Tax Revenue

Topics: Tax, Taxation, Corporate tax Pages: 21 (5758 words) Published: August 27, 2013
E-ISSN 2281- 4612 ISSN 2281-3993

Academic Journal of Interdisciplinary Studies
Published by MCSER-CEMAS-Sapienza University of Rome

Vol 1 No 2 November 2012


Tax Revenue and Economic Development in Nigeria: A Macroeconometric Approach Worlu, Christian N.
Accountancy Department, Nnamdi Azikiwe University Awka, Anambra State, Nigeria. E-mail:

Emeka Nkoro
Economics Department, University of Port Harcourt Port Harcourt, Rivers State, Nigeria. E-mail: Tel: +234-08060769296 Doi:10.5901/ajis.2012.v1n2p211

Abstract The study examines the impact of tax revenue on the economic growth of Nigeria, judging from its impact on infrastructural development from 1980 to 2007. To achieve this objective, relevant secondary data were collected from the Central Bank of Nigeria(CBN) Statistical Bulletin, Federal Inland Revenue Service (FIRS) and previous works done by scholars. The data collected were analyzed using the three stage least square estimation technique. The results show that tax revenue stimulates economic growth through infrastructural development. That is, it highlights the channels through which tax revenue impacts on economic growth in Nigeria. The study also reveals that tax revenue has no independent effect on growth through infrastructural development and foreign direct investment, but just allowing the infrastructural development and foreign direct investment to positively respond to increase in output. However, tax revenues can only materialize its full potential on the economy if government can come up with fiscal laws and legislations and strengthen the existing ones in line with macro economic objectives, which will check-mate tax offenders in order to minimize corruption, evasion and tax avoidance. These will bring about improvement on the tax administration and accountability and transparency of government officials in the management of tax revenue. Above all, these will increase the tax revenue base with resultant increase in growth. Key words: Tax Revenue, Infrastructural Development, Foreign Direct Investment, Economic Growth.

I. Introduction A Tax is a fee charged or levied by a government on a product, income, or activity. If it is levied directly on personal or corporate income, it is called a direct tax. If it is levied on the price of a good or service, then it is called an indirect tax. The main reason for taxation is to finance government expenditure and to redistribute wealth     211   

E-ISSN 2281- 4612 ISSN 2281-3993

Academic Journal of Interdisciplinary Studies
Published by MCSER-CEMAS-Sapienza University of Rome

Vol 1 No 2 November 2012


which translates to financing development of the country (Ola, 2001, Jhingan, 2004, Musgrave and Musgrave, 2004, Bhartia, 2009). Whether the taxes collected are enough to finance the development of the country will depend on the needs of the country and, countries can seek alternative sources of revenue to finance sustainable development(Unegbu and Irefin, 2011). Tax revenue is the receipt from tax structures. Revenues accruing to an economy, such as Nigeria, can be divided into two main categories, which are; Oil Revenue (includes revenue from royalties, Petroleum Profit Tax (PPT), gas tax) and Non-Oil revenue( includes trade, loans, direct and indirect taxes paid by other sectors of the economy, Aids, agriculture etc). However, tax revenue mobilization as a source of financing developmental activities in less developed economies has been a difficult issue primarily because of various forms of resistance, such as evasion, avoidance corrupt practices attending to it. These activities are considered as sabotaging the economy and are readily presented as reasons for the underdevelopment of the country. Government collects taxes in order to provide an efficient and steadily expanding non-revenue yielding services, such as infrastructure-education, health, communications system etc, employment...

References: Economics, 118, 1419-1447.
Osoro, N.E.(1991): “Tax Reform in Tanzania: Motivations, Directions and Implications”.
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