Economics

Taxation and Economic Growth in Nigeria: An Empirical Analysis

Taxation and Economic Growth in Nigeria: An Empirical Analysis

ABSTRACT

The contribution of taxation to any economy globally cannot be overemphasized. Apart from the revenue function it performs for the government, it is also used to assist the national government to achieve the country’s macro-economic objectives in the areas of fiscal and monetary policies. Over the years, It has been observed that a substantial part of revenue generated in Nigeria is from taxes, yet the role of taxation in promoting economic activities and growth is not felt, mainly because of feasible evidences which cannot be seen nor perceived by the citizens in terms of infrastructure and basic amenities. Past documentations have revealed that revenue from taxes in developed nations have high impact on its economic growth which clearly seen by the amenities provided by such nations. Thus, the main objective of this study is to explore the relationship between taxation in Nigeria and her economic growth. Time series data were applied in carrying out this research work. Multiple Linear Regression analysis was used to analyze the data by employing d use of Vector Error Correction Model. The findings reveal that petroleum profit tax, company income tax and value added tax have a positive impact on Nigeria’s economic growth while custom excise and duties impacted negatively but overall, a significant relationship between tax revenue and the Nigerian economic growth exists. The utilization of the generated revenue from taxes calls for serious concern, and requires a special attention of policy makers, non-compliance with tax laws on the part of the tax payers is a hindrance and ineffective administration of tax has given enough loop holes for tax evasion, the consequence of which is poor revenue. We recommend among others that only skilled and professionals and trustworthy hands be responsible for tax administration and the general public should be educated right from the grass root on the importance of taxes to the entire nation.

TABLE OF CONTENTS

Title page
Declaration i
Certification ii
Dedication iii
Acknowledgements iv
Abstract v
Table of contents vi

CHAPTER ONE: INTRODUCTION
1.1 Background of the Study- – – – – – – – 1
1.2 Statement of the problem – – – – – – – 4
1.3 Objectives of the study – – – – – – – 5
1.4 Research Questions – – – – – – – – 6
1.5 Research Hypothesis – – – – – – – 6
1.6 Scope of the study – – – – – – – – 7
1.7 Significance of the study – – – – – – – 7

CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction – – – – – – – – – 9
2.2 Conceptual Issues – – – – – – – – 9
2.2.1 Taxation and Tax administration in Nigeria – – – – 9
2.2.2 Brief History of Taxation System in Nigeria – – – – 13
2.2.3 The Nigerian Tax structure and Tax system – – – – 14
2.2.4 Federal Government Collectible Tax in Nigeria – – – – 18
2.3 Role of Tax Revenue in Economic Growth and Development – – 23
2.4 Review of Empirical Literature – – – – – – 30
2.5 Theoretical Framework – – – – – – – 37

CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction – – – – – – – – – 40 3.2 Research Design – – – – – – – – 40
3.3 Methods of Data Collection – – – – – – 41
3.4 Techniques of Data Analysis – – – – – – 41
3.4.1 Model Specification – – – – – – – – 41
3.5 Data Estimation and Evaluation Technique – – – – 42
CHAPTER FOUR: DATA ANALYSIS AND PRESENTATION
4.1 Introduction – – – – – – – – – 44 4.2 Data Presentation – – – – – – – – 44
4.3 Data Analysis and Findings – – – – – – 45
4.3.1 Stationarity Test Results – – – – – – – 45
4.3.2 The Regression and Specification Tests Result – – – – 46
4.3.3 Co-Integration Test – – – – – – – – 47
4.3.4 Estimated Long Run Relationship using VECM – – – – 48
4.4 Other Robustness Test Results – – – – – – 52

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary – – – – – – – – – 53
5.2 Conclusion – – – – – – – – – 57
5.3 Recommendation – – – – – – – – 58
References
Appendix

REFERENCES

Aboyade, O. (1983): Integrated Economics: A study of Developing Economies. Addison-Wesley Publishers Ltd.
Adedeji, T. O, Oboh, C. S. (2010): An Empirical Analysis of Tax Leakages and Economic Growth in Nigeria. European Journal of Economics, Finance and Administrative Sciences. ISSN 1450-2275 Issue 48 (2012) © Euro Journals, Inc. 2012

Adegbie, F. F. (2010): ―Customs And Excise Duties Contribution Towards The Development
And Growth Of Nigerian Economy‖ European Journal of Economics, Finance and Administrative Sciences ISSN 1450-2275 Issue 29 (2011) © EuroJournals, Inc. 2011

Adereti, S. A, Sanni, M. R, & Adesina, J. A (2011): Value Added Tax and Economic Growth of
Nigeria, European Journal of Humanities and Social Sciences Vol. 10, No.1 (Special Issue), 2011 © JournalsBank.com (2011). ISSN 2220-9425 457

Aguolu, Osita (1999): ―Tax revenue and Tax Management in Nigeria Enugu‖ Meridian Associates

Akanbi, M. M. A. (2002): Implication of corruption on the Nigeria Polity. Paper presented at the Annual Lecture of Postgraduate Students Association, Unilorin , October 30.

Akinola, A. (2001): ―Why corruption resides in Nigeria‖ Headlines Daily Times pg 1-3.

Alli, B.D., (2009): ―Managing the Tax Reform Process in Nigeria‖. Niger Account 42(1): 45-51.
Al-Qardawi, Y. (1999): Fiqh Az-Zakah (A comparative study of the rules, regulations and philosophy of Zakah in the light of the Qur‘an and Sunnah). London: Dar Al-Taqwa Ltd.
Anyanwu, J.C., (1997): Nigerian Public Finance. Joanne Educational Publishers, Onitsha.

Appah, E., (2004): Principles and Practice of Nigerian Tax revenue, Ezevin Mint Printers and Publishers, PortHarcourt.
Ariyo. A. (1998): Productivity of the Nigerian Tax system: 1970 to 1990, African Economic Research Consortium, Nairoboi Kenya.
Asada D. (2005): The administration of personal income tax in Nigeria: Some problems areas, working paper, University of Jos.



Copyright © 2021 Author(s) retain the copyright of this article.
This article is published under the terms of the Creative Commons Attribution License 4.0