Tax Revenue Effort in Nigeria

Abstract

Today, countries, especially the developing ones rebase their Gross Domestic Product (GDP) to determine their economic strength. Nigeria as an acclaimed giant in Africa cannot but continuously examine variables which may impact the economy. It is in this light that this study was intended to investigate the Determinants of Tax Revenue Effort in Nigeria. To achieve this, secondary data, as time series data, covering a period of 1980 to 2015, were used and sourced from the Central Bank of Nigeria Statistical Bulletin, Annual Abstract from the Office of the National Bureau of Statistics and the Federal Inland Revenue Service, both in Nigeria. The dependent variable of Tax Revenue Effort (TTAXeff) was regressed on macro independent variables of Agricultural Sector Productivity(AGRICSP), Manufacturing Sector Productivity (MANSP), Tourism Sector Productivity(TOURSP), Telecommunication Sector Productivity(TELCOMSP), Capital Flight(CAPFR), Trade Openness (TOPEN) and Human Capital Development(HCD). The study adopted a longitudinal research design and used the Autoregressive Distributed Lag (ARDL) technique to evaluate the models. The findings revealed that Agricultural Sector Productivity, Tourism Sector Productivity, Trade Openness and Human Capital Development had significant and positive effects on Tax Revenue Effort in Nigeria. The Manufacturing Sector Productivity, Telecommunication Sector Productivity and Capital Flight had significant but negative effects on Tax Revenue Effort in Nigeria. There is however the need to consistently ensure better performance of tax efforts in the country through strict and meticulous enforcement of tax rules and tax administrations procedures in the country.

Taxable Capacity and Tax Effort: An Analysis for Pakistan

“…So, this sector is positively contributing to the export of any economy which further leads the way to higher profits and income and boost tax revenues. Our results are consistent with the findings of Ikhatua and Ibadin (2019).…”

“…Foreign trade contributes significantly in most developing economies via export duties, imports quotas, tariffs and so on. The outcome of this variable contradicts not just theory but also the findings of Gaalya, (2015); Brun and diakite (2016) and Ikhatua and Ibadin (2019).…”

“…He concluded that market capitalization and number of branches affected tax revenues positively and significantly in long run. Ikhatua and Ibadin (2019) investigated the determinants of tax effort in Nigeria. The estimation results showed that tourism sector productivity, agricultural sector productivity, human capital development and trade openness were positively and significantly associated with tax effort.…”

Spatial variability of the predictors of government tax revenue in Nigeria

“…However, tax revenue was more responsive to income level with a unit increase in income leading to 0.63 percent increment in tax revenue. In a similar study, Ikhatua and Ibadin (2019) showed that tax revenue is determined by agricultural sector productivity, manufacturing sector productivity, capital flight and trade openness using the autoregressive distributed lag model. Moreover, the study of Bassey and Efiong (2018) revealed that the inflation rate has a negative effect on tax revenue generation, while the degree of economic openness and the level of economic development are positively related with tax revenue in Nigeria.…”

“…Nevertheless, the aforementioned can best be determined by a local spatial statistical technique such as the geographically weighted regression (GWR) that allows for the examination of spatial non-stationarity between tax revenue and its correlates. However, existing studies (see Ajide and Bankefa 2017;Akintoye et al 2019;Bassey and Effiong 2018;Ikhatua and Ibadin 2019;Muibi and Sinbo 2013a, b;Rabiu and Mustafa 2020;Taiwo 2016) on the determinants of government tax revenue have been largely limited to global modeling technique such as the ordinary least-squares (OLS) linear regression or spatial regression methods. The major assumption in a global model that has been regarded as fundamentally defective is that the relationship between the predictor and tax revenue are homogenous in space.…”