A PROPOSED FORMULA FOR HORIZONTAL REVENUE ALLOCATION IN NIGERIA

Virtue U. Ekhosuehi () and Augustine A. Osagiede ()
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Virtue U. Ekhosuehi: Department of Mathematics, University of Benin, Benin City, Nigeria
Augustine A. Osagiede: Department of Mathematics, University of Benin, Benin City, Nigeria

Asia-Pacific Journal of Operational Research (APJOR), 2012, vol. 29, issue 06, 1-16

Abstract: In this study, we have applied optimal control theory to determine the optimum value of tax revenues accruing to a state given the range of budgeted expenditure on enforcing tax laws and awareness creation on the payment of the correct tax. This is achieved by maximizing the state's net tax revenue over a fixed time interval subject to certain constraints. By assuming that the satisfaction derived by the Federal Government of Nigeria on the ability of the individual states to generate tax revenue which is as near as the optimum tax revenue (via the state's control problem) is described by the logarithmic form of the Cobb–Douglas utility function, a formula for horizontal revenue allocation in Nigeria in its raw form is derived. Afterwards, we illustrate the use of the proposed horizontal revenue allocation formula using hypothetical data.

Keywords: Cobb–Douglas utility function; horizontal revenue allocation; optimal control theory; Vidale–Wolfe advertising model (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0217595912500339

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