EMPIRICAL ASSESSMENT OF THE EFFECT OF TAXATION ON THE NIGERIAN ECONOMY, 1992-2019

EMPIRICAL ASSESSMENT
OF THE EFFECT OF TAXATION
ON THE NIGERIAN ECONOMY,
1992-2019
Ifeoma M. Ihegboro; Igwemeka
Ebele & Onuselogu O.C.O
Department of Banking and Finance,
University of Nigeria, Enugu
Campus.
ABSTRACT
This paper presents an empirical model
using an error correction model (ECM)
approach to analyze the effect of direct and
indirect taxes on economic growth in Nigeria
by using annualized time series data
spanning 1992-2019. The regression
estimates show that income and capital gain
tax is positively but not significantly related
to economic growth whereas Value added
tax was negatively and significantly
associated with economic growth within the
reference period. Tax on international trade
was also observed be negatively associated
with economic growth. These outcomes
suggest that although increases in income
and capital gain tax seem to influence
economic growth positively, it has not been
so significant driving growth. On the other
hand, the results confirm the notion that
increase in value added tax could be
detrimental to growth since it has
overwhelming impact on both the supply
and demand sides of the economy. The error
correction term has the right sign and shows
that convergence to long-run equilibrium
adjusts at the speed of 50.56% on annual
basis.
In view of the findings, it is
noteworthy that fiscal policy implemented
by government remains a strong pillar in
improving public financial resources, and
also in the sustenance of public
expenditures in order to attain sustainable
economic growth while maintaining
economic stability.
Accounting and Finance Research Association

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