Tax studies have become increasingly sophisticated especially during
the past decade and have yielded conflicting results as regards the tax
matter. Some studies focus on the cost and benefit of tax incentives while a
few look at whether public funds could have been better spent or if tax
incentives were economically justified. Tax studies offer little guidance to
policy makers who are concerned about tax rates or tax offerings and the
effectiveness of employing tax incentives as an economic and developmental

The mode by which industrial development and economic growth can be effectively, efficiently, stimulated and developed is very demanding. As a result of this, the government charges less tax and gives tax holidays in order to encourage investments and economic activities in those areas which help to improve production capabilities, activate economic growth as well as the allocation of resources in a socially desirable manner. Investors often emphasize on the relative importance of a good tax system in investment decisions compared with other considerations such as political and economic stability, availability of social infrastructure, securite  of the life and property and also the general cost of doing business and so on. To the prospective investor, the general feature of a tax system (tax base rate) is more important than the tax incentives in many developing countries. The tax laws are not clearly written and may be subject to frequent review which makes long-term planning difficult for businesses and add to the perceived risks of undertaking major capital intensive projects.

Taxation is a process or means through which communities or groups
are made to contribute a part of their income for the sole purpose of societal
administration while tax, is a compulsory levy levied on the people at a
given place for the sole purpose of government revenue for government
Tax incentive itself, is the use of government spending and tax policies
to influence the level of national income. This measure encourages the
springing up and gradual growth of new enterprises by the reduction of
profit tax, which in turn encourages production, influences the production
level and curbs unemployment. So, the government should provide such tax
incentives in order to boost development which will bring about an increase
in employment opportunities and also cause an improvement in the

Amadiegwu (2008:74), a tax expert wrote that the objective of tax
incentive is that by borrowing rather than taxing, the government has a
better chance of expanding investment spending which is essential in
enlarging production possibilities and attaining a sustainable improvement in
the standard of living of the people.

Dotun and Sanni (2009:265), in their Nigerian companies taxation
stated that these incentives can be targeted on the low income earners, local
and developing industries, farmers, which will increase their savings and is
necessary for higher investment. Tax incentives create employment
opportunities for the people, helps to fight economic depression and inflation
thereby increasing the equitable distribution of income and wealth.
A good economic development policy should contain the following

Goals and objectives create a context for accountability as regards the
use of economic and developmental incentives. Common goals used in
economic development include targeted economic sector growth, business
retention and/or recruitment, geographic focus, job creation, light
mitigation, improving on distressed areas and environmental improvements.

An economic development policy should define the type of incentives
and the extent to which the government will use them. For example, the
government may decide to grant an entitlement to any firm that meets the
minimum required qualification or may choose to provide incentives based
on the assessment of individual firms. Government may also establish
maximum funding for a particular process.

A clearly defined evaluation process should be outlined in an economic
development policy for the purpose of consultancy and transparency which
How the purpose of the tax incentive measures up to establish
development criteria.
A cost benefit analysis An evaluation of a tax based impact both in terms of increase in
taxable value.
Economic and industrial development incentives Act (2008) both
financial and non-financial include a broad range of tools ranging from
expected planning processes to direct or indirect funding. Government often use these incentives to pursue specific economic goals such as tax base diversification, job creation, business retention, and expansion that are
usually set by the government which consists of both the federal, state and local practice. The use of financial incentives to benefit private parties introduces risk factors which are not generally present in other public
financial management areas. For this reason, economic incentives must be based on a policy that establishes parameters for their appropriation in relation to the economic developmental goals of the government.