Assessing the Impact of Infrastructure on Tax Structure and Improving Economic Performance: The Case of Nigeria

Oladimeji Abeeb Olaniyi, Adewale Mathew Adekanmbi, Samson Adegboyega Opadeji and Amos Dauda Shallie

Journal of Applied Economic Research, 2024, vol. 23, issue 3, 623-641

Abstract: The relevance of this study is to establish the interactive role of infrastructure on tax composition in stimulating long-term economic performance in Nigeria. However, empirical evidence showed that greater emphasis was placed on studies relating to the impact of taxation on the performance of the economy. The purpose of this study is to examine the impact of infrastructure on tax structure and improving economic performance in Nigeria. The hypothesis - the interactive role of infrastructure on tax composition and the economic performance nexus in Nigeria - was estimated with the Ridge Regression (RR) technique to take care of the incidence of multicollinearity that existed among the study variables using the dataset covering 1993-2022. Also, the study utilized the Barro growth model, which emphasized investment in infrastructure enhanced through taxes as the core endogenous factor that drives growth. The findings revealed that with the presence of infrastructure; value added tax, company tax, customs and excise duties and petroleum profit tax has a positive and significant relationship with economic performance while personal income tax has a positive but insignificant relationship with economic performance in Nigeria within the study period. The study thus concluded that with the presence of infrastructure, tax composition significantly contributed to economic performance in Nigeria within the study period. Based on this finding, this study recommends that policymakers should focus on measures such as tax education and enlightenment to encourage voluntary tax compliance to generate substantial revenue to fund infrastructural development, thus, improving the level of economic performance in Nigeria.

Keywords: tax structure; infrastructure; economic performance; multicollinearity; ridge regression (search for similar items in EconPapers)
JEL-codes: H21 H54 O4 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnjaer:v:23:y:2024:i:3:p:623-641

DOI: 10.15826/vestnik.2024.23.3.025

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