TAX REVENUE AND ECONOMIC GROWTH OF NIGERIA (1981-2015)

ABSTRACT
The aim of this study was to examine the impact of tax revenue collected by federal government on the economic growth of Nigeria, while looking at the specific objectives which include: assess the impact of companies’ income tax on economic growth of Nigeria; ascertain the influence of Petroleum Profit Tax on economic growth of Nigeria; examine the impact of custom and excise duties on economic growth of Nigeria and determine the impact of VAT on the economic growth of Nigeria.
Ex -post facto and survey research designs was adopted in the work to investigate reasons for consistent low tax contributions to GDP in Nigeria over a period of 35 years. Secondary data were obtained from FIRS and Bureau of Statistics for the purpose of this research. Method of analysis include ordinary Least square regression model was estimated to examine the individual effects of tax revenue proxies of Value Added Tax (VAT), Petroleum Profit Tax (PPT), Customs and Excise Duties (CED), and Companies of Income tax (CIT) on Gross Domestic Product (GDP), Auto-regressive distributed lag (ARDL) model was adopted to determine the combined effect of tax revenue proxies on GDP of Nigeria.
The study revealed that the GDP is strongly impacted upon by VAT, PPT, CED, and CIT. In summary, the simple regression analysis shows thatabout 75% variations in GDP can be attributed to changes in PPT; also, Value Added Tax (VAT) was discovered to be responsible for about 95% changes in GDP. The average contribution of tax revenue to GDP for the thirty five year period was computed at mere 7.8%, which is still far below the acceptable global average of 20%.  Although the simple regression showed that CIT and CEDindividually has positive effect on GDP, the multiple regression analysis through long run estimation indicated that in the long run, CIT and CED have negative effects on GDP and PPT and VAT have positive effects on GDP.

The study concluded that tax revenue combined have significant effect on the economic growth of Nigeria, although Companies Income Tax (CIT) and Custom Excise Duties (CED) have not contributed positively to economic growth of this nation over the period of study, hence government need to reposition the tax administrative system and sufficiently equip them to deal with complexities of technological advancement in global commerce, enforce compliance and track all taxable persons in order to generate sufficient revenue needed to foster economic growth in Nigeria.

TABLE OF CONTENTS
Title Page
Abstract
Table of Contents
List of Tables
List of Figures

CHAPTER ONE: INTRODUCTION
1.1  Background to the Study
1.2  Statement of the Problem
1.3  Objective of the Study
1.4  Research Questions
1.5  Hypotheses
1.5.1 Rationale for Hypotheses
1.6  Significance of the Study
1.7  Scope of the Study
1.8  Operationalization of Variables
1.10 Operational Definition of Terms

CHAPTER TWO: REVIEW OF LITERATURE
2.1  Conceptual Review
2.1.1 Historical Background of Taxation in Nigeria
2.1.2 Taxation
2.1.3 Nigerian Tax System
2.1.3.1Relevant Tax Authorities
2.1.3.1.1The Federal Inland Revenue Service Board (FIRSB)
2.1.4Nigeria National Tax Policy
2.1.5Revenue Generation of Nigerian Government
2.1.6Reasons for Insufficiencies of Tax Revenue
2.1.7Problems of Tax Administration in Nigeria
2.1.8Problems of Tax Collection in Nigeria
2.1.9The Role of Taxation on Economic and Social Development Sustainability
2.1.10 Tax reforms in Nigeria
2.1.11. Economic growth
2.2 Theoretical Review
2.2.1 Deterrence Theory
2.2.2 Behavioural Economics
2.2.3Risk Management Theory
2.2.4Other Theories of Taxation
2.2.4.1 Benefit Received Theory
2.2.4.2 Cost of Service Theory
2.2.4.3 Responsive Regulation Theory
2.2.5    Theoretical Framework
2.3 Empirical Review
2.3.1 Tax Reforms and Economic Growth in Nigeria
2.3.2Tax Revenue and Economic Growth in Nigeria
2.3.2.1 Company Income Tax and Customs and Excise Duties and Economic Growth
2.3.2.2 Petroleum Profit Tax and Economic Growth in Nigeria
2.3.2.3 VAT and Economic Development
2.3.2.4 Customs and Excise Duties and Economic Development
2.4Gaps in Literature

CHAPTER THREE: METHODOLOGY
3.1Research Design
3.2Population
3.3 Sample size and sampling Technique
3.4Sources of Data
3.4.1 Validity of the Research Instrument
3.5Model specification
3.6. Method of Data Analysis
3.7Model Estimation and Evaluation Technique
3.8Apriori Expectation
3.9Ethical Considerations

CHAPTER FOUR:DATA ANALYSIS, RESULTS AND
DISCUSSION OF FINDINGS
4.1Descriptive Analysis
4.2Empirical Analysis
4.2.1. Correlation Analysis
4.2.2. Regression Analysis
4.2.2.1. Test of Hypothesis One (H01)
4.2.2.2. Test of Hypothesis Two (H02)
4.2.2.3 Test of Hypothesis Three (H03)
4.2.2.4 Test of Hypothesis Four (H04)           
4.2.3 The Main Model
4.2.3.1 Diagnostic Test 
4.2.3.2 Regression Result
4.2.3.3 Post Estimation Test
4.3 Discussion of Findings

CHAPTER FIVE: SUMMARY, CONCLUSION
AND RECOMMENDATIONS
5.1Summary
5.1.1. Summary of Findings
5.1.2Implications of Findings
5.2Conclusion
5.3Recommendations
5.4Contribution to Knowledge
5.5Limitation of the Study
5.6Suggestion for Further Studies
References 

CHAPTER ONE
INTRODUCTION
1.1       Background to the Study
Effective tax administration is an issue as old as taxation itself.  The balancing act between maximizing tax revenues and minimizing the impact on the populace in which the state must engage was evident as early as 2350 BC. The responsibility shouldered by the government of any nation, particularly the developing nations, is enormous. The need to fulfil 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 roads, maintenance of law and order, defence against external aggression, regulation of trade and business to ensure social and economic maintenance (Appah & Eze, 2013). 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 as enunciated by (Okoye & Raymond, 2014).
According to Azubike (2009), 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. 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 (Uremadu & Ndulue 2011). 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 as noted by (Nzotta, 2007). 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 poses a great challenge and impediment to national economic growth as submitted by (Angahar & Alfred, 2012). In the findings of (Edemode 2009), the need for the government to generate adequate revenue from internal sources has therefore become a matter of extreme urgency and importance. The desire of any government to maximize revenue from taxes collected from tax payers cannot be over- emphasized. This is because, as it 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 (Leyira, Chukwuma & Asian 2012).
According to Ariwodola (2001), tax is a compulsory levy imposed by the government authority through its agents on its subjects or his property to achieve some goals. Tax is the transfer of resources from the private sector to the public sector. Okezie (2012) noted that tax is the price everyone must pay for an egalitarian society. The tax administration in any country does not only encompass the procedures of imposing these compulsory levies but also the establishment of tax laws and ensuring its compliance. Despite the millennia that have passed and the quantum of academic research work, Chandler (2013) opined that today's policymakers are still grappling with the questions of effective tax administration leading to adequate tax revenue.
Empirical studies have shown that the quantum of revenue available to any government needed to meet the social and capital expenditure in a country depends on its ability to harness funds from internal and external sources and channel it towards national development and economic prosperity. Appah (2010), in his findings, stated that revenue from taxation forms the bedrock of the revenue base of most governments all over the world. The extent to which a government can provide social, economic and infrastructural development is a function of the amount of funds at its disposal.
It has been observed that in Nigeria, the quantum of income generated from non-oil tax over the years by the federal government is grossly insufficient in relation to the ever increasing social, political and infrastructural developmental needs of the country. As noted by Odusola (2006), Nigeria economy has thrived largely on oil revenue in the past three decades. In essence, Nigeria runs a monolithic economy which is subject to international oil price mechanism far beyond the control of the government, thereby exposing the economy to global market fluctuations, distorting budgetary projections, and renders meaningful developments improbable. The current budget of borrowing in Nigeria is a fall out of the dwindling oil revenue that has sank into abysmal low prices in the international market and has thrown the Nigeria budget for 2016 into serious crisis.
Appah (2010) further stated that the economic growth and development of any nation depends on the amount of revenue generated by the government for the provision of infrastructural facilities. The highway of economic growth of most developed nations of the world is paved with revenues derived from efficient taxation system as implied by Enahoro and Olabisi, (2012). The provision of public services such as power, roads, efficient transportation system, healthcare facilities, schools, security of lives and properties and defence against internal and external aggression, are the exclusive responsibility of governments all over the world.  According to Worlu and Emeka (2012), to meet these responsibilities, governments need to harness all sources of revenue available to it nationally and internationally. Reliance on external sources of revenue for developmental purposes has proved unproductive for many countries over the years, and those countries which experienced rapid social and infrastructural development around the world were found to have leveraged on revenue from efficient tax system.
The International Monetary Fund (2012), observed that the developing countries must be able to raise the revenues required to finance the services demanded by their citizens and the infrastructure (physical and social) that will enable them to move out of poverty (economic growth). Tax Justice Network (2012), Stated that taxation is expected to play an important role in this revenue mobilization. The structure of tax must be strengthened rather than tax administration and geared towards generating more revenue from existing tax sources by being more efficient and effective according by Oloidi and Oluwalana (2014), who describe efficiency as the ability to utilise available resources for optimal results while effectiveness is the ability to be able to functionally produce expected results.
From above, it can be deduced that efficient taxation system capable of generating greater amount of the revenue needed for social and infrastructural development purpose is of primary importance in Nigeria. According to McPherson (2004), efficiency and effectiveness is the benchmark for designing a good tax administrative system.In the opinion of Tanzi and Zee (2000) efficient tax administration plays vital role to revenue collection of any country. In the acclaimed study, they posited that the formation of tax policy capable of raising sufficient revenue to meet the social an infrastructural development of the citizen in equitable and minimum tax disincentives on the polity is of great essence. Four critical areas which are inimical to the formation of a national tax policy such as economic structure  that makes the imposition and collection of certain taxes impossible; limited capacity of tax administrators; paucity or poor  quality of data and the political set up in developing countries. They further said that it is difficult to create an efficient tax administration without a well-educated and well-trained staff. Where money is lacking to pay good wages to tax officials and to computerize the operation (or even to provide efficient telephone and mail services), and where taxpayers have limited ability to keep accounts, inefficiencies will definitely thrive. As a result, governments often take the path of least resistance, developing tax systems that allow them to exploit whatever options are available rather than establishing rational, modern, and efficient tax systems. So tax administrations must be strengthened to accompany the needed policy changes.
Aderibigbe and Zachariah (2014) are of the opinion that tax system is an opportunity for the government to collect additional revenue needed in discharging economic development and creating a conducive business environment for its citizens, they also opined that tax is a major source of government revenue all over the world. The structure of Nigerian tax administration is in relation with the system of government in operation. These include the three tier system comprising of the local government, state government and federal government structures. Each of these tiers of government is constitutionally saddled with administration of specific taxes, while the joint tax board oversees the whole system and resolve disputes as noted by Akintoye and Dada (2013). The Board of Inland Revenue administers the federally collected taxes through the Federal Inland Revenue Service (FIRS), while the board of state internal revenue service administers the taxes collectible by the state government and the revenue committee administers taxes and levies collectible by the Local governments (James and Moses, 2012).
The history of Nigerian tax administration can be traced to the British model tax administration since 1960 and has been in operation until 1990 when the self-assessment scheme came into play which seems similar to the American model of tax administration system (Enahoro and Olabisi, 2012). They further commented that countries have encountered problems on assessing how efficient tax administration is, against the quantum of tax revenue collected. In other words, the process of tax collection is of great importance to developing nations especially in an economy like Nigeria where great reliance is place on one source of revenue. Some of the challenges of Nigerian tax administration as highlighted by McPherson (2004)  are; paucity of tax statistics, unethical practices (corruption), non-prioritization of tax efforts, poor administrative processes, multiplicity of taxes, economic structural problems which hinders effective implementation of taxes and the challenge of underground economy.
A good tax administrative system should have efficiency and effectiveness as its watch word. According to Kiabel and Nwoka (2009), the administration of tax is the responsibility of various tax authorities as established by relevant tax laws. However in Nigeria, the inefficiencies of tax administration as highlighted above have led to various tax issues. Abiola and Asiweh (2012) observed that those working in the informal sector of Nigerian economy do not see the need to pay tax whereas they dominate the economy leading to tax evasion and tax avoidance. From the above purview, this study sets out to critically examine the impact of tax administration and revenue on the economic development of Nigeria.
The whole essence of tax administration is to generate sufficient revenue to advance the welfare of the people of a nation with focus on promoting economic growth and development of a country through the provision of basic amenities for improved public services via efficient administrative system, and structures. Tax revenue plays a crucial role in promoting economic activity growth and development. Through tax revenue, government ensures that resources are channeled towards important projects in the society, while giving succor to the weak. The role of tax revenue in promoting economic activity and growth may not be felt if poorly administered. For business to thrive and compete globally, infrastructural amenities such as power, roads, telecommunication, water and quality health facilities are essential, as this will reduce the overhead cost of business owners and give room for expansion thereby creating wealth for the prosperity of all citizenries. The provision of these amenities is the primary duty of government and requires huge capital outlay. Efficient tax administration will enhance the total revenue available to the government to carry out its role. This calls for a need for proper examination of the relationship between revenue generated from taxes and the economy, to enable proper policy formulation and strategy towards its efficiency.
According to Olashore (1999), the Nigerian economy has remained in a deep slumber with macroeconomic indicators reflecting an economy in dire need of rejuvenation, revival and indeed radical reform. Oni (1998), is also of the opinion that there is the need for tax administration to be refurbished and refunds of taxes as well as duty drawbacks administration are inefficient.

1.2    Statement of the Problem
The revenue accruing to the federal Government of Nigeria from taxation over the years has remained grossly insufficient to meet the expanding social and public spending required in fostering economic growth and development in the country. In the opinion of Ayua (1996), the tax system is grossly inefficient as it is characterized by tax evasion, avoidance and record falsifications which have led to consistent low tax revenue inflow. Gross inefficiency and leakages have hampered the amount of revenue realized from tax sources over the years which has been affecting the economy negatively.
The inability of the Federal Inland Revenue Service Board to ensure total compliance to tax rules by companies and bring all operational companies into the tax net has significantly limited the contribution of tax revenue to economic growth. According to James and Moses (2012), the prevalence of tax evasion in the Nigeria tax system, has curtailed the amount of revenue collected from tax income, this in no doubt has effect on the government expenditure and inflation in the economy. Moreover, the revenue generation capacity of the nation’s present tax administrative system is hampered by challenges such as paucity of data, inefficient monitoring and enforcement system, and corrupt practices, as noted by, (Leyira, Chukwuma, and Asian 2012). All these have impeded the economic growth of Nigeria; which has resulted to her current state of economic recession with the resultant effect of companies closing down, hence, reducing the tax revenue of the Government.
In most countries, tax system is seen as an embodiment of contention and controversy whether in its policy formulation, legislation or administration as observed by (Bariyama & Gladson 2009). For example Nigeria government is contemplating to raise Value Added Tax rate, while the organised private sector is resisting that attempt and would rather have government bring more companies and individuals into the tax net as noted by (Alli, 2009). According to Enahoro and Olabisi (2012) there is a huge scale of corrupt practices prevalent in Nigeria tax administrative system, this tells to a reasonable extent that the economy is at a disadvantage position. Ahmad (2005) pointed out that the objectives of tax system are multi-dimensional in nature, which includes revenue generation, resources allocation, a fiscal tool for stimulating economic growth and development and Social functions, like redressing the rural-urban population drift, and making everybody to be responsible. Taxes, and tax systems, are fundamental components of any attempt to build any nations economic growth, and this is particularly the case in developing or transitional nations like Nigeria. However, given the ever increasing social and infrastructural expenditure needs of government, greater tax revenue will be needed to execute or sustain the required level of spending that can trigger economic growth.  These shortcomings may be more evident where government’s financing relies heavily on more “distortionary” taxes (e.g. direct taxes) and where public expenditure focuses on “unproductive” activities. Ayua (1996) pointed out that the major problem lies in the procedures, machinery and approaches adopted in collection, assessment and compliance practices of tax, however, this study seeks to ascertain the effect of poor tax administration system and assess its impact on economic growth of Nigeria.
The problems associated with the major tax reforms in Nigeria can be attributed to its inability to achieve its set objectives towards which it was focused. Ogbonna and Ebimobowei (2012) identified some of the problems to include the increasing cost of tax administration by the Federal Government of Nigeria in relation to the tax revenue collections as evidenced by scholars, which is a major indication of high level of inefficiency in the tax operations of the country contrary to the canons of taxation enunciated by Adam Smith. Furthermore, the prevailing distortions in the tax system have jeopardized some of the purpose of the Nigerian tax reform agenda resulting in an ineffective tax system.
Companies Income Tax administration in Nigeria does not measure up to appropriate standards. If good old test of equity, certainty, convenience and administrative efficiency are applied, Nigeria will score low as a result of tax evasion and inadequate monitoring. Non compliance with tax laws and regulations by tax payers is deep in the system because of weak control, poor tax administration, poor tax education, inconsistent government policies, lack of adequate statistical data and corruption among tax officials (Azubuike 2009).
Adegbie and Fakile (2011) found out that fraud and financial malpractices have negative impact on the contribution of Customs and Excise duties to Nigerian economic development. The Nigerian customs service is much criticized for corruption and inefficiency and its upper echelon is often driven with intrigue and infighting. All these need to change if the Nigerian dream of economic development is to be achieved. Value Added Tax rate in Nigeria is one of the factors contributing to the collapse of the real economy (Odusola 2006). This is because it disrupts the manufacturing sector by accelerating astronomical increase in the prices of goods and services. Hence it increases the volume of unsold goods thereby reducing capacity utilization, increasing poverty levels, increasing unemployment, discouraging local and foreign investors and subjects the country to economic volatility.
Although the Petroleum Profit Tax serves as the instrument of redistribution between the industrialized economies who own the technology and the emerging economies from where the petroleum resources are extracted, most of the objectives of Petroleum Profit Tax in Nigeria are not achieved (Uremadu and Ndulue 2011). This is because of several challenges such as lack of adequate trained tax inspectors and officials; inadequate application of technology; poor assessment of tax payers; tax evasion and avoidance and ineffective tax laws and regulations
Likewise, the problem associated with tax justice in Nigeria was addressed as against economic growth in Nigeria. The tax administration system is seen as a central pillar of any national development strategy, Action Aid (2013) defined tax justice as a transparent, accountable and efficient set of arrangements that raises substantial revenue for needed public services, development and government infrastructure through a broad tax base, with the proportionally largest contributions coming from those with the greatest wealth and income. Corruption and corrupt practices have eaten deep into this nation; therefore, the Nigerian tax justice is tainted with lack of transparency, unaccountability and inefficient administration system, which on the other hand has a negative effect on the economic growth of our nation. Globally , a tax contribution of 20% to a nation’s Gross Domestic Product is acceptable ,however in Nigeria , tax contribution to Gross Domestic Product is about 0.7% as submitted by Okonjo Iweala (2013).

This is quite unacceptable. Therefore this research work was designed to unravel the problem of low tax yield to Nigeria’s economy and proffer immediate solutions. The problem of poor economic growth due to insufficient revenue collection from the non-oil tax sector and inefficient administrative framework by federal government of Nigeria were the major issues this research work investigated. The immediate and remote causes or reasons for poor/little tax revenue contribution to economic growth (below expected), in Nigeria is therefore a fundamental problem that must be solved if the vision 20 2020 would be realized.

1.3       Objective of the Study
The main objective of this work was to examine the impact of tax revenue collected by federal government on the economic growth of Nigeria. The specific objectives are to:
        i.            assess the impact of companies’ income tax on economic growth of Nigeria;
     ii.            ascertain the influence of Petroleum Profit Tax on economic growth of Nigeria;
   iii.            examine the impact of custom and excise duties on economic growth of Nigeria and
   iv.            determine the impact of VAT on the economic growth of Nigeria.

1.4       Research Questions
Research questions were employed to pilot this research, testing for the efficiency and effectiveness of tax revenue to produce the desired economic growth. The following questions were developed:
        i.            What is the impact of companies’ income tax on economic growth of Nigeria?
     ii.            What is the influence of Petroleum Profit Tax on economic growth of Nigeria?
   iii.            In what ways has custom and excise duties impacted the economic growth in Nigeria?
   iv.            To what extent does VAT impact the economic growth of Nigeria?

1.5       Hypotheses
The following hypotheses were tested at 5% level of significance in this study:
Ho1:     Companies income tax has no significant impact on the economic growth of Nigeria.
Ho2:     Petroleum Profit Tax has no influence on the economic growth of Nigeria.
Ho3:     Custom and excise duties have no significant impact on the economic growth of Nigeria.
Ho4:     VAT has no significant impact on the economic growth of Nigeria.

1.5.1 Rationale for Hypotheses
The role and strategic importance of the petroleum industry to the Nigerian economy cannot be over-emphasized, as it is the main fulcrum around which the entire economy revolves. Petroleum Profit Tax is payable by companies which are engaged in petroleum operations. The fundamental objectives of petroleum taxation is to ensure a fair share of wealth accruing from the extraction of the petroleum resource, while also providing sufficient incentives to encourage investment and optimal economic recovery of the hydrocarbon resource (Sanni, 2011).
Value Added tax has become one of the major sources of tax revenue for financing government expenditure. However, there are several issues emanating from the operation of VAT in the country, which has made many analysts to submit that the operation of VAT is far from what is desirable. Firstly, VAT rate in Nigeria is one of the factors contributing to the collapse of the real sector of the economy, because it disrupts the manufacturing sector by accelerating astronomical increase in the prices of goods and services. This is in addition to other teething problems already plaguing the sector such as inadequate power supply, poor transportation network, multiple taxation, etc. If consumption among individuals and companies is reduced, this could have a knock-on effect on economic growth, profitability and employment, leading to less personal income taxes (Oyedele, 2011). Furthermore, the operation of VAT in Nigeria is capable of causing inflation because VAT is a consumption tax and as such increases the prices of goods and services. The real income of the final consumers is reduced leading to low purchasing power and further compound the poverty situation in the country.
Companies Income Tax has significant impact on the economy of any nation because it serves as a stimulus to economic growth in the areas of fiscal and monetary policies. But the Nigerian case is difference because the revenue derived from CIT has been grossly understated as a result of several challenges. The factors responsible for the poor performance of CIT revenue in Nigeria include: high rate of tax evasion and avoidance by companies, poor tax administration, poor taxpayers education, inconsistent government policies, and lack of adequate statistical data, inadequate manpower and corruption among tax officials.
Customs and excise duties are the country's highest yielding indirect tax and are administered by the Nigerian Custom Service. Like PIT, CIT and PIT, the operation of custom duties in Nigeria is characterized by multidimensional challenges. These include; porous borders, problem of smuggling, security challenges, poor custom duty administration, inadequate data, shortage of adequately trained personnel, etc. these factors have contributed to the slow rate of growth of custom duties in Nigeria and has therefore affected the economy negatively.
Consequently, it becomes imperative to examine the effect of federal government tax revenue on Economic growth of Nigeria.

1.6       Significance of the Study
The aim of the study was to empirically review the effect of tax revenue on the economic growth of Nigeria. The result of this study provides empirical evidence and contributes to the body of existing literature.
Specifically it assists the Federal Government of Nigeria in the light of dwindling oil revenue in Nigeria. This study would assist the government to block revenue leakages, harness greater revenue sources, evolve an effective policy framework which would guarantee quality tax administration and foster economic prosperity on the citizenry. So this research gives useful opinion to the government on how to generate more income from tax so as to be less dependent on income from the unstable oil sector alone. Nigeria oil which had been the main source of revenue earner for Nigeria government over the years has suffered serious price decline in the global market with adverse effect on Nigeria budget for year 2016 which has led the government to make huge provisions for borrowing with the attendant borrowing costs, which is inimical to development. The government would therefore greatly benefit from this research project through a more efficient and effective tax administration.
Also, the findings of this study serve as bedrock to the general public in order to discourage tax evasion as it provides empirical evidence of the percentage contribution of tax revenue to GDP below the normal threshold of 20%. This study educates tax payers on the benefit of remitting tax especially in the area of economic benefit of tax revenue, not failing to advice on the negative effect of evading tax on both the tax payer and on the economy in general.
The study also provides a holistic approach to tax administration in the country; therefore assisting the tax administrators by shedding light on existing loopholes that tax evaders explore. In addition, researchers and academic community would also draw inspiration from the in-depth analysis and articulation of the research work.  Finally, the study provides necessary information to Joint Tax Board and Federal Board of Inland Revenue concerning effective tax administration strategies that could be employed to reduce the number of tax evaders and secure tax payers loyalty to their constitutional duty and civic responsibility, thereby increasing the tax revenue generated. 

1.7       Scope of the Study
This study focused on the examination of the effect of tax revenue on economic growth of Nigeria as such, the scope of this study is defined from three dimensions namely, geographical area of coverage, time period and the data. The geographical scope of this study is Nigeria which represents both the study’s population and sample size. The time period is thirty-five years (1981-2015). This period is considered reasonable to establish the consistency and effectiveness of tax revenue generated on the economic growth of Nigeria. This study is restricted to secondary data which were obtained from the statistical bulletin from Central Bank of Nigeria (CBN) and reports of Federal Inland Revenue Service (FIRS). This provided data that was used to measure the tax revenue (independent variable) and economic growth (dependent variable) of Nigeria. The tax revenue was measured by Companies Income Tax (CIT), Petroleum Profit Tax (PPT), Custom, Excise Duties (CED) and Value Added Tax (VAT) and Gross Domestic Product (GDP) was used as a proxy for economic growth over the period of study. Using data from these sources enhanced the reliability and validity of data used in this study. Ordinary Least Square was the statistical tool used in this research.

1.8 Operationalization of Variables
The purpose of this study was to examine the impact of tax revenue collected by Federal Government on economic growth in Nigeria.
To achieve this, two variables were identified in the study, these are: independent and dependent variables. The independent variables are the Tax Revenue generated in Nigeria in the following dimensions as surrogates: Companies Income Tax (CIT), Petroleum Profit Tax (PPT), Custom, Excise Duties (CED) and Value Added Tax (VAT). The dependent variable on the other hand is Economic Growth (EG) measured by Gross Domestic Product (GDP) of Nigeria for the period under study (1981—2015).
The following model has been adopted.
Y = f(X)
Y = y1
X = x1, x2, x3, x4
Where;
Y= Economic Growth (EG)
y1 = Gross Domestic Product (GDP)
X = Tax Revenue (TAR)
x1= Companies Income Tax (CIT)
x2 = Petroleum Profit Tax (PPT)
x3= Custom and Excise Duties (CED)
x4= Value Added Tax (VAT)
Functional Relationships
GDP = f(CIT)...............................................1
GDP = f(PPT)...............................................2
GDP = f(CED)..............................................3
GDP = f(VAT)..............................................4
GDP = f(CIT, PPT, CED, VAT)..............................................4
it is expected that β1-8 > 0.
The above functional relationships are the underlying functions of effects of tax revenue on economic growth of Nigeria for the period of study. This functional relationship shows that economic growth is a function of tax revenue, which likewise is a function of company income tax, petroleum profit tax, customs and excise, value added tax.
Associated regression models were developed in chapter three under methodology of the study and employed in chapter four to investigate the effects.

1.9 Operational Definition of Terms
Nigeria Tax Authorities:  This refers to the revenue collection agencies of the Federal Government of Nigeria represented by the Federal Inland Revenue Service (FIRS), State Internal Revenue Service (SIRS) and Local Government Revenue Committee.
Joint Tax Board (JTB):  This is the supervisory and regulatory body that defines the scope of operation and administrative system between the various tiers of tax authorities.
Revenue: Implies resources or pool of funds available to the Federal Government of Nigeria from internal and external sources.
Tax: Obligatory transfer of financial resources from the private organisation to the public sector for common pool
Tax Administration: Refers to tax management process and procedures for the effective and efficient transfer of financial resources from the private organisation to the public pool.
Board: This refers to the Federal Board of Inland Revenue (FBIR)
Service: This refers to the Federal Inland Revenue Service (FIRS)
Tax Justice: This refers to the tax administration transparency issues in Nigeria.
Tax Reform Policies: These are policies established by the Federal Government in Nigeria on tax administration and implementation.
Tax Consultants: These are firms employed by the Federal Government of Nigeria charged with the duties of tax administration and collection.
Tax Evasion: This refers to the deliberate failure to pay taxes usually by making false reports. It is using illegal means to avoid paying taxes. Typically, tax evasion schemes involve an individual or corporation misrepresenting their income to the Inland Revenue Service.
Tax Avoidance: This refers to the minimization of tax liability by tax payers through lawful methods. This is the legal usage of the tax regime to one's own advantage to reduce the amount of tax that is payable by means that are within the law.
Oil Revenue: This is revenue generated through oil exploration and production in Nigeria.
Non-oil Revenue: This is revenue generated from other sources apart from oil sector in Nigeria. An example is tax.

Thin Capitalization: This is a situation where firms are heavily financed through debt with the aim to pay less tax since interest on debt is an allowable expense under tax laws

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Item Type: Project Material  |  Attribute: 114 pages  |  Chapters: 1-5
Format: MS Word  |  Price: N3,000  |  Delivery: Within 30Mins.
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