Taxation and the Nigerian Economy: (1994-2012)

Abstract

The study investigates the impact of taxation on the Nigerian economy for the period 1994 -2012.The dependent variables used in the model includes: Gross Domestic Product (GDP) as a parameter for measuring economic growth, Inflation and unemployment. The objective is this study is to determine how taxation affects these macroeconomic variables. To avoid spurious results, the data set collected from the Central Bank of Nigeria statistical bulletin and Federal Inland Revenue Services was subjected to Augmented Dickey Fuller Unit Root test, which reveals that the variables are stationary. The cointegration test also reveals that the variables are cointegrated and long run relationships exist between the variables. The results of the statistical analysis reveal that positive relationships exist between the explanatory variables (Custom and Excise Duties, Company Income Tax, Personal Income Tax, Petroleum profit tax and Value Added Tax) and the dependent Variables (Gross Domestic Product, Unemployment). But, the individual explanatory variables have not significantly contributed to the growth of the economy; also the explanatory variables have not significantly contributed to the reduction of the high rate unemployment and inflation in Nigeria for the period under review. Study recommends total restructuring of the tax system in the country and the provision of basic amenities (good roads, steady power supply, internal security, etc) which will encourage individuals and corporate organizations to honor their tax obligations in Nigeria.