Examining the nexus between tax revenue and economic growth: Empirical evidence from Nigeria

Maryam Ekeh; C. C. Ebere; A. A. Umobong

doi:10.5281/zenodo.22748736

Maryam Ekeh Department of Accounting, University of Port Harcourt, Port Harcourt
C. C. Ebere Department of Accounting, University of Port Harcourt, Port Harcourt
A. A. Umobong Department of Accounting, University of Port Harcourt, Port Harcourt

DOI: https://doi.org/10.5281/zenodo.22748736

Keywords: Tax revenue, Economic Growth, Real Gross Domestic Product, Petroleum Profit Tax

Abstract

In this paper we study the impact of tax revenue on economic growth in Nigeria for the period of 1990 to 2022. The aim of this study was to find out whether petroleum profit tax, company income tax, custom and excise duty and value-added tax have consequences for economic growth, measured using real gross domestic product (GDP). This paper investigated the relationship between tax revenue and economic growth using secondary data which was sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin and the Federal Inland Revenue Service (FIRS). The study used the autoregressive distributed lag (ARDL) estimator in estimated the multiple regression model, in addition to unit root and cointegration tests approaches used to determine the integration process of the series and possible long run relationship between the employed variables. The bounds test result revealed there is long run relationship between tax revenue and economic growth. The results revealed that petroleum profit tax and value-added tax had positive and significant impact on economic growth. Company income tax had positive and insignificant effect on economic growth, while the study showed that custom and excise duty had negative and insignificant effect on economic growth. Based on this result, the study recommends that revenue from petroleum profit tax and VAT should be used to provide growth enhancing infrastructures and the Federal Government should leverage on technology for revenue collection by automating revenue collection processes in order to reduce face-to-face contacts that breeds corruption and reduce the amount of revenue going into the government coffers.

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