Aggregate Revenue Research Articles

Impact of Tax-based Revenue on Economic Development in Nigeria, 1999 to 2023

This research measures the contributory impact of Tax-based revenue on economic development in Nigeria, 1999 to 2023, with a specific focus on the nuanced dynamics of oil-based tax (OBT), non-oil-based tax (NOBT), and aggregate tax revenue (ATR). Leveraging comprehensive data extracted from the Central Bank of Nigeria's Statistical Bulletin and Federal Inland Revenue Service (FIRS) database, the study employs the Autoregressive Distributed Lag Model (ARDL) with Gross Domestic Product Growth Per Capital (GDPPC) as the outcome variable. The empirical analysis supports a significant and positive impact of non-oil-based tax revenue on GDPG while the oil-based tax shares no significant impact on economic development. Also, aggregate tax revenue (ATR) was found to negatively but significantly impact on economic development. The study recommends the adjustment of the tax system to address the developmental constraint on investment and consumption posed by taxation while optimizing the benefits that accrue from an efficient and good tax system.

Pre and Post Treasury Single Account (TSA) Implementation and the Nigeria’s Macroeconomic Performance

The paper examined the impact of pre- and post-TSA implementation on Nigeria’s macroeconomic performance. Robust regression estimates were used to analyze the sensitivity of both pre-TSA and post-TSA periods to three macroeconomic performance measures in Nigeria between 2007 and 2014 and 2015 and 2022, respectively. Meanwhile, a paired sample t-test was employed to determine whether the mean values of government total revenue, exchange rate, interest rate, and per capita income differed significantly. The results confirmed that federal government aggregate revenue plays a significant role in influencing Nigeria's macroeconomic performance. Additionally, the mean GTR increased from $8565.95 billion in the pre-TSA period to $9151.93 billion in the post-TSA period. However, this increase was not statistically significant, likely due to delays in TSA implementation. The exchange rate rose significantly, suggesting a notable devaluation of the Nigerian currency. Hence, it is imperative for the government to further strengthen the mechanisms of the TSA.

Non-Oil Revenue and the Impact on the Economic Development of Nigeria

Nigeria as one of the major oil-producing countries in the world has been diversifying into more non-oil revenue while more attention is paid to tax revenue as it has the potential of taking the country to the Promised Land. As a result, the study sought to examine Non-Oil Revenue and its impact on the Economic Development of Nigeria, leveraging on tax revenue for the period 1994–2023. The objectives of the study examined the effect of corporate income tax, capital gain tax, value-added tax, customs and excise duties on economic growth. Tertiary Education Tax, Stamp duty, and Other Levies were used as controlled variables. Data were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin and Federal Inland Revenue (FIRS) Statistical Reports. ARDL Regression Analysis was applied to test the hypotheses. The findings revealed that the coefficients of variation for the lag values showed that the RGDP was positively impacted by TDT and CED, while negatively impacted by CIT, CGT, VAT, and SD. The ARDL model's R2 and Adjusted R2 statistics together explained almost 69% of the variation in RGDP, according to the adjusted R2 of 0.518719. This implies that a significant portion of volatility is still unaccounted for despite the model's poor predictive power. The study concluded that the aggregate tax revenue does not show the hope of taking the country to the promised land, as only two (CED and TDT) showed a positive relationship with the economic growth of the country. Thus, it recommended that the Nigerian government need to pay more attention to tax income since it can promote the necessary growth in the nation.

Harmonizing fiscal policy: Indirect taxes and global public goods

AbstractThis article focuses on the welfare effects of the interaction of a rule of indirect tax harmonization under the destination principle and the provision of public goods that are global in nature. It stresses the role of international transfers between governments set in order to equalize the social (i.e., worldwide) marginal cost of public funds across countries. Under this condition, it is shown how the combination of the tax and expenditure side of such a “harmonizing fiscal policy” can give rise to a potential Pareto improvement. This requires considering aggregate revenue effects (and the ensuing effects on the provision of public goods) of the fiscal reform jointly with under/over provision of public goods in the (first‐best) Samuelson sense.

Moderating Influence of Corruption on the Relationship between Aggregate Tax Revenue and Economic Development in Nigeria and Ghana

The study examines the moderating influence of corruption on the relationship between aggregate tax revenue and economic development in Nigeria and Ghana. Ex-post facto research design was adopted for the study where country specific data extracted from the annual publications of OECD database on tax revenue in Africa, Central Bank of Nigeria and Transparency International (TI) for the periods 1981 to 2022 were used. The dependent variable was economic development measured with Gross Domestic Product at 2015 Constant price while the independent variable was Aggregate tax revenue. The relationship between the dependent and independent variables was moderated by the presence of corruption measured by Corruption perception index for Nigeria and Ghana. Different econometric techniques were applied in the study while the data was analyzed by means of the Autoregressive Distributed Lag (ARDL) model using E views Version 10. The findings showed that in Nigeria and Ghana, aggregate tax revenue had a positive and significant influence on economic development both short and long run whereas corruption had a negative but significant influence on the relationship between tax revenue and gross domestic product of Nigeria and Ghana. The study therefore recommends among others that the respective governments of Nigeria and Ghana should put in place adequate fiscal measures to ensure that revenue generated from taxes are effectively utilized to develop their economies. They should also see the need to tackle corruption in the process of executing projects by ensuring that activities of bad and corrupt leaders are closely monitored through further strengthening the hands of the anti Graft Agencies like the Economic and Financial Crimes Commission (EFCC) and ICPC to have the political will to persecute corrupt leaders and managers of public funds.

Predicting Operating Income via a Generalized Operating-Leverage Model

We propose a generalized, practitioner-oriented operating-leverage model for predicting operating income using net sales, cost of sales, depreciation, and SG&A. Prior research links operating income directly to these items; hence, our model includes all aggregate revenues and expenses that comprise operating income. Prior research finds that the cost of sales is “much less” sticky than depreciation and SG&A; hence, we use the cost of sales as a proxy for the total variable costs and depreciation and SG&A as proxies for the sticky fixed costs. We introduce a new adjustment to the textbook operating-leverage model so that the ratio of sales to the cost of sales remains constant for the reference and forecast periods. Inspired by prior research, we adjust depreciation and SG&A for cost stickiness. We find that using our generalized operating-leverage model improves the forecast accuracy of next-quarter and next-year operating income predictions compared to predictions made using textbook operating leverage, which is a special case of our model.

Analysis of trends and determinants of the «Big 4» companies in the global audit market

The object of research is the «Big 4» – a group of the largest international auditing companies, which includes: Deloitte (Great Britain), PricewaterhouseCoopers (USA), Ernst&Young (Great Britain) and KPMG (Netherlands). The target market of the «Big Four» companies is mainly large companies operating in various sectors of the world economy and regions of the world. Over the years, the «Big 4» companies have been leading the global audit services market and growing their revenues. Companies offer audit, tax and consulting services to their clients. This study is aimed at determining and evaluating the influence of the state of the world economy on the performance of companies and identifying the key endogenous determinants of the sustainability of their development. A comparative analysis of the dynamics of growth rates of global gross domestic product and aggregate global income of the «Big 4» companies during 2009–2022 showed their similarity, but not identity. The annual growth rates of the «Big 4» aggregate income mostly exceeded similar indicators of the global gross domestic product. The conducted correlation-regression analysis of the dependence of the aggregate revenues of the «Big 4» companies on the economic situation in the world confirmed the significant influence of the state of the world economy on the performance of the «Big 4» and made it possible to determine the level of this influence. A number of endogenous determinants contributing to the sustainable development of a group of companies in an unstable economic environment have been identified: the target segment (the largest international and national companies), broad industry diversification and geographical coverage of client companies, timely updating of the range of services in accordance with demand, effective international marketing strategies, use innovative technologies, highly professional management and company personnel.

Piped water revenue and investment strategies in rural Africa

Abstract Viable pathways to universal safely managed drinking water access in rural Africa involve a blend of infrastructure types, service delivery arrangements, and sources of finance. Priorities are shaped by institutional and economic barriers and are often based on assumptions regarding user demand and revenue sustainability. Improved understanding of how alternative approaches affect revenue generated from user payments can enhance long-term viability and repayment capacity of rural piped water services. We analyse more than 3,900 monthly records from operators in Ghana, Rwanda, and Uganda and model revenue patterns for novel service area archetypes. Results indicate on and off premises connections exhibit complementary revenue patterns, with volumetric revenue determined by tariff level rather than connection type and waterpoints with the greatest dispensing capacity generating the most aggregate revenue. The prepaid credit payment approach, which is increasingly promoted to enhance revenue collection efficiency, is not associated with revenue advantages compared to pay-as-you-fetch and monthly billing approaches when tariff level is controlled. These patterns are recurrent at multi- and single country scales and across service areas where public and enterprise-led investment approaches to infrastructure development are taken, suggesting the findings may be applicable beyond the study domain. Infrastructure investment strategies can promote revenue and equity goals through off-site piped water, but more evidence is needed to understand the trade-offs of prepaid credit systems.

Competitive Online Optimization with Multiple Inventories

We study an online inventory trading problem where a user seeks to maximize the aggregate revenue of trading multiple inventories over a time horizon. The trading constraints and concave revenue functions are revealed sequentially in time, and the user needs to make irrevocable decisions. The problem has wide applications in various engineering domains. Existing works employ the primal-dual framework to design online algorithms with sub-optimal, albeit near-optimal, competitive ratios (CR). We exploit the problem structure to develop a new divide-and-conquer approach to solve the online multi-inventory problem by solving multiple calibrated single-inventory ones separately and combining their solutions. The approach achieves the optimal CR of $łn θ + 1$ if $Nłeq łn θ + 1$, where N is the number of inventories and θ represents the revenue function uncertainty; it attains a CR of $1/[1-e^-1/(łnθ+1) ] \in [łn θ +1, łn θ +2)$ otherwise. The divide-and-conquer approach reveals novel structural insights for the problem, (partially) closes a gap in existing studies, and generalizes to broader settings. For example, it gives an algorithm with a CR within a constant factor to the lower bound for a generalized one-way trading problem with price elasticity with no previous results. When developing the above results, we also extend a recent CR-Pursuit algorithmic framework and introduce an online allocation problem with allowance augmentation, both of which can be of independent interest.

Competitive Online Optimization with Multiple Inventories

We study an online inventory trading problem where a user seeks to maximize the aggregate revenue of trading multiple inventories over a time horizon. The trading constraints and concave revenue functions are revealed sequentially in time, and the user needs to make irrevocable decisions. The problem has wide applications in various engineering domains. Existing works employ the primal-dual framework to design online algorithms with sub-optimal, albeit near-optimal, competitive ratios (CR). We exploit the problem structure to develop a new divide-and-conquer approach to solve the online multi-inventory problem by solving multiple calibrated single-inventory ones separately and combining their solutions. The approach achieves the optimal CR of łn θ + 1 if Nłeq łn θ + 1, where N is the number of inventories and θ represents the revenue function uncertainty; it attains a CR of 1/[1-e^-1/(łnθ+1) ] in [łn θ +1, łn θ +2) otherwise. The divide-and-conquer approach reveals novel structural insights for the problem, (partially) closes a gap in existing studies, and generalizes to broader settings. For example, it gives an algorithm with a CR within a constant factor to the lower bound for a generalized one-way trading problem with price elasticity with no previous results. When developing the above results, we also extend a recent CR-Pursuit algorithmic framework and introduce an online allocation problem with allowance augmentation, both of which can be of independent interest.

Panasonic life solutions: anchoring its future growth strategy

Learning outcomes The learning outcomes of this paper is as follows: to explain the importance of rationalizing business operations to achieve efficiencies. To explain the importance of constantly re-inventing the product portfolio and the business for the survival and growth of the business. To discuss the use of product-market expansion strategies as used by businesses for growth and sustainability. To evaluate the internal challenges faced by a company as they adopt business strategies for business growth. To discuss a firm’s strategy to exploit significant opportunities in an evolving business environment. Case overview/synopsis Panasonic Life Solutions India Limited (PLSIND) an electrical products company with operations in India – an emerging market has set a Vision 2022 to achieve INR 69.21bn revenue target by the year 2022. PLSIND is marketed through the distributor business to consumer sales channel. To achieve the new growth targets, it was imperative for them to expand the product portfolio and explore marketing through the new business to business (B2B) and business to government (B2G) sales channels. Dinesh Aggarwal the Joint Managing Director of PLSIND was tasked with this responsibility. Both propositions depicted attractive business potential but at the same time came with additional risks of a longer sales/revenue cycle. PLSIND to a certain extent had ventured into new business projects with the launch of home automation, solar solutions for industries and smart street lighting business projects. In 2019, they also made a modest beginning by achieving revenues of INR 3.4bnn (constituting 10% of their aggregate revenues of INR 34bn) from B2B/B2G sales channels. Aggarwal believed that this was a good beginning. However, to achieve 2022 growth targets, they had to aggressively move forward with the new business strategy. Aggarwal had to work with the management team to gain acceptance and then to manage these additional risks for growth that came with this new business strategy. How could he win the confidence of the management team? How could he best reorganize the business teams and processes internally to enhance the required operational efficiencies for business growth? Complexity academic level This case is designed for business students at the MBA or executive MBA level courses. Supplementary materials Teaching notes are available for educators only. Subject code CSS 11: Strategy.

Is the asymmetric impact of aggregate revenue and aggregate earnings on the stock index in accordance with the prospect theory?

AbstractThis study examines the asymmetric impact on the US S&P 500 stock index due to the changes in aggregate revenue and aggregate earnings of the index constituents. We applied the nonlinear autoregressive distributed lag model of Shin et al. (Festschrift in honor of Peter Schmidt, 2014, Springer, 281–314) to determine the long run and the short run asymmetries. The presence of a cointegrating relationship confirms that despite short‐run departures, the relationship remains stable in the long run. The nonlinear autoregressive distributed lag model estimates that when aggregate revenue increases by $1,000, the S&P index is expected to increase by 8.64 points, but when the aggregate revenue decreases by the same amount, the market decreases by 31.4 points. Similarly, when the aggregate income increases by $1,000, the S&P index is likely to increase by 22.59 points, whereas if the aggregate income decreases by the same amount, the index would decrease more steeply by 32.11 points. Based on these findings, the present study establishes an asymmetric relationship between two important accounting variables. The study also confirms the validation of prospect theory in the S&P index valuation of its constituent stocks' financial performance. Aside from using the model on aggregate data for the S&P index, we also analyzed 28 individual US stocks to validate the findings.

Reform State Taxes to Increase Productivity

AbstractA larger and more productive economy would facilitate the reduction of COVID‐19 government deficits and their future repayment. Reform of state taxes is among the low‐hanging fruit to include in a broad supply‐side agenda to increase national productivity. Approximate aggregate revenue neutral reform packages to reduce tax distortions and improve productivity are discussed for state taxes on property, payroll and motor vehicles.

THE ROLE OF PRIVATE INDIVIDUALS IN THE FORMATION OF REVENUES OF NON-GOVERNMENTAL ORGANIZATIONS OF UKRAINE

Abstract. The peculiarities of forming budgets of non-governmental organizations in Ukraine owing to private individuals have been researched. The revenues of public organizations of Ukraine from membership contributions and charity of individuals from 2006 to 2019 have been analyzed. The inconsistencies of revenues of public organizations of Ukraine from sources related to private individuals have been discovered. The study of the structure of revenues of public organizations of Ukraine indicated the instability of the role of revenues from private individuals in it, with a significantly reducedthe share of membership fees and slightly increased share of income from charitable donations of individuals. This tendency may indicate an increase in the attractiveness of the activities of those non-governmental organizations of Ukraine, which benefit the entire society to individuals, as opposed of those whose activities are aimed solely at satisfying the interests of their members. Analysis of the revenues of political parties of Ukraine over the period 2016—2018 from charity of private individuals indicated a significant increase in the role of this source in the formation of budgets of political parties. It has been found that from 2006 to 2018 the role of individuals significantly increased in the formation of budgets of non-governmental organizations. Moreover, growth is observed i both nominal and inflation-adjusted prices. Analysis of public sector revenues from private individuals per unit of population showed that they were growing at a faster rate than aggregate revenues, which indicates an increase in charitable activities of the Ukrainian population. Accordingly, based on the conducted research and obtained results of analysis of revenues of public organizations and political parties of Ukraine from private individuals, it has been concluded that the role of private individuals in the formation of budgets of public organizations of Ukraine continues to increase. Keywords: public organizations, political parties, revenues of non-governmental organizations, civil society, civil society finances. Formulas: 0; fig.: 5; tabl.: 4; bibl.: 14.

The Impact of Fiscal Policy on the U.S. Stock Market Return

In this study, I analyze the impact of the aggregate, income, corporate, and social security tax revenues on both the U.S. output and the stock market return in a structural vector autoregression (SVAR) framework between 1960:Q1 and 2015:Q4. Unlike some of the other studies, I use not only aggregate but also disaggregated tax revenue variables to examine the impact of fiscal policy. Results show that an exogenous increase in aggregate tax revenue reduces both the output and the market return. In addition, an increase in income, corporate, and social security tax revenues reduces both output and the market return significantly at varying degrees.

Tax Return and Economic Growth: Evidence from Nigerian Experience (2000-2017)

This paper determined the effect of tax return on gross domestic product. Data were collected using secondary source only. The technique employed was multiple regressions as tool of analysis for the study. The findings of the study show that Tax Returns on Customs and Excise Duty, Value Added Tax and Aggregate Tax Revenue have positive significance growth rate on Gross Domestic Product. Based on this, the paper recommended among others that government should also ensure that they remove impediments to investment in form of legal and regulatory barriers. There is need to ensure stable macroeconomic environment. The Government should ensure that Value Added Tax Growth Rate is boosted in order to improve the economy. Keywords: Tax return, Customs and Excise Duty (CED), Value Added Tax (VAT), Aggregated Tax revenue, Gross Domestic Product (GDP) and Nigerian tax DOI: 10.7176/RJFA/11-18-16 Publication date: September 30 th 2020

Mind the (Tax) Gap! It is Bigger and More Complex than You Think

Historically, national revenue agencies have relied largely on trends in aggregate revenue collections along with reporting on compliance yields as the central element of their performance reporting, together with a few efficiency-related measures. Generally, trends of increasing revenue collections (ahead of budget) and rising compliance program outputs have been seen as indicators of a successful revenue agency and a healthier tax system. But is this necessarily the case? Do such indicators properly and adequately reflect the health of the tax system? In an effort to answer these questions, a relatively small but growing number of national tax agencies have over the last decade or so sought to better understand the health of their tax system by turning their attention to the concept of the ‘tax gap’— the difference between the estimated amount of tax legally payable for each tax administered and what is actually collected in practice. This interest has brought a focus to better understanding tax gap estimation methods, the introduction of comprehensive tax gap research programs, and the public dissemination of tax gap findings to increase community awareness and draw attention to the fact the revenue agency is serious about the tax gap as a long-term performance measure. This development constitutes a new frontier in the management of government revenue systems. And as these agencies often have administrative responsibility for more than just taxes (e.g. student loan repayments and superannuation contributions), these tax gap estimates can have implications beyond just taxes. In the case of the individuals income tax, this must also mean that related tax gap estimates pose a frontier challenge to government agencies administering income-related transfers (e.g. pensions and unemployment benefits) and service entitlements (e.g. health care cards). This paper builds on recent tax gap research findings published by the Australian Taxation Office (ATO) and examines what they mean for the main types of individuals income tax non-compliance, the main perpetrators, the behaviours underlying this non-compliance, and possible policy and administrative responses. The analysis is made by allocating the ATO’s individuals income tax gap estimates to its 2% individuals sample file of taxpayers in 2016-17 and reviewing the results by sources of tax gap and how they differ across various socio-economic and demographic groupings. The paper also examines what these results might mean for the repayment of income-contingent Study and Training Support Loans (STSL) and for the payment of means-tested government transfers. Finally, the paper presents a menu of potential reforms to address key weaknesses in individuals income tax policy design and administration.

The Fiscal Cost of COVID-19: Evidence from the States

Abstract: How has the COVID-19 pandemic affected state budgets? Using a quarterly panel of states between 1994 and 2019, we estimate how changes in employment affect tax revenues. We find that a one percentage point (pp) rise in employment is associated with a 1.56pp rise in total tax revenue, which is concentrated among sales taxes (a 1.19pp increase), individual income taxes (a 1.63pp increase), and corporate income taxes (a 4.13pp increase). These results are robust to a wide array of controls, such as state composition and housing price growth, and to instrumental variable specifications. After estimating state-specific elasticities and forecasting counterfactual employment within states using the most recent data, we find that the average state will experience a 6.7% decline in its tax revenues under an optimistic scenario, culminating in $79.9 billion lost in total aggregate revenue for the United States, or a 11.1% decline under a pessimistic scenario, culminating in $125.2 billion lost in total.

Tax Enforcement Spillovers – Evidence from South Africa

The purpose of this paper is to test for tax enforcement spillovers within economic and spatial networks. Using the population of corporate tax returns for the years 2009 to 2015, we can show that tax audits exert a positive and significant effect on the tax liability of non-targeted neighboring firms. Quantitatively, the results suggest that the audit of a close geographic neighbor increases corporate tax reporting by 0.7 percent. While the observed spillover effect decline in distance to the audited entity and are short run in nature, the implied aggregate revenue gains are non-negligible. Additional analyses show that the effect is driven by audit cases, where audited firms do not experience an upward revision in their tax owed in the course of the audit. This suggests that the observed effect is rooted in communication among taxpayers and is not driven by audit-related cost shocks of competitors or business partners.

The Fiscal Cost of Covid-19: Evidence from the States

Abstract: How has the COVID-19 pandemic affected state budgets? Using a quarterly panel of states between 1994 and 2019, we estimate how changes in employment affect tax revenues. We find that a one percentage point (pp) rise in employment is associated with a 1.56pp rise in total tax revenue, which is concentrated among sales taxes (a 1.19pp increase), individual income taxes (a 1.63pp increase), and corporate income taxes (a 4.13pp increase). These results are robust to a wide array of controls, such as state composition and housing price growth, and to instrumental variable specifications. After estimating state-specific elasticities and forecasting counterfactual employment within states using the most recent data, we find that the average state will experience a 6.7% decline in its tax revenues under an optimistic scenario, culminating in $79.9 billion lost in total aggregate revenue for the United States, or a 11.1% decline under a pessimistic scenario, culminating in $125.2 billion lost in total.