Taxation and National Development

Abstract

The main objective of this paper is to investigate taxation and national development using a small macro econometric model estimated for 1970-2010. Based on the least squares methodology, we specified a lin-log model of Human Development Index as a proxy for national development. An important finding was that taxation has a very positive impact on national development of Nigeria, especially in its socio-economic contribution since the 1970’s. The findings show that Petroleum Profit Tax, Company Income Tax and Excise Tax respectively exhibit a positive relationship with the level of national development. Also, a negative relationship exists between corporate tax and Human Development Index. The Johansen and Juselius (1988) maximum likelihood procedure shows that a long-run relationship exists among the variables. We recommend a developed federal fiscal system that could guarantee the full potential of taxation in achieving developmental targets.