Taxation and Nigerian Economic Growth

Abstract

This study evaluate tax as an instrument of economic growth. In the study different type of taxes were used as a proxy to tax and Real Gross Domestic Product was used as a proxy for economic growth. Relevant data to the study were collected from the Central Bank of Nigeria statistical bulletin, National Bureau of Statistics and Federal Inland Revenue Service.  Regression was used in analyzing the Model. The Augmented Dickey-Fuller unit root test was employed to establish the stationarity of the variables while the General-to-Specific approach to Autoregressive Distributed Lag (ARDL) model was used for testing for the existence of long-run and short-run equilibrium conditions. The study found that there exists a long run equilibrium relationship evidence between taxes and Real Gross Domestic Product (RGDP) during the period studied. The adjusted R2 value of 0.972914 showed that about 97.29% of the total variation in the real GDP is explained by the independent variables included in the model. The regression test also shows a very strong relationship among the variables. We therefore conclude that tax is a strong instrument of economic growth and therefore recommend that government should strengthen the administration of Company Income Tax by improving tax monitoring systems and ensuring that corporate organizations comply with regulations.There should be improved transparency and accountability in the management of revenue generated from Petroleum Profit Tax to ensure that the funds are effectively used for economic development. The government should enhance the efficiency of Value Added Tax collection through improved tax compliance mechanisms and public awareness on the importance of paying taxes.