Tax Structure on Economic Growth: A Comprehensive Analysis of Direct and Indirect Tax in Nigeria

This study examined the relationship between tax structure and economic growth in Nigeria, specifically analyzing the comparative impact of direct and indirect taxes. While taxation remains a fundamental fiscal instrument for resource mobilization, the optimal mix of tax revenue necessary to stimulate sustainable economic growth remains a contentious subject in the Nigerian context. The paper reviews theoretical underpinnings and empirical evidence regarding the efficiency, equity, and growth implications of direct taxes (such as Personal Income Tax and Company Income Tax) versus indirect taxes (such as Value Added Tax and Customs and Excise Duties). The analysis reveals that Nigeria’s tax structure is heavily skewed towards indirect taxation, which, while buoyant, tends to be regressive and potentially distortionary to consumption. This study concludes that a re-balancing of the tax structure towards direct taxation, alongside broadening the tax base and improving compliance, is essential for fostering inclusive economic growth.

Tax structure, direct tax, indirect tax, ARDL and Economic growth

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