TAXATION AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT

Regardless of the precise amount of service, tax is an obligatory charge placed by a public authority on the earnings and assets of people and businesses in accordance with government decrees, acts, or laws. Tax contributes to government revenue in any economy. Its importance in any economy cannot be overstated because it is one of the main sources of income for the government. This study has been done to look into the effect of tax income on the Nigerian economy because of how important it is. There were four hypotheses that were tested. The Central Bank of Nigeria Bulletin (CBN) and reports from the Federal Inland Revenue for the 10-year period (2012–2022) were the primary sources of secondary data used in the study. In order to find both long- and short-run effects, the study employed Autoregressive - Distributed Lag (ARDL) based on the results of the unit root test. The analysis found that the Petroleum Profit Tax has a short-term negative impact but a long-term positive impact on the Gross Domestic Product of Nigeria. Value added has a significant negative impact on economic growth, while Custom and Excise Duty and Company Income Tax both have positive and significant long-term effects on the Gross Domestic Product of Nigeria. Value added has a short-term negative impact on GDP but a long-term positive impact. Due to the low contribution of tax revenue to GDP over the research period, we advised that the government strengthen its efforts to increase tax revenue collection. This can be achieved by closing all tax law loopholes and enlisting the help of more potential tax filers, particularly those in the unorganised sector, to expand the tax base.If the favourable relationship between tax revenue and economic growth is to be maintained, harsh penalties should also be enforced on any person or business entity who engages in any type of tax fraud, regardless of the state.