This study examined the relationship between tax structure and economic growth in Nigeria using annual data between 1970 to 2007. The motivation is to track the impact of the observed change in the tax structure on economic growth in order to inform policy. Two tax structures namely pre Value Added Tax (VAT) and post VAT were identified and their impacts evaluated.
The empirical analysis was anchored on the endogenous growth theoretical framework which allowed for linking tax structures to growth. Econometric models were then developed to explore the relationship between the identified tax structures and economic growth. The first model present a growth equation with average tax rate variable, while the second model is where the specific tax variables were included alongside variables in the first model. The third, fourth and fifth models were used to test the robustness of the second model. This was accomplished basically by introducing additional variables. Prior to the empirical estimations, the standard tests of unit root and co-integration analysis were conducted to ascertain the appropriate estimation procedure and technique(s) to use. The unit root test show that all the variables of the models are stationary at the first difference, while the co-integration analysis indicates that one model out of the five models had no co-integrating relationship, while the rest had co integrating relationships. On the basis of these tests results, the model for which we found no co-integrating relationship was estimated using the Vector Auto Regression (VAR) technique while the others with co-integrating relationship were estimated via the Error Correction Modeling (ECM) technique. Further to this, the Granger Causality test was also conducted to ascertain the direction of causality among the variables of the model.
The estimated results show that in the first model, average tax bears insignificant relationship with growth rate of real GDP. Likewise, following the introduction of specific tax variables in the modeling, average tax rate and other tax variables were not significant in the determination of economic growth in Nigeria. The results obtained from robustness check models indicate that the signs and significance levels of the tax variables varied with other policy variables that are applied in conjunction with the tax variables. [...]
Table of Contents
1.1 Background To The Study
1.2 Statement Of The Problem
1.3 Objectives Of The Study
1.4 Justification Of The Study
1.5 Scope Of The Study
1.6 Organization Of The Study
2.1 Introduction
2.2 Overview Of The Nigeria Tax Structure
2.3 Major Federal Government Taxes
2.3.1 Company Income Tax (CIT)
2.3.2 Petroleum Profit Tax (PPT)
2.3.3 Customs and Excise Duties
2.3.4 Value-Added Tax (VAT)
2.4 Tax Structure and Revenue Profile Of Nigeria
2.5 The Relationship Between The Different Taxes And GDP in the Two Structures
3.1 Introduction
3.2 Tax Structure And Economic Growth: Theoretical Issues
3.3 Tax Structure And Economic Growth: Empirical Evidences
4.1 Introduction
4.2 Theoretical Framework
4.2.1 Technologies
4.2.2 Factor endowment
4.2.3 Preferences
4.2.4 The evolution of capital
4.2.5 The Effects Of Taxation
4.2.6 Welfare Effects
4.3 Model Specification
4.4 Methodology And Estimation Procedures
4.5 Time Series Properties Of The Variables
4.5.1 Unit Root Tests
4.5.2 Co integration Tests
4.5.3 Error Correction Term
4.6 Data Types And Sources
5.1 Introduction
5.2 Descriptive Statistics
5.3 Time Series Tests Results
5.3.1 Unit Root Results
5.3.2 Cointegration Tests Results
5.4 Model Estimation Issues And Discussion Of Result
5.5 The Granger Causality Test
5.6 Test for Structural Stability
6.1 Introduction
6.2 Summary Of Major Findings
6.3 Implications For Policy And Recommendations
6.4 Conclusion
6.5 Limitations Of The Study
6.6 Agenda For Further Research
Research Objectives and Key Focus Areas
This study investigates the relationship between tax structure and economic growth in Nigeria from 1970 to 2007, specifically evaluating the impact of the transition from pre-VAT to post-VAT regimes to inform future fiscal policy.
- Analysis of tax structure shifts and their correlation with GDP growth.
- Evaluation of specific tax instruments, including CIT, PPT, and VAT.
- Application of advanced econometric modeling (VAR and ECM).
- Investigation of causality between tax variables and economic indicators.
- Assessment of tax policy efficacy in the Nigerian economic context.
Excerpt from the Book
1.1 Background to the study:
The increasing size of government coupled with the ongoing global financial meltdown has renewed interest in the study of how the public sector can be used to provide a stimulus thereby remedying the situation and supporting the long-run growth of the Nigerian economy. The argument on how the public sector affects growth is polarized along two schools of thought. Those who believe that the public sector promote growth do so because of the provisions of public goods, the corrections of negative externalities and market failure by government etc. While those who think contrary to this, do so because they reason that taxes generate distortions in the economy and as such lead to lower growth, (Widmalm, 2001). The effect of taxation on growth depends on what is taxed, i.e. if the tax system extracts more or less resources from private agents (the tax level), or because they raise a given amount of revenue in more or less distortive ways (the tax structure), (Arnold, 2008). Taxation is thus, one of the most important variables that affect long term economic growth, but this simple truth has been neglected in the Nigerian economy because the huge revenue generated from oil.
Summary of Chapters
CHAPTER ONE: INTRODUCTION: This chapter provides the contextual background, research problem, and objectives, emphasizing the need to analyze tax structure impacts on Nigerian economic growth.
CHAPTER TWO: OVERVIEW OF THE NIGERIAN TAX SYSTEM AND STRUCTURE: This chapter details the history, jurisdiction, and types of taxes in Nigeria, covering both federal and state revenue sources.
CHAPTER THREE: LITERATURE REVIEW: This chapter synthesizes theoretical and empirical perspectives on the link between taxation and economic growth, drawing on diverse international studies.
CHAPTER FOUR: THEORETICAL FRAMWORK AND METHODOLOGY: This chapter establishes the endogenous growth theoretical framework and explains the econometric models, unit root, cointegration, and estimation procedures employed.
CHAPTER FIVE: PRESENTATION AND DISCURSION OF RESULTS: This chapter presents empirical findings, including descriptive statistics, unit root tests, and cointegration analysis, and discusses the robustness of the models.
CHAPTER SIX: SUMMARY, FINDINGS, CONCLUSION, AND RECOMMENDATIONS: This final chapter summarizes the research, offers policy implications for Nigerian tax reform, and outlines limitations and future research agendas.
Keywords
Tax Structure, Economic Growth, Nigeria, Value Added Tax (VAT), Endogenous Growth, Econometric Modeling, Cointegration, Error Correction Modeling, Granger Causality, Fiscal Policy, Taxation, Revenue Profile, GDP, Public Sector, Tax Administration.
Frequently Asked Questions
What is the primary focus of this dissertation?
The study examines the relationship between the tax structure (specifically the distinction between pre-VAT and post-VAT periods) and the economic growth of Nigeria from 1970 to 2007.
What are the core research questions?
The study asks whether tax structures significantly determine economic growth in Nigeria and what the specific implications of these tax policies are for policymakers aiming to spur economic development.
What is the main objective of the research?
The objective is to investigate how changes in tax structure have contributed to Nigeria's economic growth by characterizing tax revenue profiles and evaluating their impact on real GDP.
Which scientific methods are employed?
The study utilizes econometric modeling, specifically the Vector Auto Regression (VAR) and Error Correction Modeling (ECM) techniques, after conducting unit root and cointegration tests.
What does the main body of the work cover?
It provides an overview of the Nigerian tax system, a comprehensive literature review, the development of an endogenous growth model, and a detailed empirical presentation and discussion of results.
What are the key descriptive characteristics of this work?
Key concepts include Tax Structure, Economic Growth, Cointegration, Error Correction, and Granger Causality.
How does the author categorize the Nigerian tax system's evolution?
The author identifies two distinct periods: the pre-VAT period (1970–1993) and the post-VAT period (1994 onwards), using these to compare tax revenue contributions to total government revenue.
What is a significant conclusion regarding VAT in Nigeria?
The research concludes that while the change in tax structure has not yet made a significant difference to the overall growth rate, the positive, albeit weak, relationship indicates potential for VAT to impact economic growth if implementation is improved.
- Citation du texte
- Damian Nwosu (Auteur), 2010, Tax Structure And Economic Growth In Nigeria, Munich, GRIN Verlag, https://www.grin.com/document/183035
