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The Impact Of Tax Revenue On Economic Growth

1418 words - 6 pages


1.1 Background of the study
The political, economic and social development of any country depends on the amount of revenue generated for the provision of infrastructure in that given country. However, one means of generating the amount of revenue for providing the needed infrastructure is through a well structured tax system (ogbona and ebimobewei, 2012). The vital role that taxation play in an economy cannot be overemphasized. Tax is a compulsory levy imposed by government or its agent on her citizens in order to raise revenue for the funding of economic activities. Nkoro and worlu, 2012 defined Tax as a fee charged or levied by a government on a product, ...view middle of the document...

One of the ways to generating more revenue is to strength her tax system.
The purpose of this research therefore, is to examine the empirical impact of tax revenue on economic growth.
Nigeria is a monoculture economy, over depending on the oil sector. This has also been seen to be responsible for deficiency in investment capital in the country. Amadi 2002 (cited in Adofu, 2009) opined, “With oil as the main source of foreign exchange, a one-product mono-cultural economy must be continuously deficient in investment capital. Oil is subject to the vagaries of international capitalism. Therefore, revenue from it must be subject to serious fluctuations”. The above situation in the country has created savings and foreign exchange gap. This culminates to a wide gap between the actual domestic investment fund and the required infrastructural investment for accelerating economic growth. So, urgent aggressive tax drive and prudent spending on the part of the government will be regarded as an alternative to bridge the gap.
This research will be geared towards the impact of taxes generated on the growth of the Nigeria economy.
The study will focus on the following objectives:
* To examine the impact of direct tax on economic growth.
* To examine the impact of indirect tax on economic growth.
* To examine the impact of other forms of revenue on economic growth.
* To examine the impact of lagged tax revenue on economic growth.
The hypotheses of this study are as follows;
* There is a significant positive relationship between direct tax and economic growth
* There is significant impact of other forms of revenue on economic growth more than tax revenue.
* There is positive relationship between indirect tax and economic growth.
* There is an inverse relationship between lagged tax revenue and economic growth.

The study would provide an econometric basis upon which to examine the effect of tax revenue on Nigeria’s economic growth. It will empirically highlight the effect of various form of tax revenue on the growth or otherwise of the Nigerian economy, thus the study would be of relevance to the government, individuals and researchers in similar field of study.
The scope of this study shall cover the revenue generation from taxes and tax reforms in Nigeria over the years to date. However, the main focus of this study is an x-ray of the effects of tax revenue on the growth of Nigerian economy. The study will focus on the Nigerian economy from 1990 to 2013.
Methodology is the specification of procedures for collecting and analyzing the data necessary to help solve the problem at hand so that the difference between the cost of obtaining the various level of accuracy and the expected value of information associated with each level of accuracy is maximized.
Secondary data...

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