Effect of Tax Revenue Contribution to Economic Development in Nigeria

Abstract

The objective of this study is to assess the impact of taxation on economic development of Nigeria proxy by the gross domestic product (GDP). The study further looked at the relation between companies income tax (CIT), petroleum profit tax (PPT) and gross domestic product in post- IFRS period. Secondary data were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin, Federal Inland Revenue Services (FIRS) and other relevant government agencies for the period of 13 years, ranging from 2002-2015. The data were analyzed using descriptive statistics, econometric model with the aid SPSS version 20. The results show that a strong positive and significant relationship exist between economic development and Tax variables used. It also documented a decline in tax revenue in post IFRS period. The study further revealed rise and fall in tax revenue and economic development occasioned by corruption, tax evasion, economic meltdown, dysfunctionalities in the income tax system, and loopholes in tax laws and inefficient tax administration. The study therefore recommended that the economy should be diversified to enhance revenue base of the country, to rid corruption from the system, investing in economic activities that will generate jobs, harmonize our tax laws and administration to acceptable global standard. Also checkmating the activities of corporate bodies in their tax sheltering through accounting choices was also recommended.