Accounting Project Topics

Effect of Corporate Tax Revenue on Economic Growth of Nigerian Manufacturing Sector

Effect of Corporate Tax Revenue on Economic Growth of Nigerian Manufacturing Sector

Effect of Corporate Tax Revenue on Economic Growth of Nigerian Manufacturing Sector

Chapter One

Objectives of the Study

This research work aims to examine the effect of corporate tax revenue on economic growth with particular reference to Nigeria’s manufacturing sector. The specific objectives of this research work include the following:

  1. To examine the effect of company income tax on gross domestic product in Nigeria.
  2. To evaluate the effect of value-added tax (VAT) on gross domestic product in Nigeria.
  3. To ascertain the effect of customs and excise duties on gross domestic projects in Nigeria.




Tax revenue is a veritable source of government revenue; however, it is still debatable in the literature especially in determining the optimal tax revenue to be imposed to enhance development without unjustly inflicting welfare cost. Economic theories of taxation approach the question of how to minimize the loss of economic welfare through taxation and also discuss how a nation can perform redistribution of wealth in the most efficient manner. This research work focuses on the effect of tax revenue on economic growth and development in Nigeria. This chapter provides reviews of diverse literatures as well as the theoretical and conceptual frame work of the study.



According to the (black law dictionary, 1999), tax is a ratable portion of the produce of the property and labor of the individual citizens, taken by the nation, in the exercise of its sovereign rights, for the support of government, for the administration of the laws, and as the means for continuing in operation the various legitimate functions of the state. The Institute of Chartered Accountants of Nigeria, (2006) and the Chartered Institute of Tax Revenue of Nigeria, (2002) view tax as an enforced contribution of money, enacted pursuant to legislative authority. If there is no valid statute by which it is imposed, a charge is not tax. Tax is assessed in accordance with some reasonable rule of apportionment on persons or property within tax jurisdiction.

Anyanwu, (1997) defined tax revenue as the compulsory transfer or payment from private individuals, institutions or groups to the government. Sanni, (2007) advocated tax as an instrument of social engineering which can be used to stimulate, general or special economic growth and development. From Onairobi, (1994), taxes are generally either of two types: Direct and Indirect taxes. A direct tax is levied on income or profit while an indirect tax is levied on goods and services. Good examples of Direct Tax include Personal Income Tax, Capital Gain Tax, Profit Tax and Wealth Tax. Examples of Indirect Tax include Excise Taxes, Export Taxes, Import Duties, Expenditure Tax, Sales Tax and Value Added Tax.

Jarkir, (2011) stated that tax is a contribution exacted by the state; it is a non penal but compulsory and unrequited transfer of resources from the private to the public sector, levied on the basis of predetermined criteria. The classical economists were of the view that the only objective of tax revenue was to raise government revenue. But with the changes in circumstances and ideologies, the aim of taxes has also been changed. These days apart from the objective of generating .revenue, taxes is levied to affect consumption, production and distribution with a view to ensuring the social welfare through the economic development of a country.

According to Nzotta, (2007), four key issues must be understood for tax revenue to play its functions in the society. First, a tax is a compulsory contribution made by the citizens to the government and this contribution is for general common use. Secondly, tax imposes a general obligation on the tax payer. Thirdly, there is a presumption that the contribution to the public revenue made by the tax payer may not be equivalent to the benefits received. Finally, a tax is not imposed on a citizen by the government because it has rendered specific services to him or his family. Thus, it is evident that a good tax structure plays a multiple role in the process of economic development of any nation which Nigeria is not an exception Appah, (2010).

In the words of Enegbu, (2011), the Nigerian tax system has undergone several reforms geared at enhancing tax administration with minimal enforcement cost. The recent reforms include the introduction of TIN, (Taxpayer Identification Number), which became effective since February 2008, automated tax system that facilities tracking of tax positions and issues by individual tax payer, E-payment system which enhances smooth payment procedure and reduces the incidence of tax touts, Enforcement scheme which engages special tax officers in collaboration with other security agencies to ensure strict compliance in payment of taxes

Section 8 of FIRS Establishment Act 2007 has led to an improvement in the tax administration in the country, thus, the integrated tax offices and authorities now have autonomy to assess, collect and record tax. Despite this improvement, there are still a number of contentious issues that require urgent attention and among them are appropriate tax authority to administer several taxes, the issue of multiple taxes severally administered by all the three tiers of government which sometimes imposes welfare cost and the issue of the paucity of data base, which contributes to tax avoidance in the country. Tanzi, (1995)

The concepts of tax and tax revenue in prior researches have been largely discussed in different contexts by tax experts, academic scholars, international organizations as well as different governments. For example, (The World Bank, 2000) noted that taxes are a compulsory transfer of resources to the government from the rest of the economy, while Jakir, (2011) described tax as a liability on account on the fact that the taxpayer has an income of a minimum amount and from certain specified source(s).

However, in a simple term for the purpose of this study, tax is a compulsory fee individuals as well as corporate bodies are obliged to comply with as stipulated by the tax laws, while tax revenue is the process of administering the tax laws in the way that achieves government objectives. And so, tax revenue is a major source of fund for any government and the availability of fund is a very crucial aspect of running a State. Although, several options according to Soyode and Kajola, (2006) are available to governments for raising fund, tax revenue remains the principal source Phillips, (2001).





This chapter gives the methodology employed in this study, involving a discussion of data collection analysis techniques. This chapter presents the research design, methods of data collection and techniques analysis of data to be used in the study. Effort is made to describe different tools or techniques employed while analyzing the work.


A research design is the framework or the plan of study that is used as a guide in collecting data and analyzing the data. Also, research design is the plan and structure of investigation conceived so as to obtain answers to research questions. In order words research design is the base method or a tool that is applied in the collection of data that is relevant to provide solution to the research problem Ndagi, (1999).

This study adopts the Ex-post facto method of research. This is because data needed for analysis already exists. The study will cover Nigeria‘s economy with time series rather than cross- sectional data being used. Data relating to revenues from different tax components, investment expenditure and GDP will be collected for the years 1997-2016. The study uses Correlation and regression analysis technique to examine the effect of tax revenue on the economic growth and development in Nigeria which will be measured using its Gross Domestic Product (GDP). The various resources of data for this research study were mainly secondary. Data were obtained from Federal Board of Inland Revenue, State of Inland Revenue, Joint Tax Board, Nation Bureau of statistics, internet and certain journals and publications.


This section examines the instrument used and validity of such instrument considering the nature of the study. Secondary sources of data was adopted in this research with data collected from Federal Board of Inland Revenue, State of Inland Revenue, Joint Tax Board, Nation Bureau of statistics, internet and certain journals and publications. The data collected were carefully examined and verified to ensure that there was any form of abnormality and inaccuracy. This will ensure a reliable outcome from the data analysis.



This study examined the impact of CIT and VAT on GDP, using OLS technique based the computer software package windows SPSS 20 version. The data so far collected for the study is presented in table 1 below, while the results of the analysis are in table 2.





This study examined the impact of company income tax and value-added tax on economic growth in Nigeria. The study adopted gross domestic product as proxy for economic growth and the dependent variable, while company income tax and value-added tax were independent variables. Data on the variables for the period 2005 – 2014 was collected from the Central Bank of Nigeria Statistical Bulletin. The study employed OLS technique based on Windows SPSS 20 version to analysis the data. The findings from the statistical analysis of data revealed that company income tax and value-added tax have positive significant impact on economic growth in Nigeria.

Based on the above findings, the study recommended that the tax authorities in Nigeria should strengthen the tax administration system as tax revenue has been proven to be an important source of government revenue for sustainable development. The study also recommended that the tax authorities responsible for tax administration should upgrade the tax database to capture all potential tax-payers in order to broaden tax income. Government should embark on massive public enlightenment campaign and carried out tax education among the citizenry to ensure voluntary tax compliance. Also, qualified tax professionals should be employed and trained regularly, and retained in the system of tax administration. Government should seriously work towards diversifying the revenue base of the economy as the reduction in the price of crude oil at the international market would adversely affect income from petroleum profit tax.


The following recommendations emerged from the findings and conclusions of the study:

  1. The introduction of the Tax Identification Number (TIN) which is a registration and storage of tax payers‘data in Nigeria is a welcomed idea but for it to be successful it should be structured in such a way that will make all potential tax payers liable. Citizens and companies should be able to operate bank accounts only if they have TIN numbers. Government parastatals, multinationals, conglomerates and companies in the country should not engage any vendor who does not have a TIN number. This will go a long way in reducing Tax evasion.
  2. The tribunal recommended by the Tax Act 1993 should be established to reduce cases of tax evasion and remittance of tax collections especially. Only professionals and trustworthy hands should be responsible for tax administration.
  3. All taxes should be remitted via an e-payment system or via direct payment to the various tax authorities‘accounts. This will enhance and support the cashless economy system introduced recently.
  4. Tax Clearance Certificates and other tax documents used in government transactions should be referred back to the relevant revenue authority for authentication.
  5. The government should ensure that taxes are accounted for to the public via print and electronic media. The intent of government with such tax should be communicated to the general public. In so doing, a separate body should be set up to inspect and ensure that the funds generated by government through tax at each level of government is properly used and any level of government that fails to utilize such taxes as communicated to the public should be charged to court.


  • Abiola, J. and Asiweh, M. (2012) Impact of tax administration on Nigeria, International Journal of Business and Social Science, Volume 3 No. 8 (Special Issues, April)
  • Afuberoh, D. and Okoye, E. (2014) The impact of taxation on revenue generation in Nigeria: A study of Federal Capital Territory and selected states, International Journal of Public Administration and Management Research, ISSN 2346-7215 Vol. 2, No. 2.
  • Aguolu, O. (2004) Taxation and Tax Management in Nigeria, 3rd Edition, Enugu; Meridian Associates.
  • Ayuba, A. J. (2014) Impact of non-oil revenue on economic growth: The Nigeria perspective, International Journal of Fianace and Accounting, 3(5), 303 – 309
  • Chude, D. I. and Chude, N. P. (2015) Impact of company income taxation on the profitability of companies in Nigeria: A study of Nigerian Breweries, European Journal of Accounting, Auditing and Finance Research, 3(8), 1 – 11
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