Taxation and Inflation in Nigeria: An Empirical Analysis

Abstract

This study examines the role of taxation as a tool for addressing the challenges of inflation in Nigeria. Data for this study were gathered from Annual Abstract from the Office of National Bureau of Statistics and the office of the Federal Inland Revenue Service for a period of twenty years (1994 to 2014). The data gathered were thereafter analyzed using the error correction model (ECM) and from the analysis the paper revealed that all the variables (companies income tax, value added tax and custom and excise duties) had a positive and a non-significant relationship with inflation. However, from the conclusion the paper recommended that the government and policy makers should formulate an active tax policy to curb the issue of inflations in Nigeria and there should be a review of the periods where Nigeria witnessed lower inflation rates to see whether or not taxation (indirect taxes) played a role in ensuring the low inflation rate and then the successive introduction of the policies as it relates to taxation in the subsequent period.

Keywords: companies income tax, value added tax, custom and excise duties, inflation

DOI: 10.7176/RJFA/10-4-11