Does Taxation Drive Economic Development in Nigeria?

International Journal of Research and Scientific Innovation (IJRSI) | Volume VII, Issue VII, July 2020 | ISSN 2321–2705

Does Taxation Drive Economic Development in Nigeria?

Etim Osim Etim^1*, Nsima Johnson Umoffon², David Johnny Ekanem^3
1,2Department of Accounting, Faculty of Business Administration, University of Uyo, Nigeria
³Department of Accounting and Finance, Faculty of Social and Management Sciences, Ritman University, Ikot Ekpene, Nigeria

*Corresponding Author

Abstract:- This study examined whether taxation drive economic development (Human Development Index) in Nigeria used data spanning from 1985 to 2018 obtained from the Central Bank of Nigeria (CBN) statistical Bulletin, Federal Inland Revenue Service (FIRS) tax reports and Human Development Report by United Nations Development Programme (UNDP) reports. Data collected were analysed using descriptive and inferential statistics involving multiple regression analysis. Findings revealed that an inverse and significant relationship exist between Company Income Tax (CIT) and Human Development Index (HDI) in Nigeria; direct and significant relationship between Value Added Tax (VAT) and HDI direct and insignificant relationship between Personal Income Tax (PIT), Petroleum Profit Tax (PPT) and HDI. It was concluded that taxation has the capacity to cause positive economic development in Nigeria if the tax base is expanded and loopholes in the tax administrative system which causes tax revenue hemorrhage are closed and the strengthen of taxation framework to make the Nigerian economy tax base economy rather than oil base economy.

Keywords: Human Development Index, Taxation, Oil base economy, tax base economy

I. INTRODUCTION

Revenue generated by an individual, organization or government determines the extent of socio-economic infrastructural provision as well as the living standard of the people. From ancient times, public finance is majorly funded through taxes often imposed on subjects by the government in power. Revenues may be derived from tax and non-tax sources, oil and non-oil, internally and externally generated, among other sources or classification. Whatever the source or classification, taxation revenue are the most potent, reliable and efficient source of revenue to both developed and developing economies (Konrad, 2014).

Taxation in any country is required to serve several purposes some of which include generation of revenue to government, redistribution in income, instrument of social and economic development, fiscal policy tool for correcting balance of payment disequilibrium, protection of indigenous and infant industries, among others.

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