TAX GAP MANAGEMENT AND ECONOMIC DEVELOPMENT IN NIGERIA

Abraham Irekponor and Adanma Eyisi
Department of Accounting
College of Management Sciences
Michael Okpara University of Agriculture, Umudike
Corresponding Author: abrahamirekponor@yahoo.com

ABSTRACT
The study investigated the effect of tax gap management on economic development in Nigeria on the
hypothetical premises that there is an insignificant effect of tax gap management on economic development. Tax gap management was proxy with the difference between budgeted tax revenue and actual tax revenue. While economic development was proxy with human capital index, foreign direct investment and gross domestic product. Secondary data that span from 1998 to 2018 were obtained from different sources that include the Federal Inland Revenue Service, Central Bank of Nigeria, and the World Bank. The data were analysed using the ordinary least squares based simple regression technique and the autoregressive distributed lag/bounds test approach. The study found positive significant relationship between tax gap management and gross domestic product which have tendency to influence economic development at the long run but a negative effect on foreign direct investment and positive insignificant effect on human capital index. Consequently, it was recommended that government should make policies that will enhance human capital index to reduce tax gap. Tax policies should not be ambiguous but should provide incentive to attract investors. Government should formulate frame work that will make fiscal institution to judiciously apply tax revenue on critical infrastructure that will influence increased economic growth.

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