TAX COMPOSITION AND ECONOMIC GROWTH IN NIGERIA
Keywords:
Company income tax, Economic growth, Petroleum profit taxAbstract
The study examines the effect of tax composition on economic growth in Nigeria spanning from 2000 to 2020. The independent variable is tax composition measured by petroleum profit tax, and company income tax. Meanwhile, the dependent variable is economic growth measured by gross domestic product. Data for the study were sourced from the Central Bank of Nigeria Statistical Bulletin (various years), Central Bank of Nigeria Annual Report and Statement of Accounts, Bureau of National Statistics and Federal Inland Revenue Service (FIRS) reports of various years. The study adopted the Autoregressive Distributed Lag Model since the unit root test evidenced mixed integration (i.e. the study variables are integrated both at levels and first difference). The statistical package used to run the regression is STATA 16. The ARDL bond test reported that, tax composition has long run effect on economic growth in Nigeria. However, on the short run, Petroleum profit tax (LOGPPT) (Coef. = 10.659, t = 2.65 and P -value = 0.021)has a positive significant effect on economic growth in Nigeria. However, company income tax (LOGCIT) (Coef. = -0.603, t = -0.49 and P -value = 0.630) has a negative insignificant effect on economic growth in Nigeria. Hence, the study concludes that, while higher petroleum profit tax revenue promotes economic growth, higher company income tax revenue surprisingly stalled economic growth in Nigeria during the period under investigation. Asuch, the Nigerian government should embark on strategic pursuit of broadening the economy by engaging in a complete re-organization of the tax administrative machineries in order to reduce the loopholes of tax evasion and avoidance.
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