Taxation and Economic Growth in Nigeria: An Empirical Analysis

Taxation and Economic Growth in Nigeria: An Empirical Analysis

ABSTRACT

The contribution of taxation to any economy globally cannot be overemphasized. Apart from the revenue function it performs for the government, it is also used to assist the national government to achieve the country’s macro-economic objectives in the areas of fiscal and monetary policies. Over the years, It has been observed that a substantial part of revenue generated in Nigeria is from taxes, yet the role of taxation in promoting economic activities and growth is not felt, mainly because of feasible evidences which cannot be seen nor perceived by the citizens in terms of infrastructure and basic amenities. Past documentations have revealed that revenue from taxes in developed nations have high impact on its economic growth which clearly seen by the amenities provided by such nations. Thus, the main objective of this study is to explore the relationship between taxation in Nigeria and her economic growth. Time series data were applied in carrying out this research work. Multiple Linear Regression analysis was used to analyze the data by employing d use of Vector Error Correction Model. The findings reveal that petroleum profit tax, company income tax and value added tax have a positive impact on Nigeria’s economic growth while custom excise and duties impacted negatively but overall, a significant relationship between tax revenue and the Nigerian economic growth exists. The utilization of the generated revenue from taxes calls for serious concern, and requires a special attention of policy makers, non-compliance with tax laws on the part of the tax payers is a hindrance and ineffective administration of tax has given enough loop holes for tax evasion, the consequence of which is poor revenue. We recommend among others that only skilled and professionals and trustworthy hands be responsible for tax administration and the general public should be educated right from the grass root on the importance of taxes to the entire nation.

TABLE OF CONTENTS

Title page
Declaration i
Certification ii
Dedication iii
Acknowledgements iv
Abstract v
Table of contents vi

CHAPTER ONE: INTRODUCTION
1.1 Background of the Study- – – – – – – – 1
1.2 Statement of the problem – – – – – – – 4
1.3 Objectives of the study – – – – – – – 5
1.4 Research Questions – – – – – – – – 6
1.5 Research Hypothesis – – – – – – – 6
1.6 Scope of the study – – – – – – – – 7
1.7 Significance of the study – – – – – – – 7

CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction – – – – – – – – – 9
2.2 Conceptual Issues – – – – – – – – 9
2.2.1 Taxation and Tax administration in Nigeria – – – – 9
2.2.2 Brief History of Taxation System in Nigeria – – – – 13
2.2.3 The Nigerian Tax structure and Tax system – – – – 14
2.2.4 Federal Government Collectible Tax in Nigeria – – – – 18
2.3 Role of Tax Revenue in Economic Growth and Development – – 23
2.4 Review of Empirical Literature – – – – – – 30
2.5 Theoretical Framework – – – – – – – 37

CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction – – – – – – – – – 40 3.2 Research Design – – – – – – – – 40
3.3 Methods of Data Collection – – – – – – 41
3.4 Techniques of Data Analysis – – – – – – 41
3.4.1 Model Specification – – – – – – – – 41
3.5 Data Estimation and Evaluation Technique – – – – 42
CHAPTER FOUR: DATA ANALYSIS AND PRESENTATION
4.1 Introduction – – – – – – – – – 44 4.2 Data Presentation – – – – – – – – 44
4.3 Data Analysis and Findings – – – – – – 45
4.3.1 Stationarity Test Results – – – – – – – 45
4.3.2 The Regression and Specification Tests Result – – – – 46
4.3.3 Co-Integration Test – – – – – – – – 47
4.3.4 Estimated Long Run Relationship using VECM – – – – 48
4.4 Other Robustness Test Results – – – – – – 52

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary – – – – – – – – – 53
5.2 Conclusion – – – – – – – – – 57
5.3 Recommendation – – – – – – – – 58
References
Appendix

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