IMPACT OF PETROLEUM PROFIT TAX ON ECONOMIC GROWTH IN NIGERIA

Abstract

The Downturn in the Nigerian economy has been traced to failure of successive governments to utilize oil revenue and excess crude oil income effectively in the development of other sectors of the economy. The study examines the effect of petroleum profit tax on economic growth of Nigeria for a period of 36 years, ranging from 1981-2017. Revenue from petroleum taxes is the proxy for petroleum profit tax (PPT) while economic growth was measured using Gross Domestic Product (GDP). The study used various preliminary tests which included trend analysis, descriptive statistics and stationary tests employing the use of the Augmented Dickey Fuller test (ADF). The research adopted ex-post facto research design as secondary data were used for the analysis using the Ordinary Least Square (OLS) regression analysis. Data were sourced from the Central Bank of Nigeria Statistical Bulletin and the Federal Bureau of Statistics. The results reveal that there is a significant and positive relationship between PPT and Economic Growth in Nigeria during the period under review. The regression result also shows that long run relationship exists between the variables. Findings indicate that it is important that PPT as an economic and fiscal policy tool be employed in order to grow Nigeria GDP. The study further revealed that the rise and fall in tax revenue and economic development are occasioned by corruption, tax evasion, economic meltdown, dysfunctionalities in the income tax system, and loopholes in tax laws as well inefficient tax administration. The study recommends that the economy should be diversified, to mitigate against corruption within the system, investing in economic activities that will generate jobs, harmonize our tax laws and administration to acceptable global standard. The government should equally provide the necessary human and material infrastructures that are needed to support petroleum business so they can earn more income that will boost taxation and checkmate the activities of corporate bodies in their tax sheltering.