THE IMPACT OF TAX REVENUE ON GOVERNMENT EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT

The contribution of taxation to any economy globally cannot be overemphasized. Apart from the revenue function it performs for the government, it is also used to assist the national government to achieve the country’s macro-economic objectives in the areas of fiscal and monetary policies. Over the years, it has been observed that a substantial part of revenue generated in Nigeria is from taxes, yet the role of taxation in promoting economic activities and growth is not felt, mainly because of feasible evidences which cannot be seen nor perceived by the citizens in terms of infrastructure and basic amenities. Past documentations have revealed that revenue from taxes in developed nations have high impact on its economic growth which clearly seen by the amenities provided by such nations. Time series data were applied in carrying out this research work. Multiple Linear Regression analysis was used to analyze the data by employing the use of Vector Error Correction Model. The findings reveal that petroleum profit tax, company income tax and value added tax have a positive impact on Nigeria’s economic growth while custom excise and duties impacted negatively but 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.

Keywords: Government Expenditure, Economic growth, Government Revenue, Taxation and Economy.

TABLE OF CONTENTS

TitlePage 

Certification I

Dedication II

AcknowledgementsIII

AbstractIV

Table of Contents V

CHAPTER ONE: INTRODUCTION 

1.1Background to the Study1

1.2Statement of the Research Problem 3

1.3Aim & Objectives of the Study4

1.4Relevant Research Questions4

1.5Relevant Research Hypotheses4

1.6Significance of the Study5

1.7Scope of the Study5

1.8Definition of Terms5

References8

CHAPTER TWO: LITERATURE REVIEW

2.1Preamble 10

2.2Theoretical Framework of the Study10

2.2.1Ability to Pay Theory10

2.2.2Concentration Theory11

2.2.3The Diffusion Theory12

2.2.4Benefit Theory13

2.3Empirical Review13

2.3.1The Principles of Taxation18

2.3.2Objectives of Taxation19

2.3.3Taxation as a Tool for Wealth Creation and Employment22 

2.3.4Problems of Tax Administration in Nigeria23

2.3.5Tax Avoidance and Tax Evasion Practices24

2.3.6The Nigerian Tax Structure25

References29

CHAPTER THREE: RESEARCH METHODOLOGY

3.1Preamble33

3.2Theoretical Framework  33

3.3Model Specification 33

3.4Description and Measurement of Variables34

3.5Technique of Data Analysis35

3.6Types and Sources of Data 35

3.7Method of Data Analysis35

3.8Limitation of the Methodology35

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1Preamble37

4.2Econometrics Properties of Data37

4.3Descriptive Analysis41

4.4Test of Hypothesis43

4.5 Discussion of Finding45

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary 46

5.2Conclusion47

5.3Recommendations 48

Bibliography