CHAPTER ONE
INTRODUCTION
BACKGROUND TO THE STUDY
Education has been defined differently by various scholars. Okonkwo (1988) defined education as a cultural action directed at creating attitudes and habits considered necessary for participation and intervention in one’s historical process. According to Okafor in Iwuchukwu (1993) defined education as a process of acculturation through which the individual is helped to attain the development of his potentials and their maximum activation when necessary according to right reason and to achieve hereby his perfect self-fulfillment.
In the view of Uche (1984) education is the process of training and developing of the mental potentials, physical knowledge skills and characters of individuals by formal and informal schooling. But Iwuchukwu (2006) is of the view that the emergence of the national policy on education journey, which began since 1847 with the establishment of British privy council on education. Tertiary institution according to National Policy on Education (1981) are those institution that cover the post-secondary section of national education system which given on universities, polytechnics and college of technology including College of Education, the advanced teachers training colleges, correspondence colleges and institution as may be due to them.
Over the year, it has been conjectural by education experts that one of the major problems military against the realmation of the objectives of establishing tertiary institutions in Nigeria problem of poor funding on this, therefore Ozurumba (1998) said the best education plan could be easily aborted if not supported by adequate funds. Inadequate funding of the system has been a contributing problem in this country. Authenticating this further Amadi (1999) said during the oil boom, the current period of great economic reversals in the petroleum oil sector, financing of education has suffered untold damages.
To this end, tertiary institutions need finance to carry out research in medicine, engineering, education etc they need funds for training and retraining of lectures, acquire state of the art facilities and other amenities that can engender student’s potentials to the overall achievement of the arms and objectives of higher education in Nigeria. Moreso, as a result of the job opportunities available to graduates and our increasing population, there was a demand for higher education which led to the government to introduce tax to education sector.
Tax fund is an amount of money that has been saved or has made available to part to the government so that it can been for a public services. Tax fund is used by the government to maintain and take care of some certain things in the country. Under current Nigeria law, taxation is enforced by the three tiers of government, i.e. federal, state and local government with each having its sphere clearly spelt out in the taxes and levies (approved list for collection) degree 1998, of importance at this juncture however are tax regulations pertaining to investors both foreign and local.
The importance of tax regulations cannot be overemphasized, as most transactions with any ministry, department, or government agency cannot be concluded without evidence of tax clearance i.e. a tax clearance certificate certifying that all taxes due for the three immediately preceding years of assessment have been settled in full. The following are some of the relevant tax regulations in the country.
Value added tax (VAT): This was introduced by the VAT decree No 2 of 1993, to replace the old sales tax. It is a consumption chain and is borne by the final consumer. It requires a taxable person upon registering with the federal board of inland revenue to charge and collect VAT at a flat rate of 5% (recently increased to 10%) of all invoiced amount of taxable goods and services. Capital gaining tax: This accrues on an actual year basis and it pertains to all gains accruing to a tax payer from the sale or lease or other transfer of proprietary right in a chargeable interest which are subject to a capital gains tax of 10% such chargeable assets may be corporate or incorporate and it does not matter that such asset is not situated in Nigeria. Education tax: An education tax of 2% of assessable profits is imposed on all companies incorporated in Nigeria. This tax is viewed as a social obligation placed on all companies in ensuring that they contribute their own quota in developing educational facilities in the country. Personal income tax: The legal basis for this tax is found in the provisions of the personal income tax decree (now act) 104 of 1993.
Tax fund has enable the government to be able to establish or building of schools repairing of roads and other government projects that benefits the citizen. The funding of these higher institutions rested surely on the government which bore this neck breaking burden. Also the government had to introduce new programmes and specialized areas were introduced and facilities, equipment for teaching and learning were provided and the government had to give out scholarship and bursary awards to students.
To alleviate this gigantic burden, the education tax fun (ETF) decree No 7 of 1st January, 1993 was promulgated. It is in the light of this that this study has been designed investigation into the impact of education tax fund on tertiary institutions.