1.1 Background to the Study
Revenue generation in the Local government is principally derives from rates/taxes. Tax is a compulsory levy imposed by government on individuals and companies for the various legitimate function of the state. (Olaoye, 2008), Tax is a necessary ingredient for civilization. The history of man has shown that man has to pay tax in one form or the other, which is either in cash or in kind, initially to his chieftain and later on a form of organized government. (Oyo, 2013) No system or rules can be effective whether foreign or local unless it enjoys some measures of financial independence. Development is a sine qua non for modern civilization. In a crusade and struggle to carryout development at all nooks and crannies of the society, local government as a third tier of government and the closest to the people at the grassroots, is saddled with the responsibility of direct development of the rural populace to a certain level.
As a grassroots-based government, consisting of small units of local communities upon which political powers are developed to cater for their needs, local government serves as a valuable instrument for rapid and even development of local communities. As a community-based Authority, it creates a great sense of “we-feeling” among the people of the area. The sense of “we-feeling” fosters commitment to common cause that makes the mobilization of the people possible. It therefore seeks to exploit, tap, mobilize and harness the available human and material resources of local communities for rapid socio-economic and political development. For local government system to serve as valuable instrument for rural transformation, it must possess sound and strong financial base.
Furthermore, finance constitutes the life wire of any organization whether it is public or private, central or local government, organization therefore, needs the internally generated revenue in carrying out its developmental projects. Such as construction of accessible roads, building of public schools, health care centers, good pipe-borne water, constant electricity supply, construction of bridges among others. Local government cannot embark, execute upon, and pass on possibly, or carryout the maintenance of these projects and other responsibilities without adequate revenue generation . This is the basic reasons why development is skeletaled at some local government councils in Nigeria. The rationale behind the revenue generation at the grassroots level was to help: improved standard of living in the rural communities, and this improvement in standard of living can be done through provision of employment, provision of good social amenities such as good road network , mass transit-transport services well equipped primary health care centers, clean pipe-borne waters,, constant electricity supply, building of public schools and skills acquisition centers for those that were not opportune to be in school. When the above mentioned infrastructural facilities are provided to the rural populace, the people will see to it the need and the necessity to pay tax without being forced to do so.
Adedeji (1979) capped it all when he declared that, the success or failure, effectiveness and ineffectiveness of local government depend largely on the financial resources available to the individual local government and the way these resources are being utilized.
1.2 Statement of the Problem
Revenue generation in Local Government is faced with myriads of problems ranging from corruption, embezzlement, mismanagement of funds by local government representatives. And all these problems distorted the development of rural areas in Akwa Ibom state, the measure issue here is; what has contributed to the non performance of the local government in developing their rural communities in the state?
Could it be as a result of total dependence on federal and state statutory allocations?
Could ineffective utilization of available scare resources or mismanagement of funds by public officials distort rural development in Akwa state?
Is it as a result of lack of professional training of tax collectors that causes under-development in Oron Local Government?
Could it also be as a result of inadequate enlightenment on the need for rural populace to pay taxes that has caused set-back in the development of rural areas in Oron Local Government?
Finally, is the under development of Oron Local Government caused by inability of local government to enforce bye-laws that could enhance their revenue collection exercise?
1.3 Objectives of the Study
The broad objective of this study is to examine how revenue generation affects rural development in Oron Local Government.
The specific objectives of the study are:
To determine the relationship between internally generated revenue and the development of rural areas in Oron Local Government.
To determine if the competencies of tax collectors in Oron Local Government enhance rural development in the area.
To examine whether corruption among officials in Oron Local Government undermined rural development in the area.
1.4 Research Questions
Is there a significant relationship between internally generated revenue and rural development in Oron Local government Area?
Is there any significant relationship between the competences of the tax collectors in Oron local government as compared to the level of rural development in the area?
Does corruption among public officials undermined rural development in Oron local government.
1.5 Research Hypotheses
Hypothesis is theoretical and conceptual idea or quest regarding how researcher thinks; the result of the study will look. It consists of a set of assumptions accepted previously as a basis of investigation. It is a proposition that is yet to be tested for its validity. For the purpose of this research study, the following hypothesis were formulated.
H1: There is a significant relationship between internally generated revenue and the development of Oron Local Government Area.
H2 There is a significant relationship between the competence of tax collectors in Oron local government area and the level of rural development in the area.
H3: There is a significant relationship between corruption of public officials and rural development in Oron local government area.
1.6 Significance of the Study
From the outlook, there is need for the Local Government to improve their performance. However, the research is significantly considering the closeness of local government to the grassroots people and the need to utilized substantial revenue from its various sources in addition to federal and state allocations for rural development. This study will help in identifying some measures of generating revenue that has been neglected over the years In Oron Local Government Area. The study will also enlighten local government officials on the areas of needs for the development of rural areas. Hence, this study will enhance our knowledge towards effective management of internally generated revenue.
Finally, it will be paramount significant to the society as it will enable new researchers to have an in-depth knowledge of the study. This significance of this study is by no means
1.7 Scope and Limitations of the Study
The scope of this research work is concerned with revenue generation and development of the rural areas in Akwa Ibom state with Oron as the case study.
Also, the research work is not devoid of limitations. This implies that the researcher encountered some limitations in carrying out this research work, some of which include;
Lack of funds to gather information in the study area
Lack of adequate information. This is because most revenue officials proved adamant in giving out information to the researcher
Above all, there is also insufficient data on the amount of government revenue due to corruption, thus the researcher could not estimate government revenue and the level of development in the rural areas
Time constraint was also a major obstacle to this research work
Definition of Terms
Some concepts require proper explanation to enhance our understanding of the terms, where necessary opinions of scholars will be cited to explain the terms.
Local governments: Local Government according to Lawal (2000) is a political sub-division of a nation of federal system which is constituted by laws and has substantial control of control of Local affairs which includes; the power to impose taxes or exact labour for prescribed purpose. According to William Robson (2006) defined local Government as involving the conception of territorial non-sovereign community, the legal right and the necessary organization to regulate its own affairs.
Public Revenue: This could be defined as the funds generated by government to finance its activities. In other words, revenue is the total fund generated by government (federal, state and local governments to meet their expenditure for a fiscal year). It is also refered to as grand total of money or income received from the source of which expenses are incurred. Revenue could be internal or external.
Generation: This is the process of sourcing revenue for the local government in carrying out their aim or objectives.
Expenditure: Public expenditure refers to the expenses which the government incurs for its maintenance in the interest and the economy in order to help other countries.
Tax: Tax can be defined as a compulsory levy imposed by government on goods, services, income and wealth. It provides definite source of revenue for government expenditure. Tax could be direct or indirect tax. A tax is a payment made by the tax payers and used by the government for the benefits all the citizens.
Tax avoidance: Tax avoidance is the act of streaming ‘ones’ financial affairs within the law so as to minimize the tax liabilities.
Development: According to Ake (2001) development is the process by which people create and recreate themselves and their life circumstances to realize higher levels of civilization in accordance with their own choice and value. It is also type of social change in which new higher per-capital income and levels of living through more modern production methods and improved social organization.
EFFECT OF REVENUE GENERATION ON RURAL DEVELOPMENT A CASE OF ORON LOCAL GOVERNMENT