The Impact of Taxation on Economic Growth and Development

Belau Kazeem. S, Sunmonu, Sadiat, O and Odeyale, Adeolu, J.
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Belau Kazeem. S: Department of Banking and Finance, Olabisi Onabanjo University, Ago-iwoye, Ogun State, Nigeria.
Sunmonu, Sadiat, O: Aradel Holdings Plc, Nigeria.
Odeyale, Adeolu, J.: Department of Banking and Finance, Federal Polytechnic Ekowe, Bayelsa State, Nigeria.

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Abstract: Since Nigeria is an open economy that engage in international trade the importance of identification of revenue source that would help the country improve its economic growth and development is very sacrosanct. The identification of tax revenue is very relevant in enhancing the country growth and development. This study examines into the effect of tax revenue on economic growth and development. The study employed the time series data sourced from the CBN Statistical Bulletin from 1992 to 2024. The dependent variable is the gross domestic product while the independent variables includes value added tax, company income tax, inflation rate and interest rate. The multiple regression revealed that company income tax has positive significant effect on gross domestic product while interest rate has negative significant effect on gross domestic product. The government should adopt policies that balance revenue generation with economic growth. Given the negative and significant effect of value-added tax (VAT) on GDP, policymakers should consider reducing VAT rates on essential goods and services to minimize the burden on consumers and businesses. Additionally, broadening the tax base and improving tax compliance could generate revenue without hampering economic activity.

Date: 2025-03-17
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Published in Asian Journal of Economics, Business and Accounting, 2025, 25 (3), pp.389-399. ⟨10.9734/ajeba/2025/v25i31718⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04997092

DOI: 10.9734/ajeba/2025/v25i31718

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