The Relationship between Petroleum Profit Tax, Personal Income Tax and Economic Growth in Nigeria

Abstract

This study examined the relationship between petroleum profit tax, personal income tax and economic growth (proxy by real gross domestic product) in Nigeria. Secondary time series data was collected for the period 2005 to 2014 from CBN Statistical Bulletin. The study employed Ordinary Least Squares (OLS) technique based on the computer software Windows SPSS 20 version for the analysis of data, where RGDP (the dependent variable) was regressed as a function of PETA and PITA (the independent variables). The results of the analysis showed that both petroleum profit tax and personal income tax have significantly positive relationship with economic growth. Based on the findings, the study recommended that government should strengthen the tax administration system to broaden the tax income, and embark on tax education to ensure voluntary tax compliance. The study also recommended that government should diversify the revenue base of the economy as the reduction in the price of crude oil at international market would adversely affect income from PETA.

Keywords: Petroleum profit tax, Personal income tax, Economic growth, Government revenue