Tax Structure and Economic Growth in Nigeria

Abstract

The development of endogenous growth theory has opened an avenue through which the effects of taxation on economic growth can be explored. Taxes are the importance aspects of government revenue and they also act as means of transferring resources from the private sector to the public sector. Explicit modeling of the individual decisions that contribute to growth allows the analysis of tax incidence and the prediction of growth effects. This paper reviews the theoretical and empirical evidence to assess whether a consensus arises as to how taxation affects the rate of economy growth. It is shown that the theoretical models isolate a number of channels through which taxation can affect growth and that these effects may be very substantial. Although there are empirical difficulties, the empirical evidences point very strongly to the conclusion that the tax effect is very weak.

Keywords: Tax, Structure, Growth, Economic, Nigeria.