The Nexus between Tax Revenue and Economic Growth in Nigeria

Abstract

This study examined the nexus between tax revenue and economic growth in Nigeria. Specifically, the study evaluated the impact of petroleum profit tax on economic growth of Nigeria, assessed the effect of company income tax on economic growth of Nigeria and ascertained the influence of value added tax on the economic growth of Nigeria. The ex-post facto research design was employed; time series were collected data from the statistical bulletins of the CBN and the FIRS. The study’s model reflected variables including gross domestic product, petroleum profit tax, company income tax and value added tax. Data collated for these variables were analyzed to ascertain the short and long run effect of the variables using the Multiple Regression Analysis, Co-integration and other post estimation tests. Findings from the study indicated petroleum profit tax exerts a positive significant impact on economic growth with a coefficient an estimate coefficient of 3.707601(p=0.5150>0.05), company income tax also influences positively and significantly on economic growth with an estimating value of 55.79390 (p=0.2580>0.05) while the value added tax was also discovered to have a noticeable and positive effect on economic growth with reported coefficient estimates 16.04333 (p=0.5949>0.05). Following these discoveries, the study advocated that government should make efficacious the tax system of the country so as to curb practices that hampers the effectiveness of the system to generate the required revenue to cause a change in the growth of the economy and modify the institutional arrangement so as to aid a model for best practices of industries in the country.