Company Income Tax and Economic Growth of Selected African Countries: The VECM Approach

AFRAG064

Company Income Tax and Economic Growth of Selected African Countries: The VECM Approach

Uche Okoro, Orji Department of Accountancy, Faculty of Economics and Management Sciences

Abia State University, Uturu Nigeria.    ucheorji4real@gmail.com

John Uzoma Ihendinihu Department of Accountancy College of Management Science

Abia State Nigeria. ihendinihu.john@gmail.com

Abstract

This study examines the effect of company income tax revenue on economic growth of selected Anglophone and Francophone African countries over the period 2000- 2018. The study made use of annual secondary data generated from World Bank Development indicator, OECD revenue data base. These data are converted into quarterly data using Quadratic Match-Sum procedure from E-views. The choice of this period is due to availability of data that cut across the countries under investigation. The data was analyzed by means of Vector Error Correction Model using E-views 10 package. The study reveals that company income tax (CIT) significantly but negatively impacted on Real GDP in the long run in the Francophone countries like Madagascar and Rwanda while company income tax negatively though insignificantly influences the Real GDP of the Anglophone countries like Nigeria and Ghana. The findings also revealed that there is a short run causal effect of company income tax on Real GDP in the selected countries. Based on the findings, the study recommends among others, that to enhance the tax base of the selected countries especially through the companies, a good environment for entrepreneurship and innovation to thrive must be provided and employment opportunities should be created. Also, Government should make it a routine to regularly furnish taxpayers with the basic objectives of its tax system and reasons for modifications to make taxpayers see clearly the reasons to pay taxes as at when due.

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