Abstract
This study investigated the impact of taxation on economic development of Nigeria from 2003 to 2017.Vector Error Correction Model (VECM), Augmented Dickey-Fuller (ADF) unit root test, Autoregressive Distributed Lag (ARDL) bounds test, Jarque-Bera Normality Test and Eigenvalue stability condition were utilised in this study. The study revealed that companies’ income tax, petroleum profit and value added tax have a long run impact of -0.225(p-value=0.000),-0.0005 (p-value=0.699), and 0.211(p-value=0.000) respectively on the economic development of Nigeria.It was concluded that taxation has a significant long run relationship with Nigeria’s economic development. The study recommended that the government should not increase companies’ income tax rate because it is detrimental to the economic development of the country in the long run, instead the government should increase the value added tax because it has the potentiality to improve economic development of Nigeria. Also, the government should not concentrate effort on petroleum profit tax as it not significant on economic development of the country.
Highlights
The rate of economic development creates an inequality among the countries of the world
Test for Model Stability Based on the result of Eigenvalue stability condition as presented in Table4.7, the Vector Error Correction Model (VECM) specification imposes 3 moduli
The results show that revenue derived from the administering companies income tax is negatively and significantly related to economic development in Nigeria
Summary
The rate of economic development creates an inequality among the countries of the world. Economic development ensures an increase in output together with a change in technical and institutional arrangement involved in production (Satope & Akanbi, 2014). Countries that are developed economically have an advancement in factors that brings about transformation in culture, social, educational, political and economic standards (Mick, 2007). The standard economic approach to taxation and development focuses on how economic change influences the evolution of the tax system (Besley & Persson, 2013). This in Advances in Social Sciences Research Journal (ASSRJ)
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