Global Journal of Management and Business Research, B: Economics and Commerce, Volume 20 Issue 1

government in this case the incidence of tax is borne by either the producer or the final consumer or shared by both. Taxation Principles Business Dictionary.com defined as basic concepts by which a government is meant to be guided to designing and implementing an equitable taxation regime. These include: 1. Board Basing: Taxes should be spread over as wide as a possible section of the population, or sectors of the economy, to minimize the individual tax burden. 2. Compatibility: Taxes should be coordinated to ensure tax neutrality and overall good governance. 3. Convenience: Taxes should be enforced in a manner that facilitates voluntary compliance to the maximum extent possible. Bhartia (2009) noted that the time of payment, the manner of payment, the quality to be paid ought to all be clear and plain to the tax payer and every other person. 4. Earmarking: Tax revenue from a specific source should be dedicated to a specific purpose only when there is a direct cost – and- benefit link between the tax source and the expenditure, such as the use of motor fuel tax for road maintenance and also education tax for buying educational materials. However, what we are experiencing today in Nigeria is fiscal indiscipline, corruption and misappropriation of funds. 5. Efficiency: Tax collection efforts should not cost an inordinately high percentage of tax revenue. This principle seems to be lacking in Nigerian tax system. World Bank Report says that for every N100 that business has to pay in taxes, they pay about N30 in compliance costs. According to the minister of finance Okonjo-Iweala, this is a waste of capital. 6. Equity: Taxes should equally burden all individuals or entities in similar economic circumstance. Equity Principle states that tax payer should pay the tax in proportion to his income (Anyanfo (1996) cited in Ogbonna & Ebimobowei, 2012) 7. Neutrality: Taxes should not favour any one group or sector over another, and should not be designed to interfere with or influence individual decisions making. 8. Predictability: Collection of taxes should reinforce their inevitability and regularity. 9. Restricted Exemptions: Tax exemptions must only be for purposes (such as to encourage investment) and for a limited period. 10. Simplicity: Tax assessment and determination should be easy to understand by an average tax payer. 11. On both equity and simplicity principles, Anyanfo (1996) “states that it is only when a tax is based on the tax payer’s ability to pay can it be considered equitable or just”. He argued that tax law should be transparent. v. Personal Income Tax According to Anyawu (2007) Personal income tax is a levy imposed by the government of a country on its citizens, individual or entities known as the taxpayers. The levy imposed on the taxpayers is such that it varies with the level of income or profits of the taxpayers. Taxes imposed on the personal income of an individual taxpayer are termed “Personal Income Tax”. Thus, personal income tax signifies taxes imposed on the personal income of the individual. These taxes are imposed on the income of the individual on a basis of ‘Pay as You Earn” (PAYE) and the individual taxpayer must be an employed person and expected to file returns on a yearly basis. vi. Tax Reform in Nigeria The role of taxation in every economy cannot be over emphasized, that is why every nation is working tirelessly to have a good tax law: Ogbonna and Ebimobowei (2012) highlighted numerous tax laws being enacted in Nigeria. Here, we enumerate only nine (9) bills on tax reforms recommended by study group on the Nigerian Tax System as follows: Federal Inland Revenue Services Act 2004, Companies Income Tax Act 2004, Petroleum Profit Tax Act 2004; Education Tax Act 2004, Customs, Excise Tariffs etc. (Consolidation) Act 2004; National Surgeon Development Act 2004; and National Automobile Council Act 2004. vii. Economic Development Economic development is the sustained, concerted actions of policy makers and communities that promote the standard of living and economic health of a given area. Economic development can also be referred to the quantitative and qualitative changes in the economy. Economic development requires collective action and large-scale, long-horizon investment. Economic development addresses the fundamental conditions necessary for the micro economic functioning of the economy. It is within the purview of government. Though it is certainly possible to have growth without development in the short or even medium-term, economic development creates the conditions that enable long-run economic growth. Jobs are a main concern of policy: for growth what matters is the number of jobs while for economic development the focus is wages, career advancement opportunities, and working conditions (Feldman & Francis, 2003). value gained or added on the products before being sold, VAT is an output tax less input tax. He went further to say that VAT is one of indirect taxes collected by the © 2020 Global Journals 15 Global Journal of Management and Business Research Volume XX Issue I Version I Year 2020 ( ) B The Effect of Pay as you Earn on Social and Economic Development in Nigeria iv.