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    Chapter One 3

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    Chapter One 3

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    Chapter one

    Introduction

    1.0 Introduction

    This chapter will focus on Background of the study, Problem statement of the study,
    Purpose of the study, Research objectives, Research questions , Scope of the study,
    Significance of the study, Operational definitions of the study and Conceptual
    framework of the study.

    1.1 BACKGROUND OF THE STUDY

    Globally, Economic development in Germany is from the intellectual property


    perspective mainly based on the development of higher R&D intensive products and
    services, questioning the economic relevance of utility model protection, what is
    supported by the decreasing application numbers since 1999. The third key factor of
    intellectual property for the German GDP development is according the analysis the
    protection of designs, what supports theoretical assumptions about positive economic
    contributions as well as entrepreneurial protection efforts in practice. Growing
    numbers of German enterprises recognize the economic importance of product design
    beside the ‘‘classical’’ functional characteristics of material, construction or
    technology. The development of matured product markets with close functional
    substitutes, showing only marginal differences in product characteristics, encourages
    enterprises to invest intensively in modern esthetical product solutions, targeting not
    only on customer preferences but also on product differentiation.

    Economic development is considered to be as progressive when the subsequent


    period, in comparison with the previous one, has a higher rate of growth of
    macroeconomic indicators and a lower rate of risk (SD). On the contrary, decreasing
    in growth and increasing in risks are associated with the regressive policy of
    economic development.
    The structural power determined by the economic development in general and the
    situation at the labour market in particular which basically decide the strength and
    bargaining position of the trade unions. Therefore, the unions have a strong interest in
    shifting Germany’s one-sided export-oriented development into a more balanced
    development between export and domestic sectors. At this point the circle will be
    closed as a move towards a more sustainable economic development model in
    Germany requires – among other things – more expansive and more solidaristic wage
    developments.

    In Africa, economic development in some countries through substantial amounts of


    financial inflows or remittances. Cross-border movements of people also contribute
    not only to information sharing and the associated reductions of informational
    frictions across countries, but also stimulate bilateral financial flows as migrants
    create or integrate into pre-existing international business and financial networks
    thereby bolstering business and financial contacts and activities between their home
    and host countries.

    The positive effect of electricity and FFCs on economic development in this supply,
    which may be linked to inefficiency and ineffectiveness in the energy sector. This has
    interfered with the smooth running of most economic activities especially that of
    small enterprises, which happen to be the major source of livelihood and economic
    development. Many people have had to resort to alternative sources of energy with the
    resultant effect of a high concentration of pollutant emissions that generate heat and
    cause climate change.

    Economic development is an economic growth and development that attempts to


    improve the condition of citizens. In other words, sustainable economic development
    is a kind of economy that meets the needs of the citizens without affecting the lives of
    the future generation in responding to their needs .Thus, it is necessary to diversify the
    economy in order to achieve sustainable economic growth and development based on
    the above submission, it can be inferred that, the current situation and condition of Al-
    Major children in the Northern part of the country. Thus, improvement of social
    economic conditions of Al-Major children is essential in order for government to
    address the problem of poverty in the country.
    In Somalia, The study thought to establish the effect of gross domestic product on the
    economic development of Somalia and asked respondent whether higher Gross
    Domestic Product leads to low infant mortality, results from the study indicated that
    majority of the respondents agreed to the statement as shown by the mean value of
    4.08 and a lower standard deviation of 0.902. Infant mortality refers to deaths of
    young children, typically those less than one year of age. It is measured by the infant
    mortality rate (IMR), which is the number of deaths of children under one year of age
    per 1000 live births. In countries with low per head GDP, macroeconomic growth is
    often considered as key policy instrument for improving health. The premise is that,
    economic growth will increase the average income of individuals, especially
    improving the incomes of poor people, which in turn will improve the life quality by
    providing better qualified consumption of goods, have access to health care services,
    better housing and sanitation, leads to reduction in infant mortality.

    There are countless private sector enterprises that are profitable, and some of the
    larger companies have gone global for example Dahabshil, and regional. According to
    Cassanelli (2010), even though the private sector contributed to economic
    development in the country they are also hindering lasting political stability in the
    country. There are incentives to avoid taxation, and a functional taxation system is not
    yet in place.
    1.2 PROBLEM STATEMENT OF THE STUDY

    first surveying the principle features and recent history of corporate taxation, followed
    by considering the incentives that tax systems provide for the behavior of
    corporations. Tax systems encourage firms to use debt rather than equity finance and
    more generally to economize on dividend payments to shareholders. Taxation reduces
    corporate investment and directs investment to assets receiving favorable tax
    treatment. Tax considerations influence particularly strongly the operations of
    multinational corporations, due in part to their ability to choose between jurisdictions
    with different tax features. The location and magnitude of foreign direct investment
    respond to tax rate differences, as does international tax avoidance through financial
    and other means. But in spite of growing knowledge of the effect of taxation on
    corporate activity, it is still not known whether owners of corporations or others in the
    economy ultimately bear the burden of corporate taxes. (View at bus.umich.edu).

    In Somalia, corporate taxation serves as a vital source of revenue for the


    government, but the lack of a well-structured corporate tax system can hinder
    economic development by discouraging investment and stifling business growth. If
    tax rates are too high, they can drive businesses into the informal sector, while low
    tax rates may fail to generate sufficient revenue to support public services and
    infrastructure. The challenge for Somalia’s policymakers is to develop a corporate tax
    policy that promotes business investment while also generating necessary public
    revenue. This research seeks to address this challenge by analyzing the mathematical
    relationship between corporate tax rates and economic development in Somalia.
    (Sahane, 2021)

    1.3 Purpose of the study


    The main objective of the study was to investigate the effect of taxation on economic
    development of Somalia.

    1.4 Specific objectives


    1. To determine the effect of direct tax on Economic Development in Somalia.

    2. To examine the effect of indirect on Economic Development in Somalia.

    3. To assess the benefits of Digital economy on Economic Development in Somalia.

    1.5 The research questions of this study will be:


    In carrying out this research, certain questions need to be answered and these
    questions are:

    I. How the effect of direct tax on Economic development in Somalia?

    II. How the effect of indirect on Economic development in Somalia?

    III. What are the benefits of Digital economy on Economic development in


    Somalia?

    1.6 Scope of the study

    This study is deeply impounded the role in which taxation manipulate the economic
    development in Mogadishu, Somalia.

    The reason I choose to gather data from Mogadishu is that the main office of the
    ministry of finance are located at Mogadishu , and it will be focused gust the way in
    tax effects the development of economic in Somalia . This study will be connected
    between Oct – March 2026.

    This is the period that university board of research has allocated for the students to
    conduct their students.

    1.7 Significance of the study


    The study will also help in shaping and providing a better understanding to citizenries
    how taxation is charged on and its contribution to the economy. More so, it will help
    other researcher to carry out further research on this subject area.

     It also helps to other researchers who are going to conduct a research in this
    field.

     It will contribute to spread this innovative concept “the impact of taxation


    on economic development of Somalia.
     The study also helps for private and non-government sector development,
    and importantly brings the benefits of the development efforts to the
    citizens.

    1.8 Operational definitions of the study


    Mathematical analysis

    The mathematical analysis is presented in detail for the single-phase, miscible


    displacement of one aid by another in a porous medium. It is shown that initial
    boundary value problems with various boundary conditions for this miscible
    displacement possess a weak solution under physically reasonable hypotheses on the
    data. In the second part of this paper, it is proven how the analysis can be extended to
    two-phase aid own and transport equations in a porous medium.

    Economic Development

    Economic development is the creation and use of increasingly sophisticated methods


    of production, often characterized by their “roundaboutness.” Almost any productive
    activity can serve as an example. Let’s take construction. In developing countries,
    construction is a pretty labor-intensive activity.

    Digital Economy

    Digital economy that is more and more dependent on 37 the use of software. Yet
    many questions remain about how countries should benefit from what was achieved
    through Article 12B. We hope our study will be useful in moving forward with
    negotiations within the UN Tax Committee and that more work on the topic will bring
    clarity on a fairer model for international taxation.

    Direct Tax

    The term green taxes describe environ mental taxes or taxes levied with the objective
    of protecting the natural environment. These can be referred to as taxes to control the
    negative effect of certain activities and products on the environment. The idea is to
    dissuade certain ecologically harmful activities and actions by citizens and
    companies, thus encouraging environmentally sensitive decisions and actions.
    Environmentally taxes are such that the cost of the negative externalities or
    unfavorable impact in the economy is incorporated in the prices to ensure production
    and consumption decisions that are ecologically friendly.

    Indirect Tax

    Direct taxation has been influenced by the well-known Atkinson-Stieglitz and


    Chambly-Judd analyses. However, we conclude that the policy relevance of the sharp
    finding of the optimality of no taxation of capital income is thoroughly undercut by
    the implications of large uncertainty about future earnings and the growing disparity
    in earnings as a cohort ages. Adding such uncertainty and disparity to the frameworks
    employed by AtkinsonStiglitz or Chambly-Judd results in the conclusion that taxation
    of capital income or of wealth is indeed part of optimal taxation. Furthermore, the full
    thrust of the ChamleyJudd result depends critically on bequest behavior, but behavior
    assumed in the model is not widespread in the population.

    Indirect Tax

    Indirect tax has contributed to a long animated debate, in political and academic
    circles, regarding the virtues and defects of those two forms of taxation. In this
    chapter we provide an overview of the evolution of the ratio of direct taxes to indirect
    taxes across countries over the past three decades, the theorizing that has gone behind
    the alleged superiority of one form of taxation or the other, the determinants that
    appear to be behind the intensity with which both forms of taxation are used, and the
    economic relevance of the choice of tax structure in terms of economic growth,
    macroeconomic stability, the distribution of income, and the flow of foreign direct
    investment (FDI).

    1.9 Conceptual framework of the study

    IV

    DV
    Corporate taxations

    Direct Tax Economic


    Development in
    Indirect Tax
    Somalia
    Digital economy

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