Effect of Taxation on Domestic Investment in Nigeria

Uchime, Helen Nkem; Sunday, Anichebe Alphonsus

doi:10.20448/802.61.96.104

Cited by 4 publications

(6 citation statements)

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“…Several authors have done much empirical work to demonstrate the major debates over how tax revenue generation affects private domestic investment yielded conflicting results. Some support the hypothesis that a rise in the share of tax revenue collection is positively associated with domestic investment; for example, Akinleye et al (2019) argued that corporate income tax contributes more to macroeconomic private domestic investment, Adejare & Akande (2018) and Nkem & Sunday (2019) (Nkem & Sunday, 2019) found significant relationship value added tax and private investment (Njuru et al (2013) found a significant relationship between import duty, excise duty and private domestic investment, a study conducted by Ekpung & Wilfred (2014) performed the analysis which revealed corporate income tax negatively related with investment and Andrejs et al (2019) revealed that value added tax and corporate income tax are negative correlated with private domestic investment.…”

Section: 0mentioning

confidence: 96%

Influence of Value Added Tax Revenue on Private Domestic Investment in Developing Countries

Chindengwike

2022

JGE

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The study's overarching goal is to assess the influence of Value Added Tax (VAT) revenue on private domestic investment in emerging countries. The study used a time series research design, and it is a case study of one country, Tanzania. Annual time series data from 1998 to 2020 were used in the study. The data on tax income (VAT) is taken from the Tanzania Revenue Authority website and the Bank of Tanzania, while the data on private domestic investment as Gross fixed capital formation of the private sector as a percentage of GDP is obtained from the World Bank. Following the first tests for heteroscedasticity, multi-collinearity, unit roots, lag length selection, and co-integrating vectors. The long-run and short-run correlations were then computed. The findings demonstrated that in the long run, value added tax is negatively associated to private domestic investment. The analysis showed a negative association between the degree of investment and the value added tax parameter estimates. Even though value added tax generates government revenue, increasing it encourages tax evasion and leads to high prices of goods, putting the burden on low-income earners, reducing disposable income and distorting saving and private domestic investment. The study recommends that governments reduce VAT rates, simplify their tax regimes, address any tax administrative issues, and plug all gaps for tax evasion in order to increase revenue generation and attract private investments. For example, the government should improve an appropriate tax system and implement progressive tax reforms to attract private investors. As the study's findings demonstrated that value added tax has a negative long-term impact on investment, a greater value added tax levied causes higher corporate costs. Governments must also lower VAT rates, simplify their tax regimes, address any tax administrative issues, and close any gaps for tax evasion in order to increase revenue generation and attract private investment. For example, the government should improve an appropriate tax system and implement progressive tax reforms to attract private investors. As the study's findings demonstrated that value added tax has a negative long-term impact on investment, a greater value added tax levied causes higher corporate costs.

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Section: 0mentioning

confidence: 96%

Influence of Value Added Tax Revenue on Private Domestic Investment in Developing Countries

Chindengwike

2022

JGE

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“…However, Edame and Okoi (2014) studied tax and domestic investment nexus from 1980 to 2010 using the OLS estimator and showed that domestic investment is a decreasing function of tax in Nigeria. In addition, using the OLS technique, Uchime and Sunday (2019) found an insignificant relation between VAT and domestic investment in Nigeria from 1995 to 2017. Elsewhere, studies have reported a positive connection between tax and domestic investment.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Whereas efforts have gone into research on VAT-domestic investment relation in Nigeria (Asogwa & Nkolika, 2013;Edame & Okoi, 2014;Uchime & Sunday, 2019), some of the studies have methodological problems inherent in them. For instance, the works of Asogwa and Nkolika (2013) and Uchime and Sunday (2019) used annual data less than thirty years (i.e., observations). This falls short of the minimum requirement for times series analysis.…”

Section: Yearsmentioning

confidence: 99%

“…This falls short of the minimum requirement for times series analysis. Also, Asogwa and Nkolika (2013) applied the OLS method even though the variables were a mixture of I(0) and I(1), while Edame and Okoi (2014) and Uchime and Sunday (2019) did not conduct stationarity test on the variables used in their research. Although the research by Yusuf and Mohd (2021) adopted a linear ARDL method, the non-linear ARDL (NARDL) is a more appropriate method as macroeconomic variables tend to have non-linear relations between them (Abu et al, 2022b).…”

Section: Yearsmentioning

confidence: 99%

“…Whereas the few studies on Nigeria deserve commendation, they have certain problems which the present research attempts to correct. First, existing studies (Asogwa & Nkolika, 2013;Uchime & Sunday, 2019) used inadequate data (less than thirty years/ observations) in their analysis, and fell short of the basic requirement for time series analysis. In addition, they (Asogwa & Nkolika, 2013;Edame & Okoi, 2014;Uchime & Sunday, 2019) didn't conduct relevant pre-estimation tests like unit root test and/ or applied inappropriate methods.…”

Section: Literature Reviewmentioning

confidence: 99%

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Long-Term Asymmetric Impact of VAT on Domestic Investment in Nigeria

Abu,

Izuagie,

Ben-Obi

2023

OMEE

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We employ a non-linear ARDL (NARDL) technique to explore long-term asymmetric influence of value added tax (VAT) on domestic investment using quarterly data for Nigeria from 1994 to 2021. A long-term relation was found between domestic investment and VAT (alongside lending and inflation rates, credit to private sector, exchange rate, openness and households’ consumption expenditure) based on the bounds test to cointegration. We uncovered a long-term asymmetric association between domestic investment and VAT. The results show that a positive shock (an increase) in VAT has a long-term decrease and significant influence on domestic investment, while a negative shock (a decrease) in VAT has an insignificant positive influence on investment during the long-term. Other significant long-term drivers of domestic investment are credit to private sector, inflation and lending rates, openness, exchange rate and households’ consumption expenditure. Some recommendations have been offered based on the empirical outcomes.

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Value Added Tax and Economic Growth: An Empirical Study of China Perspective

Zeraibi

Mukherjee

2019

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This study investigates the role of Value-Added Tax (VAT) on the economic growth in China. The data used for the study is a time series of the period from 1985-2016. These researches use the gross domestic product (GDP) as a dependent variable. For the independent variables, this research using the total population, employed persons, consumer price index, and value-added tax. The current findings add to a growing body of literature on identifying the properties of VAT in China and identifying the tax system reform from 1993 to 2012 and the mechanism of transfer application of the business tax in the services sector to Value-Added Tax. The test result indicated to have a positive relationship between the GDP and independent variables value-added tax in both in the long and short run. AbstrakPenelitian ini bertujuan menyelidiki peran pajak pertambahan nilai (PPN) terhadap pertumbuhan ekonomi di Cina. Data yang digunakan untuk penelitian ini adalah deret waktu selama periode 1985-2016. Variabel dependen yang dipergunakan ialah produk domestik bruot. Sedangkan variabel independennya ialah jumlah penduduk, orang yang dipekerjakan, indeks harga konsumen, pajak pertambahan nilai. Temuan saat ini menambah literatur yang berkembang tentang mengidentifikasi sifat-sifat PPN di Cina dan mengidentifikasi reformasi sistem perpajakan dari tahun 1993 hingga 2012 dan mekanisme aplikasi transfer pajak bisnis di sektor jasa ke Pajak Pertambahan Nilai. Hasil penelitian menunjukkan terdapat pengaruh positif dan signifikan antara variabel dependen (PDB) dan variabel independen (Re, PPN) baik dalam jangka panjang maupun jangka pendek.Kata Kunci: pajak pertambahan nilai, pertumbuhan ekonomi, sistem perpajakan JEL Code: F43, H21

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Effect of Taxation on Domestic Investment in Nigeria

Cited by 4 publications

References 0 publications

Influence of Value Added Tax Revenue on Private Domestic Investment in Developing Countries

Influence of Value Added Tax Revenue on Private Domestic Investment in Developing Countries

Long-Term Asymmetric Impact of VAT on Domestic Investment in Nigeria

Value Added Tax and Economic Growth: An Empirical Study of China Perspective

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