Moderating Role of Financial Development on the Relationship Between Tax Revenue and Economic Development of Nigeria

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This study examined the moderating role of financial development on relationship between direct tax revenue and economic development in Nigeria. The specific objectives were to investigate the relationship between personal income tax, company income tax and petroleum profit tax on human development index and per capita income and the moderating effect of financial development on direct taxes and economic development of Nigeria. The study anchored on benefit theory of taxation while correlational and ex-post facto research designs were adopted for the study. The population of the study was direct taxes revenue data and economic development in Nigeria from 1991 to 2020 and secondary data were sourced from Annual statistical bulletin of CBN, Federal Inland Revenue service (FIRS) and National Bureau of Statistics. The secondary data were analysed using univariate, bivariate and multivariate analysis. The result of the multiple regression shows that personal income tax, company income tax and petroleum profit tax positively and significantly influence economic development in Nigeria. Also, financial development positively and significantly moderates the relationship between direct taxes and economic development. Consequently, the study concludes that the level of financial development affects the revenue generation potentials through direct taxes for the economic development of Nigeria. Hence, the study recommends among others that government parastatals, multinationals, conglomerates and companies in the country should not engage any vendor who does not have a TIN number. This will go a long way in reducing tax evasion; taxes should be remitted via an e-payment system or via direct payment to the various tax authorities’ accounts.