TAXATION AND ECONOMIC GROWTH IN NIGERIA
Keywords:
Taxation, Economic Growth, Direct Tax and Indirect Tax
Abstract
The pivotal role of taxation in revenue generation cannot be under emphasis in any economy. Due to its importance, this study has been carried out to investigate the impact of taxation on economic growth in Nigeria. Four hypotheses were stated and tested. The study used mostly secondary data from the Central Bank of Nigeria Bulletin (CBN) and reports from Federal Inland Revenue for the period of 29 years (1994 – 2022). The study used Regression Analysis by applying an Error Correction Model (ECM) and Granger Causality Approach based on the outcome of the unit root test and to discover both long and short run effect. The study revealed that Custom and Excise Duty has a negative and insignificant impact on Nigeria Gross Domestic Product in the short run. Petroleum Profit Tax (PPT) has a negative impact on the Nigeria Gross Domestic Product in the short run. However, Value Added Tax (VAT) and Company Income Tax both have positive and significant impact on Nigeria Gross Domestic Product in the short run. The study recommended that Efforts should be intensified by the government towards increased collection of tax revenue this is due to the low contribution of tax revenue to GDP over the period of study. This can be done through blocking all loopholes in our tax laws as well as bringing more prospective tax payers into the tax net (especially the informal sector). Also there should be stringent penalty imposed on any individual or corporate body who indulge in any form of tax malpractices, if the positive correlation between taxation and economic growth should be maintained.
References
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28. Onaolapo, A.A.,Aworemi, R.J. & Ajala, O.A. (2013). Assessment of value added tax and its
effects on revenue generation in Nigeria. International Journal of Business and Social Science, 4 (1), 220-225
29. Onaolapo, A.A., Fasina, H.T., & Adegbite T.A., (2013).The analysis of the effect of petroleum profit tax on Nigerian economy. Asian Journal of Humanities and Social Sciences, 1(1).
30. Oshiobugie, O.B.S. $ Akpokerere, O. E. (2019).Tax revenue and the Nigeria economy. International Journal of Academic Management Science Research, 3(2), 61-66
31. Otu, O. H., & Adejumo, T. O. (2013). The effect of tax revenue on economic growth in Nigeria. International Journal of Humanities and Social Science Invention, 2 (6), 16–26. https://www.academia.edu/20772705/The_Effects_of_Tax_Revenue_on_Economic_Growth_ in_Nigeria_1970_2011
32. Owolabi, S. A., & Okwu, A. T., (2011). Empirical evaluation of contribution of value added tax to development of Lagos state economy. Middle Eastern Finance and Economics. 1(9), 24 –34.
33. Udoh, J. E., (2015), taxing the informal economy in Nigeria: Issues, challenges and opportunities. International Journal of Business and Social Science, 6(10), 160-175.
34. Worlu, C. N. & Emeka. N. (2012). Tax revenue and economic development in Nigeria: A macroeconometric approach academic. Journal of Interdisciplinary Studies, 21(46), 121-139
35. Yusuf, H.A., Abidin, T.S.Z., Bakar, N., & Musa, O.H. (2018). Causality between VAT and economic growth in Nigeria: An ARDL bounds testing approach. Journal of Emerging Economies & Islamic Research, 6 (1), 55 - 67.
2. Adeusi, A. S., Uniamikogbo, E., Erah, O. D., & Aggreh, M. (2020). Non-oil revenue and economic growth in Nigeria. Research Journal of Finance and Accounting, 11(8), 95–106. https://doi.org/10.7176/ RJFA/11-8-10
3. Adeyemi, O. J. (2023). Re-Assessing the Relationship between Tax Revenue and Economic Growth in Nigeria; World Scientific News 176 (2023) 1-26
4. Akeju, K. F. (2018). Informal Sector and Tax Compliance: The Role of Associational Membership in South West, Nigeria; International Journal of Applied Economics, Finance and Accounting. 3 (1), 1-9
5. Amos, O. A., Uniamikogbo, E., & Aigienohuwa O. O. (2017). Tax revenue and economic growth of Nigeria; Scholars Journal of Economics, Business and Management, 4(10) 696-702
6. Anyanfo, A. M. O. (1996). Public finance in a developing economy: The Nigerian case. The department of banking and finance. University of Nigeria.
7. Asaolu, T.O., Dopemu, S.O. and Monday, J.U. (2018) Impact of Tax Reforms on Revenue Generation in Lagos State: A Time Series Analysis. Research Journal of Finance and Accounting, 6, 85-96.
8. Ayeni, A. P., Ibrahim, J., & Adeyemi, A. O. (2017). Tax revenue and Nigerian economic growth. European Journal of Accounting, Auditing and Finance Research, 5(11), 75–85.
9. Ayuba, A. J. (2014). Impact of non-oil revenue on economic growth: The Nigerian perspective.
International Journal of Management Sciences and Business Research, 1(9), 12–22. https://doi.org/10. 5923/j.ijfa.20140305.04
10. Chigbu, E. E., Akujuobi, L. E., & Appah, E. (2012). An empirical study on the casualty between economic growth and taxation in Nigeria. Curr. Res. J. Econ. Theory. 4(2), 29–38.
11. Ibadin, P. O. & Oladipupo, A. O. (2015).Indirect taxes and economic growth in Nigeria. EkonMisao I PraksaDbk, 24 (2), 345-364.
12. Ihenyen, C.J. & Mieseigha, E.G. (2014). Taxation as an instrument of economic growth (The Nigerian Perspective).Information and Knowledge Management, 4(12), 49 – 53.
13. Ininnimo, E.E, Abuo, M.A & Bosco, I.E. (2018). Taxation and economic growth in Nigeria. International Journal of Research and Innovation in Social science, 2(4), 28-35
14. Irokwe, U.I. & Agu, E.O. (2019) Tax revenue and economic development in Nigeria.
15. International Journal of Auditing and Accounting Research, 5(4) 1-15.
16. Lyndon M. E. & Paymaster F. B., (2016). The Impact of Company Income Tax nd Value-Added Tax on Economic Growth: Evidence from Nigeria; European Journal of Accounting, Auditing and Finance Research. 14 (7), 106-112
17. Madugba, J. U. and Joseph, U.B. A., (2016). Value Added Tax and Economic Development in Nigeria. International Journal of Development and Economic Sustainability. 4 (3), 1-10
18. Ngwoke, O.M. (2019). Effect of taxation on economic growth (2007-2017). European Journal of Accounting, Finance and Investment, 5(4), 68-82
19. Organization for Economic Corporation and Development report OECD (2009)
20. Odusola, A. (2006). Tax policy reforms in Nigeria. United Nations University-World
Institute for Development Economics Research. Abuja: UNU-WIDER, 1 - 42.
21. Ofishe, O. W., (2015). The Impact of Value Added Tax on Economic Growth in Nigeria. Research Journal of Finance and Accounting 6(23) 34-46.
22. Ofoegbu, G. N., Akwu, D. O., & Olive, O. (2016). Empirical analysis of effect of tax revenue on economic development of Nigeria. International Journal of Asian Social Science, 6(10), 604–613. https://doi.org/10. 18488/journal.1/2016.6.10/1.10.604.613
23. Ogwuche, I.P., Abdullahi, A. M., & Ovedokun, G. E. (2019). Company income tax and Nigerian economic growth. Journal of Taxation and Economic Development, 18(1), 72-83
24. Okonkwo, I.V. & K.O Chukwu (2019). Government tax revenue and economic development in Nigeria. International Journal of Research in Business, Economics and Management 3(3), 91 - 105.
25. Okoror, J.A., & Onatuyeh, E.A. (2018). Value-added tax and economic growth: New evidence from Nigeria. Accounting & Taxation Review, 2(4), 99-112.
26. Olugbade J. A. and Adegbie F. F., (2020). Personal Income Tax and Infrastructural Development in Lagos State, Nigeria: Journal of Finance and Accounting. 8(6): 276-287
27. Omodero, C. O., Okafor, M. C., & Nmesirionye, J. A. (2021). Personal Income Tax Revenue and Nigeria’s aggregate earnings. Universal Journal of Accounting and Finance, 9(4), 783–789. https://doi.org/10.13189/ujaf. 2021.090424
28. Onaolapo, A.A.,Aworemi, R.J. & Ajala, O.A. (2013). Assessment of value added tax and its
effects on revenue generation in Nigeria. International Journal of Business and Social Science, 4 (1), 220-225
29. Onaolapo, A.A., Fasina, H.T., & Adegbite T.A., (2013).The analysis of the effect of petroleum profit tax on Nigerian economy. Asian Journal of Humanities and Social Sciences, 1(1).
30. Oshiobugie, O.B.S. $ Akpokerere, O. E. (2019).Tax revenue and the Nigeria economy. International Journal of Academic Management Science Research, 3(2), 61-66
31. Otu, O. H., & Adejumo, T. O. (2013). The effect of tax revenue on economic growth in Nigeria. International Journal of Humanities and Social Science Invention, 2 (6), 16–26. https://www.academia.edu/20772705/The_Effects_of_Tax_Revenue_on_Economic_Growth_ in_Nigeria_1970_2011
32. Owolabi, S. A., & Okwu, A. T., (2011). Empirical evaluation of contribution of value added tax to development of Lagos state economy. Middle Eastern Finance and Economics. 1(9), 24 –34.
33. Udoh, J. E., (2015), taxing the informal economy in Nigeria: Issues, challenges and opportunities. International Journal of Business and Social Science, 6(10), 160-175.
34. Worlu, C. N. & Emeka. N. (2012). Tax revenue and economic development in Nigeria: A macroeconometric approach academic. Journal of Interdisciplinary Studies, 21(46), 121-139
35. Yusuf, H.A., Abidin, T.S.Z., Bakar, N., & Musa, O.H. (2018). Causality between VAT and economic growth in Nigeria: An ARDL bounds testing approach. Journal of Emerging Economies & Islamic Research, 6 (1), 55 - 67.
Published
2023-09-15
How to Cite
Gbenga, O., & Nicholas, E. U. (2023). TAXATION AND ECONOMIC GROWTH IN NIGERIA. International Journal on Economics, Finance and Sustainable Development, 5(9), 63-78. https://doi.org/10.31149/ijefsd.v5i9.4782
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