Impacts of Taxation on Economic Development in Nigeria

Abstract

The study investigated the impact of company's income tax revenue, education tax revenue, and petroleum profit tax revenue on health, education and standard of living respectively in Nigeria from 2000 to 2020. The study test the unit roots of the variables by using Augmented Dickey Fuller and found out that all variables involved are stable at level and first difference. The study used Bound Co-integration test and ARDL – Autoregressive Distributed Lag to estimate its three models. The results are as follows: in model 2a with life expectancy at birth as dependent variable, there exist a negative relationship between company income tax revenue/education tax revenue and life expectancy at birth (LEXB), and there exist a positive relationship between petroleum profit tax revenue and life expectancy at birth (LEXB) within the periods of study; while in model 2b with student enrolment at tertiary level as dependent variable, there exists a positive relationship between company income tax revenue and school enrolment at tertiary level (SET), there exists a negative relationship between education tax revenue and school enrolment at tertiary level (SET) within the periods of study, and there exists a positive/significant relationship between petroleum profit tax revenue and school enrolment at tertiary level (SET) within the period of study; finally in model 2c with per capita gross national income as dependent variable, there exist a negative relationship between company income tax revenue in current year and one year lag respectively and per capita gross national income (PCGNI), there exist a positive relationship between education tax revenue and per capita gross national income (proxy for standard of living), and there exist a positive relationship between petroleum profit tax revenue and per capita gross national income (PCGNI) within the periods of study. The study therefore recommends that company income tax revenue, education tax revenue and petroleum profit tax revenue respectively are very useful while formulating and implementing decisions on health, education and standard of living in Nigeria.