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Indirect Taxes And Economic Growth In Nigeria

Author

Listed:
  • Peter Okoeguale Ibadin

    (University of Benin, Edo State, Nigeria)

  • Adesina Olugoke Oladipupo

    (University of Benin, Edo State, Nigeria)

Abstract

This study examined the impact of indirect taxes on economic growth of Nigeria, utilizing time series data spanning a thirty-four year period, from 1981 to 2014. The data collected from secondary sources, were analyzed and tested for unit root, using the Augmented Dickey-Fuller test. The residuals, whose unit root are usually tested at level, were found to be stationary while all other variables, such as the Value Added Tax (VAT), Petroleum Profit Tax (PPT) and Custom and Excise Duties (CED), except the Real Gross Domestic Product (RGDP), were stationary at second difference, suggesting a long run relationship. Consequently, the study utilized the Error Correction Model to evaluate the impact of VAT, PPT and CED on the RGDP. The findings revealed that VAT and PPT exert a positive and significant relationship on the RGDP. It was also revealed that CED of two-period lags has a positive relationship with RGDP and VAT of two-period lags showing a negative but significant relationship with RGDP. On the basis of these findings, it is suggested that some caution on the part of the government is required to identify all administrative loopholes for linkages to plug and to continue to maximize the contribution of VAT revenue to economic growth. This is important when it is realized that any action taken on VAT, as it relates to RGDP will take a year to become effective while taking two years to slow down the economy. In addition, and to achieve an optimum policy thrust, there must be commitment and honesty on the part of the agents of VAT., PPT., and CED with respect to its collection and payment ; special remuneration, training and retraining of these agents, all in an attempt to enhance impact of these taxes on economic growth.

Suggested Citation

  • Peter Okoeguale Ibadin & Adesina Olugoke Oladipupo, 2015. "Indirect Taxes And Economic Growth In Nigeria," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 24(2), pages 345-364, december.
    • Handle: RePEc:avo:emipdu:v:24:y:2015:i:2:p:345-364
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    References listed on IDEAS

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    1. Gareth Myles, 2000. "Taxation and economic growth," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 141-168, March.
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    Cited by:

    1. John MacCarthy & Paul Muda & Prince Sunu, 2022. "Tax Revenue and Economic Growth Nexus in Ghana: Co-integration and Granger causality Test," Bulletin of Applied Economics, Risk Market Journals, vol. 9(2), pages 15-35.
    2. John Obiora Anyaduba & Praise Oghenefejiro Otulugbu, 2019. "Taxation and Income Inequality in Nigeria," Accounting and Finance Research, Sciedu Press, vol. 8(3), pages 118-118, August.
    3. Alban Elshani & Leke Pula, 2023. "Impact of Taxes on Economic Growth: An Empirical Study in the Eurozone," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 24-41.
    4. Alvi, Aramish Altaf & Audi, Marc & Ashiq, Rakhshanda, 2024. "Is indirect Taxes Bad for the Poor? Examining the Determinants of Poverty in Pakistan," MPRA Paper 121536, University Library of Munich, Germany.
    5. Choueb Abdraman Oumar & Bisso Boukar Oumar, 2025. "Impacts Of Tax Structure On Income Inequality In Developing Countries [Effets De La Structure Fiscale Sur L'inégalité De Revenu Dans Les Pays En Développement Impacts Of Tax Structure On Income Inequality In Developing Countries]," Post-Print hal-05047475, HAL.

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    More about this item

    Keywords

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    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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