EFFECT OF TAXATION ON ECONOMIC GROWTH IN NIGERIA: A TIME SERIES ANALYSIS BETWEEN 1981-2019

Abstract

The study assessed the effect of taxation on economic growth in Nigeria during the period of 1981-2019. To do this, secondary data of taxation measures (personal income tax, company income tax, and value added tax) and economic growth measure (gross domestic product) were obtained from the Central Bank of Nigeria statistical bulletin, National Bureau of Statistics and World Bank Indicators. Data obtained were analyzed via descriptive (Mean, Standard Deviation, Minimum and Maximum Values, Skewness, Kurtosis, and Correlation) and inferential(Unit Root and Co-integration, Augmented Dickey Fuller, Bound Test for Cointegration, Ganger Causality Wald, and Vector Auto Regression Tests) statistical tools. The Vector Auto Regression results indicated that while all taxation variables significantly affect economic growth; however, the relationship was negative. The negativity attributable to taxation in the country could be that the tax collection mechanisms and administrative structure put in place are weak. In view of the findings, it was recommended among others that there is the need for the government to ensure that all companies and individuals are captured in the tax net and fully comply with the payment of tax. As a matter of fact, there is the need to enforce penalty for companies and individuals that evade tax and strengthen the tax collection mechanisms in the country.