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A Longitudinal Assessment of Tax Reforms and National Income in Nigeria: 1971-2014

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  • Innocent Nwaorgu
  • Wilson Herbert
  • Francis Onyilo

Abstract

This study assesses the impact of tax reforms on Nigeria’s national income over the period, 1971 to 2014. Using a variety of growth indicators signifying tax reforms, our regression model specified growth rate of national income (proxied by GDP) as a function of growth rates in these indicators. Diagnostic tests (F-statistics, Adjusted R-Square and Durbin-Watson) were carried out to ascertain the robustness of the parameter estimates. We found that tax reforms significantly improved national income and economic growth during the period of study, especially growth rates of value added tax and personal income tax. Our results show that growth rate of personal income tax has a positive significant effect on the national income and economic growth, while that of value added tax has a negative significant effect on growth of national income. The growth components of company income tax and petroleum profit tax are positive but not statistically significant. On the other hand, reforms in custom and excise duties were found to yield negative and statistically non-significant effect. The leading conclusions from these findings are- (1) strategic tax reforms significantly influence the behaviour of national income and GDP; (2) tax policy significantly fosters the growth of national income; and (3) policy makers, especially Ministry of Finance and Federal Inland Revenue Service and their state counterparts, should give requisite attention to tax policy issues, in the light of their obvious implications on growth of the national income and economic development.

Suggested Citation

  • Innocent Nwaorgu & Wilson Herbert & Francis Onyilo, 2016. "A Longitudinal Assessment of Tax Reforms and National Income in Nigeria: 1971-2014," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(8), pages 1-43, August.
    • Handle: RePEc:ibn:ijefaa:v:8:y:2016:i:8:p:43
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    References listed on IDEAS

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    5. Dahl, Henrik & Mitra, Pradeep, 1991. "Applying Tax Policy Models in Country Eocnomic Work: Bangladesh, China, and India," The World Bank Economic Review, World Bank, vol. 5(3), pages 553-572, September.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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