Implications of tax revenue on economy growth in nigeria. Harelimana, 2018 there is a temporary impact on the tax policy exogenous model growth is an endogenous growth model that affect permanent economic growth. The study period spans economic cycles for about 66 percent of the life of. Effects of income tax changes on economic growth brookings. In india, for example, the contribution of direct taxes to total tax revenue was 18. As the economist writer implies, economic growth is a major driver of the level of tax revenues. This report investigates how tax structures can best be designed to support gdp per capita growth. The target population for this study consisted of the quarterly reports on the state. It suggests a tax and growth ranking of taxes, confirming results from earlier literature but providing a more detailed disaggregation of taxes. We investigate the relation between changes in tax composition and longrun economic growth using a new dataset covering a broad crosssection of countries with different income levels. Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption. In these studies, researchers used economic development and economic growth interchangeably.
Yet, the endogenous growth theory, pioneered by romer 1990, has produced growth models in which government spending and tax policies. Tax revenue and economic growth in ghana munich personal. Economic development encompasses policies that governments undertake to meet broad economic objectives such as price stability, high employment, expanded tax base, and sustainable growth. Here is masood 2010 who explores the relationship between economic growth and tax revenue for pakistan. Evidence from panel groups data 101 which are 22 countries in subsaharan africa from 1980 to 1996. The effects of state tax policy on economic growth, entrepreneurship, and employment remain controversial. Taxation is important mechanism that boosts countryas economic level. Economic growth is the growth of an economys output of goods and services which is. The impact of the government revenues and expenditures on. The impact and consequences of tax revenues components on. This study used physical capital, human capital, population growth, tax revenue gdp, personal income tax, corporate income tax, consumption tax and property tax as the variables. The countries chosen for this study have embarked on their growth paths uneven economic growth and with uneven tax effort among these countries. This document can also be found on the joint committee on taxation website at. It showed that there is a significant relationship between non oil revenue and the growth of the nigeria economy.
This study examines the effect of tax revenue on economic growth in ghana using quarterly data for the period 1986 to 2010 within the var framework. The studys objective was to determine the effect of value added tax on economic growth in kenya. Joint committee on taxation, economic growth and tax policy jcx1917, may 16, 2017. This paper investigated empirical evidence on contributions of tax revenue for economic growth of ethiopia using time series data from 1993 to 2012. Gdp and tax revenuescausality relationship in developing. Yearly data for south africa for the period 1981 2016 was used to develop the autoregressive distribution lag ardl approach. The structure and financing of a tax change are critical to. The relationship between economic growth and tax revenues is a debate that has existed for a long time in the living history. A revenue neutral growthoriented tax reform would, therefore, be to shift part of the revenue base. He finds a robust negative effect of the tax burden on economic growth, where the tax burden is defined as the ratio of state and local tax revenues to personal income.
Measures of tax burden in arizona since fiscal year 1970 16 5. Estimate of annual change in ongoing tax revenue due to statutory changes, arizona state government general fund 19 6. This paper examines how changes to the individual income tax affect longterm economic growth. The choice of the study period provides an opportunity for. Data in the analysis of the impact of the government revenues and expenditures on the economic growth in romania, quarterly data over the period 1998q1 2014q1 is being used.
The impact and consequences of tax revenues components. He focused on three components in total tax revenue taxes on income. Tax revenue fell in the early 2000s before and after the 2001 bush tax cuts, only to rise again after the 2003 bush tax cut. This paper investigates the impact of taxes tax revenue on economic growth of pakistan by using time series data for the period of 19762011. Pdf the study examines the effect of tax revenue and economic growth of kenya, from 1980 to 2007. Economic growth drives the level of tax revenue tax foundation.
The general objective of this study is to examine the impacts of value added tax on revenue generation in nigeria. In addition, the government should utilize the positive relationship between tax and economic growth to realize efficient government investment expenditure that spars growth in turn boosting the revenue levels. The impact and consequences of tax revenues components on economic indicators. Comparison between tax changes and economic growth in arizona 22 7. The finding revealed that there is a significant relationship between petroleum profit tax and the growth of the nigeria economy. Gdp is taken as dependent variable while taxes, exchange rate, life expectancy and trade liberalization as independent variables. Bush signed the economic growth and tax relief and reconciliation act into law, initiating a multiyear program of reductions in taxes on individual income. Using a framework that in prior research generated. This paper investigates the impact of taxation on economic growth in south africa. An empirical case stud y of kenya by esther wairimu gacanja x50761712009 a research paper submitted to the school of economics, university of nairobi in partial fulfillment of requirements for the award of masters of arts degree in economics university ot nairobi library 0472345 8 october, 2012. We specifically consider 69 countries with at least 20 years of observations on total tax revenue during the period 1970200921 high. At this stage, however, there is little agreement about federal reserve board, washington. The study analyses tax forms such as personal income tax, corporate income tax and tax on property, and their potential relationship with economic growth, measured by gdp growth rate.
The target population for this study consisted of the quarterly reports on the state of the kenyan economy in relation to productivity. The impact of taxation on economic growth in south africa. At the contemporary periods, ethiopiaas economic growth transformed from single to double digit. Christopher heady, school of economics, university of kent, keynes college, canterbury, kent ct2 7np, uk. The result indicated a unidirectional causality between tax revenue and economic. The study focuses on the impact of petroleum profit tax, company income tax, personal income tax, value added tax revenue on nigerias economic growth between 1980 and 20. To observe the growth pattern of vat revenue and gdp 2. After checking the stationary of the variables through adf test. The nigerian perspective is because the bulk of revenue needed for development purposes is derived from oil. Explicit modelling of the individual decisions that contribute to growth allows the analysis of tax incidence and the prediction of growth effects. Government use tax proceeds to render their traditional functions, such as the provision of public goods, maintenance of law and order, defence against external aggression, regulation of trade and business to ensure social and economic maintenance azubike, 2009. Abstract this paper examines how changes to the individual income tax affect longterm economic growth. The impact of taxation as an aid to economic development includes abstract and chapter one, complete project material available the impact of taxation as an aid to economic development in edo statea case study of oredo local government area, edo state, nigeriaproposalthe research work will discuss in detail the impact of taxation as an aid to economic development in edo state. This study was designed to investigate the tax revenue and nigerian economic growth for period of three decade, using time series data from 1986 to 2015.
The study adopted a descriptive and historical research design. Tax revenue and economic growth in nigeria olufemi. To examine the relationship between value added tax and revenue generation in nigeria to establish the effects of value added tax on revenue generation in nigeria 1. The empirical results confirm that there is a negative relationship between taxes and economic growth in south africa. Relevance of tax revenue resources to infrastructural. The contribution of taxation to any economy globally cannot be overemphasized. Economic growth drives the level of tax revenue tax. Pdf this study examines the relationship between tax revenues and the rate of economic growth for greece. The study examined the impact of tax revenue on the nigerian economy.
The impact of taxation as an aid to economic development includes abstract and chapter one, complete project material available the impact of taxation as an aid to economic development in edo statea case study of oredo local government area, edo state, nigeriaproposalthe research work will discuss in detail. A revenue neutral growth oriented tax reform would, therefore, be to shift part of the revenue base from income taxes to less distortive taxes such as. To investigate the relationship between the changes of vat revenue on the economic growth of nigeria 3. Concept of petroleum profit tax as revenue resource according to petroleum profit tax act 1959 as amended, petroleum profit tax is a liability on petroleum profit arising where a company disposes off chargeable oil and gas. The main objective of the study is to investigate the impact of taxation revenue on nigeria economic growth. He argued that an increase in the rate of value added tax will affect the countrys revenue base. The study found that there exist both short run and long run relationship between economic growth and tax revenue. Tax effort is defined as the ratio between the actual revenue collected and the revenue potential of an economy. Tax analysis and revenue forecasting issues and techniques. Our focus is on tax revenues as other sources of revenue have not been found to be closely related to economic development. Tax is a major source of government revenue all over the world. The study period spans economic cycles for about 66 percent of the life of the country, since attaining political independence in 1960. Tax systems are also used to promote other objectives, such as equity, and to address social and economic concerns. Tax systems are primarily aimed at financing public expenditures.
In january 2003 president bush approved the jobs and growth tax relief reconciliation act of 2003, substantially cutting taxes on business income. This document,1 prepared by the staff of the joint committee on taxation, includes an overview of economic growth and the impact that taxes may have on economic growth. The author uses framework of endogenous growth model and finds negative relationship between tax and economic growth. Value added tax and economic growth in nigeria john chika. The general objective of the study is to investigate the impact of vat on the economic growth of nigeria. The study examined the relationship between tax revenue and economic growth in nigeria. The impact of the government revenues and expenditures on the. Harelimana, 2018 there is a temporary impact on the tax policy exogenous model growth. Tax burden as a percentage of income, state and local governments 11 4. The study examined the effect of tax revenue on trade liberalization or openness. A lot of literature exists on tax revenue and economic growth of nigeria adereti et al. Crude oil export has continued to account for over 80% of the total federal government revenue, while the remaining 20% is contributed by nonoil. Part i of this document discusses four principal determinants of economic growth that tax policy may be able to influence. Impact of taxation revenue on economic growth of nigeria.
Yakubu and jibril 20 investigated the relative impact of value added tax on economic growth in nigeria. The links between economic growth and tax revenue in ghana. The structure and financing of a tax change are critical to achieving economic. Apart from the revenue function it performs for the government, it is also used to assist the national government to achieve the countrys macro economic objectives in the. The discussion on the two variables has exhibit contentions from academicians and policy makers with one school holding on the view that taxation is bad for the economy while the other school believe that taxation is good for the economy. Recurrent taxes on immovable property appear to have the least impact. Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes. The research design adopted in this study was causal study. Role of taxation in financing economic development economics. He uses panel data, taking advantage of variation in taxes and growth across u. This paper investigates the design of tax structures to promote economic growth. Ojong and ogar anthony and oka felix arikpo, year2016. Tax revenue is essential to accelerate the economic development basirat et al.
Taxation, efficiency, and economic growth by dale w. Data and research on income taxes including oecd tax databases, taxing wages, revenue statistics, tax policy studies. The impact of tax policy on economic growth in nigeria. The paper examined the impact of value added tax on revenue generation in nigeria. This confirms the existence of a stable longrun relationship among economic growth y as measured by real gdp, tax revenue, capital stock as. Apart from the revenue function it performs for the government, it is also used to assist the national government to achieve the countrys macroeconomic objectives in the. The objective of this study was to examine the significant difference between the effects of oil and non oil tax revenue on economic growth in nigeria. Ekeocha 2010 however, made a simulation study advocating value added tax trade from 5 to 15%.
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