ABSTRACT

The study examined the impact of taxation on economic growth in the Nigeria for the period of 40 years (1974 – 2014). The focus of the research was to determine the cause and effect of taxation on economic growth in the Nigeria. The methodology adopted  for the study was ordinary least square (OLS) involving the student’s T-test, to test  the significance  of the individual parameter estimate, the F-test, to test the significance of the entire regression plane, the R2 and Adjusted R2, to test the joint influence of the explanatory variables on the dependent variable. Finally, Durbin-Watson’s statistics (DW) was used to check the presence or absence of serial correlation on the data. The study observed that taxation on economic growth in the Nigeria has a positive and significant relationship on gross domestic product of the economy. Thus, this study recommends that urgent attention should be intensified by the government toward improving the tax revenue collection especially the non-oil tax revenue of the economy in order to enhance the blockage of all loopholes in over tax laws as well as bringing more prospective tax payers into the tax net and formulate fiscal policy that will monitor the channelling of public funds to avoid waste of resources as observed from this research work. This would protect the economy from further negative trends of taxation in the economy.

BACKGROUND OF THE STUDY

Nigeria as a nation has the vision of becoming one among the world’s 20 largest economies in the year 2020; this obviously is the brain behind the priority attention the present administration is directing at eradication of corrupt practices and infrastructural development which is essential for economic growth. A developed economy is one with the ingredient to stimulate investment and create wealth, this by implication offers an atmosphere that is business friendly and has the potential for the actualization of the vision of the nation. The desired outcome requires a lot of money to put the economy in a position that stimulatesinvestment, therefore, tax policies need to attract potential investors, and the revenue from tax should be sufficient enough to meet the infrastructural expenditures of the government (Apere, 2003). The political, economical and social development of any country depends on the amount of revenue generated for the provision of infrastructure for that given country. However, one means of generating the amount of revenue for providing the needed infrastructure is through a well structured tax system.

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