GAUGING THE RELATIONSHIP BETWEEN INCOME TAX AND ECONOMIC GROWTH IN NIGERIA

Abdullahi Musa Abdullahi , Abubakar Farouk Umar and Umar Salim Ibrahim
Volume 13 Issue 1

Abstract

This study examined the nexus between income tax and economic growth in Nigeria. The study utilized panel data sourced from the Central Bank of Nigeria (CBN) statistical bulletins, World Bank, Federal Inland Revenue Service (FIRS) annual publications and National Bureau of Statistics (NBS). The study explored the impact of six income tax streams which are Company Income Tax (CIT), Personal Income Tax (PIT), Value Added Tax (VAT) Petroleum Profit Tax (PPT), Capital Gain Tax (CGT) and Education Tax (EDU) on economic growth represented by Gross Domestic Product for the period of 12 years from 2011 to 2022. To achieve the objectives of the study, descriptive statistics, Pearson correlation coefficient and linear panel-data were employed in analyzing the data for the purpose of presentation and discussion of outcomes. The findings revealed that company income tax and personal income tax has positive and significant impact on the growth of the Nigerian economy. Moreover, value added tax and education tax revealed a negative and non-significant impact on the growth of the Nigerian economy, petroleum profit tax has a negative and significant impact on the growth of the Nigerian economy. Finally, capital gain tax has positive but insignificant impact on the growth of the Nigerian economy. The study government should assure that all tax loopholes are minimized and corporate tax evasion and avoidance should be properly investigated and sanctioned, tax collection mechanism used by tax officials must be free from corruption and embezzlement government should modernize and automate all its tax system to enhance efficient collection of taxes, government should ensure greater transparency, integrity and accountability in other to manage and utilize income tax revenue so as to give taxpayers greater assurance of its application. Keywords: Company Income Tax, Personal Income Tax, Value Added Tax, Petroleum Profit Tax, Capital Gain Tax, Education Tax and Economic Growth.

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