy for fiscal policy.

Most states of the federation get the bulk of their revenue in form of statutory allocation from the

federation acc


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