Key Features:

No of Chapters: 5 Chapters
No of Pages: 85 Pages
Methodology: Panel Regression

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Abstract:

This study investigated the tax system in Nigeria in relation to growth. The specific objectives include; to examine the relationship between state government tax revenue and Economic growth, to examine the relationship between Local government tax revenue and Economic growth and also to examine the relationship between Federal government tax revenue and Economic growth.
The population of this study comprises of the state government tax revenue, local government tax revenue and federal government tax revenue. Data collected was analyzed using the panel regression and the method of estimation was least square estimation techniques.

From the hypothesis tested, it was showed that there exist a significant relationship between the state government tax revenue and economic growth, local government tax revenue and economic growth and Federal government tax revenue and Economic growth in Nigeria. The study also discover that there exist an inverse relationship between the state government tax revenue and Economic growth in Nigeria. This implies that when tax rate increases, it brings down economic growth. The Local government tax revenue and economic growth has a direct relationship. This means that when the local government tax rate increases, economic growth will also increase. At the federal government level, the tax revenue has an inverse growth relationship with economic growth. This implies that when tax rate increases, it brings down economic growth.

Introduction:

Since the creation and existence of man,there has been increasing needs for the provision of social amenities. The quest for the satisfaction of these needs has led authorities and governments to source for means of raising funds.

Tax as a means of raising fund,no doubt,plays very critical role in government revenue generation. In some advanced democracies or countries. The earliest trace of any form of taxation in Nigeria even before the British Administration was in Northern Nigeria. The North was favored for this because it had a form of organized central administration under the Emirs unlike the south which except in few places in the west was not as organized.Thus taxes such as Zakka, Gada, Kindin, Kararat and Jangoli which were typical forms of taxes on agricultural products and livestock. With the coming of the British and their consequent colonization of Nigeria they took advantage of tax system that was existing in the Northern part of the country to introduce direct taxation into the area since that was the only alternative available to them to arise fund to administer the region. In 1914 when Northern and Southern Nigeria were amalgamated the then Governor- general deemed it necessary to extend the system of direct taxation which had been in existence in the north to the south part of the country provinces for fear of disturbance. As regard to this, direct taxation was not introduced in Eastern part until 1927 Resistance to this form of direct taxation in this area was such that it led to riot notably in Calabar, Owerri and famous Aba women riot of 1929 which was so severe that it attracted a probe into it. They were later modified and incorporated into the Direct taxation ordinance No. 29 of 1943 respectively. The direct taxation ordinance 1940 empowered native authorities to tax Africans in their area of jurisdiction while the income tax ordinance 1943 was for the taxation of non-Africans and companies. These two ordinances were the foundation of our modern taxation.

Tax according to longman dictionary of contemporary English is defined as “an amount that must be paid to government according to your income, property, goods etc and that is used to pay for public services”. There are basically two types of tax, they are direct taxes and indirect taxes. Direct taxes includes; personal income tax(PIT),poll tax ,company tax, capital gain tax(CGT) etc. while indirect taxes includes import and export duties, excise duty, value added tax(VAT) etc.
Taxation plays a crucial role in promoting economic activity and growth. Through taxation, government ensures that resources are channeled towards important projects in the society, while giving succor to the weak. Unfortunately, in today’s Nigeria, the economic development is nothing to write home about. The role of taxation in promoting economic activity and growth is not felt, primarily because of its poor administration.

In the view of Ayua(1996),”tax administration has to be revamped while refunds of taxes as well as duty draws backs administration are inefficient. This study seeks to evaluate the impact of government tax revenue on economic growth in Nigeria.