THE GROWTH AND STRUCTURE OF THE NIGERIAN FEDERAL TAX REVENUE

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Date
1998-08
Authors
ENIMOLA, SAM SUNDAY
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Abstract
The study attempts to analyse the role taxation played in economic development. The kernel of this role is built upon the use of tax revenue as a form of capital accumulation via Government Spending. In line with the classical economic synthesis, the study attached importance to the role of capital accumulation in stimulating economic growth. The index of growth in economic development as stimulated by tax revenue is the degree of responsiveness of change in GDP resulting from changes in tax revenue base, which is r e f e r e d to as tax r e v e n ue elasticity/buoyancy/flexibility. The elasticity coefficient (b) measured using a nonlinear equation model, is used as a proxy to depict the degree of this responsive relationship between tax revenue and GDP. The study, reveals a very considerable growth rate in the various tax base over the period of study except for the Personal Income Tax (PIT), which continue to decline. Appreciable increase is recorded mostly by the Petroleum Profit Tax (PPT) component; this tax base continue to have a considerable share in total tax revenue. The increase in PPT and Company Income Tax (CIT) have a meaningful effects on the Direct Tax Components which comprises PPT, PIT and CIT. Direct Tax component increases more than the indirect tax component made up of Export, Import and Excise Duties. The total Tax Revenue maintained a continous growth in its share to total Government Revenue over the period, and also in its relative contribution to GDP. The buoyancy/elasticity coefficient (b) is said to be GDP elastic if it is greater than unity and inelastic if it is less than unity. The negative or positive sign of ' b' shows the direction of linear relationship between the dependent variable (Tax Revenue) and the independent variable (GDP). The scope is divided into three phases (i) 1970-1982) ii (1983-1995) and (iii) 1970-1995. The regression results between the period of 1970- 1982, showed an elastic/buoyant responsivesness of tax to changes in GDP for almost all the tax bases except for the indirect tax components. The indirect tax component though GDP in elastic, showed a positive linear relationship except for export duties which showed a negative linear relationship throughout the different period studied. The regression results between the period of 1983- 1995 depicts an inelastic/inflexibility responsiveness of tax to GDP changes for all base except for import duties which showed a considerable elasticity coefficient. Contrary to a priori expectation, and the marginal contribution of PPT to tax revenue, and the relative importance of the petroleum sector to the economy, the PPT was GDP inelastic between 1983-1995 and for the aggregate period of between 1970-1995; though it showed a positive linear relationship. This revealed that an improvement in the marginal contribution of tax revenue to GDP might not automatically determine its flexibility/stabilization effect in the process of economic development
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BENIG A THESIS SUBMITTED TO THE POSTGRADUATE SCHOOL, AHMADU BELLO UNIVERSITY, ZARIA, IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF DEGREE OF MASTER OF SCIENCE IN ECONOMICS. DEPARTMENT OF ECONOMICS FACULTY OF SOCIAL SCIENCES AHMADU BELLO UNIVERSITY ZARIA, NIGERIA. OCTOBER, 1998
Keywords
GROWTH,, STRUCTURE,, NIGERIAN,, FEDERAL,, TAX REVENUE
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