Tax Revenue and Economic Growth in Nigeria.

ABSTRACT Tax has impacted significantly on economy globally. In addition to the revenue generation function it performs for the government, it has also proved to be a useful tool of fiscal policy in achieving the country’s macro-economic objectives. In Nigeria, revenue generation from taxes has contributed substantially to the income of the government although the role of tax in promoting economic growth has not been adequately felt. Past documentations have revealed that revenue from taxes in developed nations have high impact on its economic growth which is clearly seen by the social amenities provided by such nations. Thus the main objective of this study is to explore the relationship between tax revenue in Nigeria and her economic growth. Some components of tax revenue examined are Petroleum Profit Tax (PPT), Company Income Tax (CIT), Value Added Tax (VAT) and Custom Duty (CD) while Gross Domestic Product (GDP) was used to measure the economic growth and these indices were studied for the period of 30yrs (1987-2016). Time series data were obtained from secondary sources and applied in carrying out this research work and multiple regression analysis was adopted based on the OLS technique using SPSS 22.0 software. The dependent variable is GDP while the explanatory variables are petroleum profit tax, company income tax, custom and excise duties and Value Added Tax, the contribution of each of these taxes was related to the Growth Domestic Product (GDP). The findings revealed that petroleum profit tax, company income tax, value added tax and custom duties have a positive impact on GDP and 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. Since VAT has highest adjusted R-Square among all independent variables tested, we recommended among others that VAT rate should be reviewed upward and efficient tax policy should be formulated and implemented to increase government revenue from taxes and thereby boost the economic growth of the entire nation.