Abstract
Assessing the Relationship between Tax Incentives and Economic Growth in Nigeria is aimed at determining the effect of tax incentives on economic growth in Nigeria. The study adopted Ex Post Facto Research Design and time-series data was used. Relevant secondary data for this study were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin and the National Bureau of Statistics (NBS) and the Federal Inland Revenue Service (FIRS). The study employed ordinary least square estimation and used regression analysis to test the relationship between Tax Incentives and Economic Growth in Nigeria. The study shows that tax incentive policy is positively and significantly related to gross domestic product. The findings showed that there is a degree of relationship between corporate income tax and gross domestic product; and that there is degree of co-variability between investment allowance and gross domestic product in Nigeria. The implication of this finding is that since tax incentives have positive and significant impact on gross domestic product, policy reform in other factors that affect economic growth is needed also to complement these incentives so that a better result can be achieved. The study recommends that tax incentive policy should be designed bearing in mind the economy’s macroeconomic objectives like rapid economic growth and development. Keywords: Tax incentives, Economic growth, Corporate Income Tax, Investment Allowance DOI: 10.7176/RJFA/11-14-13 Publication date: July 31 st 2020
Highlights
1.1 Background to the study The National Economic Empowerment and Development Strategy (NEEDS 2004), in its report revealed that the Nigerian economy before the Independence in 1960 was agricultural based
The major policy variable in the study is tax incentive represented by corporate income tax allowance and investment allowance
The study so far shows that tax incentives have significantly impacted on economic growth within the period of study
Summary
1.1 Background to the study The National Economic Empowerment and Development Strategy (NEEDS 2004), in its report revealed that the Nigerian economy before the Independence in 1960 was agricultural based. Agricultural sector was employing the largest percentage of the workforce and contributing the greatest share of the national GDP. From the late 1970s, oil became prominent and government shifted from Agricultural sector to oil sub-sector. The economy was open to the international communities and so much importation killed domestic manufacturing. In the early 1980s, oil prices collapsed in the international market, as a result, government revenue fell and domestic production of goods and services fall as well, government could not finance the importation of goods and services and as a result, unemployment and price of goods and services rose creating both internal and external imbalance
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