Taxation as an Instrument of Economic Growth (The Nigerian Perspective)

Abstract

This paper examines taxation as an instrument of economic growth in Nigeria. Using annual time series data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin during the period 1980 through 2013, a linear model of Corporate Income Tax (CIT), Value Added Tax (VAT) and Economic Growth (GDP) was estimated using the Ordinary Least Square (OLS) technique.  The empirical resultsuggests that the hypothesized link among corporate income tax, value added tax and economic growth indeed exist in the Nigerian context. Thus the result offer tantalizing evidence that taxation is an instrument of economic growth in Nigeria. This conclusion points to the need for additional measures by government in ensuring that taxpayers do not avoid and evade tax so that income can be properly redistributed in the economy. In addition, regulatory authorities charged with the sole responsibility of collecting tax should further be strengthened to enforce compliance by taxpayers. Above all, the tax collected should be properly distributed so that economic growth can be properly harnessed.

Keywords: Taxation; Economic Growth; Development; Time Series Data;Nigeria