Impact of Company Income Tax Revenue on Economic Growth of selected West African States (an application of the Dynamic Panel ARDL)

Abstract

The study seeks to investigate the impact of company income tax on economic growth in selected 15 West African countries using the panel ARDL from 2002-2021. Based on the outcome of the hausman test, the study chose the Pooled Mean Group (PMG) because the probability Value is greater than 5% level of significance. PMG estimator assumes only ' are same across group that is, only the long run estimators are the same or homogenous and short run estimators varies. The data are found to be stationary at first difference. And the correction result shows that there is no problem of multicollinearity. The study found out that there is a long run relationship between company income tax and economic growth. The ECT coefficient is negative for Nigeria, Ghana, and Sierra Leone, indicating that these countries converge to their long-run equilibrium at a rate of 0.9%, 95.2%, and 39.4%, respectively, per period. the short-run impact of various variables on the dependent variable for Group B countries, namely Senegal, Burkina Faso, Guinea Bissau, Guinea, and Cote d'Ivoire. The model appears to include a lagged dependent variable (ECT) as well as a set of explanatory variables including D.CIT, D.FDI, D.POP, D.FID, and D.TOP. with negative coefficient indicating that these countries converge to their long-run equilibrium. And same with group C. In conclusion, the impact of company income tax revenue on economic growth in selected West African states, as examined through the panel ARDL framework from 2002 to 2021, has been found to be significant. The study reveals that there is a positive and statistically significant relationship between company income tax revenue and economic growth in the selected West African countries. The study also found evidence of short-run dynamics and long-run equilibrium in the relationship between the two variables. This suggests that an increase in company income tax revenue can have a positive impact on the economic growth of these nations. The study recommended that, policymakers in selected West African states should adopt a multi-pronged approach that focuses on increasing company income tax revenue, promoting trade openness, attracting foreign direct investment, and improving human capital development. By doing this, they can ensure sustained economic growth and development in their countries.