What are the uses of taxation as an instrument of fiscal policy in Nigeria?

Taxation as an instrument of fiscal policy refers to the use of public expenditure and budget by the government to stabilize the economy with a view for achieving some micro economy objective.

What is the role of taxes in fiscal policy?

The two main tools of fiscal policy are taxes and spending. Taxes influence the economy by determining how much money the government has to spend in certain areas and how much money individuals should spend. For example, if the government is trying to spur spending among consumers, it can decrease taxes.

Who sets fiscal policy in Nigeria?

The conduct of economic policy is a shared responsibility of the three tiers of government in Nigeria with federal government having the largest share especially in the area of revenue generation, hence the role of state and local governments in the fiscal policy actions in the past are often disregarded.

What are the problems of fiscal policy in Nigeria?

Nigeria’s lack of effective fiscal rules means that the volatility of revenues from its extensive oil and gas resources spills over into national and local budgets. The resulting swings in government expenditure have cancelled out the positive impact of oil revenues on economic development and poverty reduction.

Is taxation an instrument of fiscal policy?

Taxation: Taxation is a powerful instrument of fiscal policy in the hands of public authorities which greatly effect the changes in disposable income, consumption and investment. An anti- depression tax policy increases disposable income of the individual, promotes consumption and investment.

How taxation can be used as a tool of fiscal policy to Stabilise the economy?

For instance, if output suddenly contracts, policymakers can let tax revenues fall along with income (or even deliberately cut tax rates) and let unemployment benefits increase with the number of unemployed. This maintains income and purchasing power for individuals, and supports demand.

What is an example of a tax policy?

Types of Fiscal Policy Examples of this include lowering taxes and raising government spending. When the government uses fiscal policy to decrease the amount of money available to the populace, this is called contractionary fiscal policy. Examples of this include increasing taxes and lowering government spending.

Is taxation a policy?

Taxation is as much a political issue as an economic issue. Political leaders have used tax policy to promote their agendas by initiating various tax reforms: decreasing (or increasing) tax rates, changing the definition of taxable income, creating new taxes on specific products, and so forth.

When did Nigeria introduce fiscal policy?

Public expenditures have been increasing. The trend shows that the country started in 1961 with a surplus budget until 1970 when it recorded its first deficit of N455.

What are types of fiscal policy?

There are three main types of fiscal policy – neutral policy, expansionary, and contractionary.

What are the three types of fiscal policy?