Effect of Tax Revenue on Investment in Nigeria

The linkage between tax and net investment has received persistent attention in both the academic literature and policy debates. One of the main drivers of economic growth is investment, and how taxes affect the investment behavior of firms is, indeed, a question of great importance. Therefore, this paper evaluated the impact of tax revenue on investments in Nigeria with a data set ranging from 1986 to 2022. The paper adopted auto-redistributed lag model (ARDL) estimation. Findings from the study revealed that in the long run, company income tax, value added tax, petroleum profit tax exerted significant positive effect on investment as against the negatively induced impact exerted by stamp duty tax. It was also found out that unidirectional causal relationship exists between tax revenue and investment in the period under investigation. Given the findings, it was recommended that government should ensure that fiscal policies related to profit petroleum tax remain stable and predictable because Investors appreciate consistency, as it allows them to make informed decisions and plan for the long term as frequent changes in tax policies can deter investment. Secondly, the government should consider offering targeted lower tax incentives for industries that align with national development goals or have the potential to contribute significantly to economic growth in the country.