ABSTRACT
This study examined the impact of Indirect tax on economic development of Nigeria. The Study adopted ex-post facto research design and therefore extracted data from 2000 – 2019 period of various taxes. The study used multiple regression analysis to estimate the relationship of the variables. The findings from data analyzed indicates that the Value added tax has significant impact on gross domestic product growth rate in Nigeria, and that Custom and Excise duties has significant impact on gross domestic product growth rate in Nigeria Based on the findings above. I therefore recommends that the concept of taxation should be taken more serious in Nigeria now it has become obvious that crude oil alone can no longer maintain the economic well-being of the populace of this Country. Also the government on its part should account properly for the taxpayers funds by utilizing the funds in the provision of obvious basic amenities and public goods.
TABLE OF CONTENTS
Title page i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
List of Tables ix
Abstract x
Chapter One:
Introduction
1.1 Background to the Study 1
1.2 Statement of problem 3
1.3 Objectives
of the study 3
1.4 Research
questions 4
1.5 Research hypotheses 4
1.6 Scope of the study 4
1.7 Significance of the study 5
Chapter Two: Review of Related Literature
2.1 Conceptual
Review 6
2.1.1 The concept of tax 6
2.1.2 Historical Development of Taxation in
Nigeria 10
2.1.3 Introduction of Indirect Tax in Nigeria 13
2.1.4 Indirect Taxation and Economic Growth 14
2.1.5 Direct and Indirect 14
2.1.6
Structure of Nigeria Tax System 15
2.1.7 Tax Policy Reforms and Institutional
Development in Nigeria 15
2.1.8 Tax Reform in Nigeria 18
2.1.9 Economic Growth 20
2.1.10
Value Added Tax and Economic Growth 20
2.1.11Custom
and Exercise and Economic Growth 22
2.2
Theoretical Framework 22
2.2.1
Classical Growth Theory 26
2.2.2
Neo- Classical Growth Theory 27
2.2.3
Keynesian Theory 28
2.2.4
Traditional Tax Handle Theory 28
2.3 Empirical Literature Review 29
2.4
Identified Gap in the Literature 41
Chapter Three:
Methodology
3.1 Research
Design 42
3.2 Area
of the study 42
3.3 Population
of the study 42
3.4 Sources
of data 42
3.5 Method
of data collection 43
3.6 Technique
of data analysis 43
Chapter Four: Data Presentation, Analysis and Discussion of Results
4.1 Descriptive analyses of variables 45
4.2. Test of Hypothesis 47
4.2.1 Hypothesis I 47
4.2.2 Hypothesis II 50
Chapter Five: Summary of
Findings, Conclusion and Recommendations
5.1. Summary of Findings 52
5.2. Conclusion 53
5.3. Recommendations 53
References 64
APPENDIX
A 67
LIST
OF TABLES
Table 1. Nigeria
major taxes 15
Table 2: Results of Descriptive Analyses of Variables 45
Table 3: Regression Analysis of Indirect Taxes on GDPgr 48
CHAPTER ONE
INTRODUCTION
1.1 Background
to the Study
The duties or responsibility shouldered by
the government of any nation, particularly the developing nations, is enormous.
The need to fulfill these responsibilities largely depends on the amount of
revenue generated by the government through various means. Taxation is one of
the oldest means by which the cost of providing essential services for the
generality of persons living in a given geographical area is funded. Globally,
governments are saddled with the responsibility of providing some basic
infrastructures for their citizens. Functions or obligations the government may
owe her citizens include but are not restricted to: stabilization of the
economy, redistribution of income and provision of services in the form of
public goods. (Abiola & Asiweh, 2012).
Taxation is a major source of government
revenue all over the world and governments use tax proceeds to render their
traditional functions, such as: the provision of goods, maintenance of law and
order, defense against external aggression, regulation of trade and business to
ensure social and economic maintenance (Edame&Okoi, 2014). The primary
function of a tax system is to raise enough revenue to finance essential
expenditures on the goods and services provided by government; and tax remains
one of the best instruments to boost the potential for public sector
performance and repayment of public debt (Okoye&Ezejiofor, 2014). A system
of tax avails itself as a veritable tool that mobilizes a nation’s internal
resources and it lends itself to creating an environment that is conducive for
the promotion of economic growth (Ayuba, 2014). Therefore, taxation plays a
major role in assisting a country to meet its needs and promote self-reliance.
In Nigeria, tax revenue has accounted for a
small proportion of total government revenue over the years compared with the
bulk of revenue needed for development purposes that is derived from oil (Out
& Adejumo, 2013). The serious decline in the prices of oil in recent times
has led to a decrease in the funds available for distribution to the federal,
state and local governments (Afuberoh & Okoye, 2014). Consequently,
dependence on oil as a particular or main source of revenue in Nigeria has
become risky and not beneficial for sustainable economic growth. It is worse
for Nigeria where there are fluctuations in prices in the oil market; thereby creating
concerns amongst Nigerians and indeed the Nigerian government on the need to
diversify the economy.
Naturally, and globally, there is a paradigm
shift to taxation revenue as an alternative source of revenue. Nigeria is not
an exception. The machinery and procedures for implementing a good tax system
in Nigeria are inadequate; hence tax evasion and avoidance of the self-employed
individuals and organizations whose data base is not captured in the relevant
tax authority’s data system (Fasoranti, 2013). The need for the government to
generate adequate revenue from internal sources has therefore become a matter
of extreme urgency and importance (Afuberoh & Okoye, 2014).The desire of
any government to maximize revenue from taxes collected from tax payers cannot
be overemphasized.
This is because, as is well-known, the
importance of tax lies in its ability to generate revenue for the government,
influence the consumption trends and grow and regulate economy through its
influence on vital aggregate economic variables (Fasoranti, 2013).
In the light of the above, and in broad
spectrum, this paper examines the impact of indirect taxes on economic growth
in Nigeria. This topic is formed and informed against the backdrop of the need
for a paradigm shift to indirect taxation in the face of the dwindling oil
prices and the relative paucity of studies, using inflation-factored GDP in
Nigeria.
1.2 Statement of the Problem
The Nigerian people,
especially the rich and the elites, deliberately evades their civic
responsibility of paying tax and sometimes employ the services of tax
specialists in order to pay less tax. This is also the problem of falsification
of ages and the number of children and defendants one has in order to reduce
the amount of tax payable. Emanating from the above factors, the states and
local governments contends that their currently assigned taxes are poor in
terms of their bases and therefore, accruable revenues are not enough to meet
their expenditure targets. Also the statutory allocation from the federation
account has been grossly inadequate as a result of a fall on gross domestic
product. This invariably reduces their overall performance, considering their
expenditure profiles.
Taiwo (2008),
observed that the distribution of government revenue is skewed in favor of one
tax base or the other (Journal of Accounting (2016), in Nigeria. Nevertheless,
the overwhelming evidence of positive impact of oil revenue on economic growth
in Nigeria cannot be overemphasized (Odusola, 2006). However, the question is,
are other forms of taxes not important for considerations? Emanating from the
above therefore, there are some questions to ask (1) what relationship exists
between Nigerian’s tax revenue from personal income by tax payers and economic
development of the nation? (2) What is the contribution of other tax bases such
as value added tax and customs and exercise duties to the overall tax revenue
of Nigeria? It is against these backdrops, that this research is carried out
with a view to finding out the causes and proffer solution(s).
1.3 Objective
of the Study
The main objective of
this study is to determine the impact of indirect tax on economic development
of Nigeria, while the specific objectives include:
- To determine the
impact of value added tax(VAT) on gross domestic product growth rate of
Nigeria.
- To ascertain the
impact of custom and excise duties on gross domestic product growth rate
of Nigeria.
1.4 Research
Questions
The following
questions have been formulated in line with the objectives of the study.
- How does value added
tax impact on gross domestic product growth rate of Nigeria?
- To what extent has
custom and excise duties impacted on gross domestic product growth rate of
Nigeria?
1.5 Research
Hypotheses
The following
hypotheses have been formulated:
Ho1: Value
added tax has no significant impact on gross domestic product growth rate of
Nigeria
Ho2:
Custom and excise duties has no significant impact on gross domestic product
growth rate of Nigeria.
1.6 Scope of
the Study
The study is on the
impact of indirect tax on the economic development of Nigeria covering the
period of 19 years, that is, between 2000 and 2019, the concentration was
focused on Personal income tax, value added tax and custom and exercise duties
mainly.
1.7 Significance of the Study
This research work will be an invaluable
source of literature for researchers, and related field who might be interest
in knowing much about the concept of ― value added tax (VAT) custom and
exercise duties.
It‘s general contribution to economic
development of Nigeria were mentioned. It will also help the government in her
policy formulation to suggest alternative strategies that can aid effective administration
and monitoring of the VAT process and procedures.
The list of vatable goods and services will
also be mentioned in subsequent chapter together with the countries that had
practiced this system of taxation with the date of adoption. All these will
contribute immensely to the knowledge previously had by some of the
beneficiaries mentioned above.
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