IMPACT OF TAXATION ON ECONOMIC GROWTH IN NIGERIA

ABSTRACT

Taxation is a financial charge on income levied by the government on citizen, corporate entities, businesses or possessions that yield revenue. Taxation is the system of imposing a compulsory levy on all income, goods, services and properties of individuals, partnership, trustees, executorships and companies by the government, The main objective of the study is to examine the effect of taxation on the economic growth in Nigeria. Specifically, the study examines the effect of value added tax on economic growth in Nigeria. Investigate the effect of petroleum profit tax on economic growth in Nigeria. Ascertain the effect of company income tax on economic growth in Nigeria and evaluate the effect of personal income tax on economic growth in Nigeria. The study adopted an ex-post facto research design. The data were analyzed with econometric techniques involving Descriptive Statistics, Augmented Dicker Fuller Tests for Unit Roots and the Ordinary Least Square (OLS). The result of the study indicates that value added tax, petroleum profit tax, personal income tax and company income tax have positive and significant effect on gross domestic product in Nigeria. The study thus concludes that taxation have positive effect on gross domestic product in Nigeria. The implication is that strong taxation policy is required for economic growth and development which will enhance employment generation, poverty alleviation, enhance capacity building for manpower and skills development promote growth and facilitate industrial development in Nigeria. Amongst the recommendations is that tax collection mechanism used by tax officials must be free from corruption and embezzlement. Federal Government, state governments and local governments should urgently modernize and automate all its tax system, improve tax payer convenience in the assessment and payment process whilst at the same time entrench effective and modern human resource management practices in the tax authorities. Judicious use of tax payer’s money should be made and be seen to have been properly utilized. This will encourage tax payers to continue to pay taxes. Effort should be made by the federal state and local government to diversify the main revenue source from oil to other sectors of the economy such as agriculture, extractive industries in order to attract direct and indirect taxes.