Impact of Tax Revenue on Economic Growth in Nigeria

Abstract

The study investigated the impact of tax revenue on economic growth in Nigeria, Annual time series data were obtained from the Central Bank of Nigeria Statistical Bulletin for the period 1981 to 2015 on the variables used for the study. Unit root test was conducted using Augmented Dickey-Fuller test technique and the result showed that the variables were stationary though at different levels. Co-integration test was also conducted using Johanssen co-integration test method and the result showed that the variables in the model were co-integrated meaning that the variables have a long run relationship. The regression result showed that petroleum profit tax, company income tax and custom and excise duty have a positive and insignificant impact on the economic growth in Nigeria.  Non oil revenue has a positive and significant impact on the economic growth in Nigeria. The R-squared value showed that about 98.4 percent of the total variations in the dependent variable were explained by changes in the explanatory variables. The error correction result showed that the speed of adjustment to long run equilibrium is 52.4 percent when any past deviation must be corrected in the present period. Based on the findings, it was recommended that government agencies responsible for administration and collection of taxes should ensure that there is effective supervision and monitoring of all taxable activities so as to ensure that tax avoidance and tax evasion are reduced as this will help in generating more tax revenue for the government. Government should also ensure that all revenues collected (tax revenues and non-oil revenue) are transparently accounted for. Moreover, government should ensure tax revenues collected are used to provide adequate social amenities to the citizens as this will motivate them in complying to tax laws.

Keywords: Petroleum profit tax, Company income tax, Tax revenue, Economic growth

DOI: 10.7176/EJBM/11-24-02

Publication date: August 31^st 2019