CAPITAL GAINS TAX, INFLATION AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT

The Capital gains tax has the potential to contribute more to total tax revenue and economic growth due to the huge capital assets disposal in Nigeria. Hence, this study examined the effect of capital gains tax, inflation and economic growth in Nigeria. In achieving this objective, the ex-post facto research design was adopted and secondary data were collected from the Federal Inland Revenue Service annual reports, CBN statistical bulletins, and the National Bureau of Statistics. The simple regression technique was adopted and analyzed using Eviews to establish the effect of the independent variables (capital gains tax, interest rate, and inflation rate) on the dependent variables (Gross Domestic Product) from 2003 to 2022. Findings revealed that Capital gain tax does not have a significant effect on economic growth. Inflation rate does not have a significant effect on economic growth. Therefore it is recommended that the optimal balance between capital gains tax rates that generate government revenue and foster economic growth is crucial. Policymakers must strike a balance to ensure that tax policies incentivize investment and entrepreneurial activities while generating sufficient revenue to fund public services and programs. Understanding these dynamics on an international scale allows for comparisons of tax policies and identification of best practices to inform policy recommendations that promote economic growth and competitiveness.. Furthermore, there should be a comprehensive xii review of the Capital Gains Tax Act to ensure conformity with global best practices and to keep the Act in pace with current economic realities. Keywords: Capital Gains, Tax, Inflation, Economic Growth.