Capital Gains Tax on Investment, Infrastructural Facilities Provision and Gross Domestic Products in Nigeria

Augustine E Osho ,Adeyemi Abiodun Adeseyoju ,Abiodun Samuel Idowu

doi:10.7176/jrdm/57-06

Abstract

This paper examined the influence of Capital Gains Tax (CGT) on Investment (INV), Infrastructural Facilities Provision (IFP) and Gross Domestic Products (GDP) in Nigeria. Ex-post facto research design was adopted with data obtained from Central Bank of Nigeria (CBN) Statistical Bulletin and Federal Inland Revenue Service (FIRS) tax reports, 2017. The data collected were presented in descriptive statistics and correlation analysis performed. Augmented Dickey Fuller (ADF) Unit Root test was used to ascertain the stationarity of variables, and the Johenson Co-integration trace and Eigenvalue test was used to show the long-run relationship of variables. The test of hypotheses using OLS regression models revealed that Capital Gains Tax is positively and significantly related to investment and infrastructural facilities in Nigeria. It is recommended that government should ensure that capital gains tax is properly administered, efficiently managed and accounted for, to enable the citizenry reap the benefits it confers on investments, Infrastructural facilities provision and gross domestic products in Nigeria. Keywords: Capital Gains Tax, Gross Domestic Products, Infrastructural Facilities Provision, Investment DOI : 10.7176/JRDM/57-06 Publication date :July 31 st 2019

Highlights

Those who shape state and local fiscal policy have had a sustained interest in the role that taxation plays in the economic development of states, regions, cities, and special districts or zones
Capital Gains Tax (CGT) refers to the tax chargeable on the gains that accrue to an individual or a company on the transfer of property such as marketable securities, buildings and lands situated in Nigeria (FIRS, 2014)
To achieve the objectives of the study, data were collected on capital gains tax (CGT) from the Federal Inland Revenue Service (FIRS), and data for gross domestic products (GDP), Direct and Portfolio Investment (INV) as well as infrastructural facilities provision (IFP) collected from Central Bank of Nigeria (CBN), Statistical bulletin, 2017

Summary

Regression Models Specification

To test the three Hypotheses formulated in the study, three univariate regression models are specified; INVt= 0 + 1CGTt + et (1). Where CGT is Capital gains tax, serving as the independent variable in all three models with INV, IFP and GDP being the dependent variables denoting Investment, Infrastructural Facilities Provision and Gross Domestic. Accept Ho. Table 1 presented the descriptive statistics for the dependent and independent variables The minimum and maximum values of CGT during the study period are 8513 and 433.9 respectively These values imply that the smallest capital gains tax collected by the Federal Inland Revenue service (FIRS) in the sampled period was 433.9 billion, with the highest. We show that investment made by the Nigerian government (both direct and portfolio) has a mean value of 3235.5 during the study period, with the maximum and minimum investments made being 12060 billion naira and 119.25 billion naira respectively. The values imply that on average, the economic development indicator of the Nigerian economy is large GDP, and increasing steadily

Correlation Analyses Table 2

Conclusion