Abstract
This study examines the impact of taxation on investment and economic growth in Nigeria from 1980-2010. The ordinary least square method of multiple regression analysis was used to analyze the data. The annual data were sourced from the central bank of Nigeria statistical bulletin and NBS. The result of the analysis showed in conformity to our prior expectation because the parameter estimates of corporate income tax (CIT) and personal income tax (PIT) appears with negative signs, this means that an inverse relationship exist between taxation and investment. The economic implication of the result is that a one percent (1%) increase in CIT will result in decrease in the level of investment in Nigeria. Consequently, an increase in PIT will result in decrease in the level of investment. Finally, the result therefore showed that taxation is negatively related to the level of investment and the output of goods and services (GDP) and is positively related to government expenditure in Nigeria. We also observed that taxation statistically is significant factor influencing investment, GDP and government expenditure in Nigeria. Based on the result of our findings, it is recommended that the government of Nigeria should use taxation to achieve its set target that will enhance economic growth and development. DOI: 10.5901/ajis.2014.v3n4p209
Highlights
Introduction and Background to the StudyThe political, economic and social development of any country depends on the amount of revenue generated for the provision of infrastructure in that given country
With the change in circumstances and ideologies, the aim of taxes has been changed. These days apart from the objective of raising the public revenue, taxes level affect consumption, production and distribution with a view to ensuring the social welfare through the economic development of a country, tax can be used as an important tool in the following manner: optimum allocation of available resources, raising government revenue, encouraging savings and investment, acceleration of economic growth, price stability, control mechanism etc. the one and major problem to be address in this work “is the poor fiscal discipline in the allocation of resources and the operation of an ineffective tax regime in Nigeria”
Taxation is a compulsory levy imposed on a subject of a state or upon his properly, corporate bodies, Institutions,etc in order to defray expenses inquired by the government to provide security, social amenities and create conditions for the economic well being of the society.(Edame,2011, Okoi and Edame,2013)
Summary
The political, economic and social development of any country depends on the amount of revenue generated for the provision of infrastructure in that given country. Tax is a compulsory levy imposed on a subject or upon his property by the government to provide security, social amenities and create conditions for the economic well-being of the society Anyanwu (1996) and Anyanfo (1997) stated that tax are imposed to regulate the production of certain goods and services, protection of infant industries, control business and curb inflation, reduce income inequalities etc. Tosuu and Abizadeh (2005) acknowledge that taxes are used as proxy for fiscal policy They outlined five possible mechanisms by which taxes can affect economic growth. Government use tax proceeds to render their traditional functions, such as provisions of public goods, maintenance of law and order, defense against external aggression, regulation of trade and business to ensure social and economic maintenance. Income and efficiency of resources use as well as macro effect on the level of capacity output, employment, prices and growth
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