TAX STRUCTURE AND ECONOMIC GROWTH IN NIGERIA (1970 – 2015)
ABSTRACT
This study examined tax structure and economic growth in Nigeria (1970 – 2015). The specific objectives of the study are to: determine the effect of company income tax revenue on economic growth in Nigeria; examine the effect of petroleum profit tax revenue on economic growth; assess the effect of value added tax revenue on economic growth; ascertain the effect of personal income tax revenue on economic growth; evaluate the effect of education tax revenue on economic growth; and investigate the effect of stamp duties revenue on economic growth in Nigeria. In line with the above objectives, six research questions were asked and six hypotheses formulated at 5% level of significance. The study reviewed some concepts, theoretical and empirical literatures. The study adopted expost facto research design, while secondary data were sourced from various annual reports and bulletins of National Bureau of Statistics (NBS), Federal Inland Revenue Service (FIRS) and Central Bank of Nigeria (CBN) for the period, 1970 – 2015. The dependent variable for the study is Gross Domestic Product (GDP) proxy for economic growth, while independent variables are Company Income Tax (CIT), Petroleum Profit Tax (PPT), Value Added Tax (VAT), Personal Income Tax (PIT), Education Tax (ET) and Stamp Duties (SD). Preliminary tests were conducted using unit root and co-integration to test for stationarity as well as long-run relationship among the variables. Ordinary Least Square (OLS) regression analysis was used to test the hypotheses. The results revealed that all the independent tax variables used in this study have significant positive effect on economic growth in Nigeria. The study concludes that tax structure in Nigeria has made a significant positive contribution to the growth of Nigerian economy. The study recommends that government should remove revenue leakages by reviewing certain incentives and exemption clauses (i.e. basic food items, educational materials, etc.) in tax laws which taxpayers manipulate to their own advantages; improve on tax education through seminars, public enlightenments, radio and television talk shows to sensitize the citizens on the benefits of taxation to Nigerian economy; and strengthen Tax Appeal Tribunal for quick dispensation of justice to discourage evasion and enhance tax compliance. The study has contributed to the body of knowledge by modifying some existing models. The findings of the study also have the potential to impact on knowledge reproduction process and public policy initiatives as it affects economic planning and development in Nigeria.