TAX REVENUE AND ECONOMIC GROWTH IN NIGERIA: EVIDENCE FROM COMPANY INCOME TAX, VALUE ADDED TAX AND TERTIARY EDUCATION TAX

Abstract

The study focuses on the effect of tax revenue on Nigeria's economic growth period

from 2010 to 2022, which has not gained attention in previous studies. In this study,

three major taxes, namely company income tax (CIT), value added tax (VAT), and

tertiary education tax (TET) are identified, with gross domestic product (GDP) as the

measure of growth. Fully modified ordinary least squares (FMOLS) is used to perform

the analysis of the long-term relationship between these variables. The results indicate

that there is a positive relationship between CIT and economic growth (coefficient:

0.4412; p-value: 0.0008), which means that CIT increases fiscal capacity and

expenditure. Value-added tax, on the other hand, had a negative impact on growth

(coefficient: -0.5064, p-value: 0.0315), perhaps because of a decrease in consumption.

The log of the exchange rate, which is significant at the 5% level, highlights the

importance of the external sector on Nigeria's growth. The TET had a positive but

insignificant effect (coefficient 0.1373, p-value 0.2154) on economic growth. The study

concludes that the taxation–growth nexus is different depending on the tax type and the

macroeconomic factors. In addition, the Nigerian economy could not generate enough

revenue to support economic growth under the previous tax policy.