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The research work will discuss in detail the impact of taxation on Economic growth in Nigeria.  It will also take cognizance of the aims and objectives of taxation and its impact on the economic growth of Nigeria.  It also aimed at identifying problems that inhibit the efficient and effective administration of the Nigeria tax’s system.  In evaluating this, the researcher adopted econometrics by applying Ordinary Least Square (OLS) techniques. It was found out that interest rate has no significant effects on taxation in Nigeria economy for the said period.  Hence, the researcher concludes that interest variation has not really effected investment growth in Nigeria. I recommended that the government should put more emphasize on the aspects of taxation since the main source of development.



1.1            Background of the study

1.2            Statement of the problem

1.3            Objectives of the study

1.4            Research Questions

1.5            Research Hypotheses

1.6            Significance of the study

1.7            Assumptions of the study

1.8            Scope of the study

1.9             Limitations of the Study

1.10       Definition of Terms



Review of related literature       

2.1            Theoretical Framework

2.2            Empirical Literature




3.1            Research Methodology

3.2            Model Specification

3.3            Model Evaluation

3.4            Decision Rules

3.5            Data Required and Sources


CHAPTER FOUR Presentation, analysis, and interpretation

4.1            Presentation, analysis, and Interpretation

4.2            Evaluation of Hypothesis

4.3            Statistical Test of Significance

4.4            Evaluation of the Working Hypothesis

4.3     Policy Implementation of the Result


5.1     Summary of finding

5.2            Summary of Findings

5.3            Conclusion s

5.4            Recommendations

5.5            Bibliography



1.1            Background of the Study

The political, economic and social development of any country depends on the amount of revenue generated for the provision of infrastructure in that given country. However, one means of generating the amount of revenue for providing the needed infrastructure is through a well structured tax system. According to Azubike (2009), tax is a major player in every society of the world. The taxation is an opportunity for government to collect additional revenue needed in discharging its pressing obligations. A taxation offers itself as one of the most effective means of mobilizing a nation’s internal resources and it lends itself to creating an environment conducive to the promotion of economic growth. Nzotta (2007) argues that taxes constitute key sources of revenue to the federation account shared by the federal, state and local governments. This is why Odusola (2006) stated that in Nigeria, the government’s fiscal power is divided into three-tiered tax structure between the federal, state and local governments, each of which has different tax jurisdictions. The system is lopsided and dominated by oil revenue. He further argues that over the past two decades oil revenue has accounted for at least 70% of the revenue, thus indicating that traditional tax revenue has never assumed a strong role in the country’s management of fiscal policy. Instead of transforming the existing revenue base, fiscal management has merely transited from one primary product-based revenue to another, making the economy susceptible to fluctuations of the international market.

However, one of the major functions of any government especially developing countries such as Nigeria is the provision of infrastructural services such as electricity, pipe-borne water, hospitals, schools, good roads and as well as ensure a rise in per capita income, poverty alleviation to mention a few.

For these services to be adequately provided, government should have enough revenue to finance them.  The task of financing these enormous responsibilities is one of the major problems facing the government.  Based on the limited resources of government, there is need to carry the citizens (governed) along hence the imposition of tax on all taxable individuals and companies to augment government financial position.  To this end, government have always enacted various tax laws and reformed existing ones to stand the taste of time.  They include:  Income Tax Management Act (ITMA), Companies Income Tax Decree (CIID), Joint Tax Board (JIB) etc.

All these are aimed at ensuring adherence to tax payment and discouraging tax evasion and avoidance.  For the purpose of this study, the researcher would be concerned with the impact of taxation as an aid to the economic development of Enugu State (Nigeria).

1.2            Statement of the Problem

The first need of any modern government is to generate enough revenue which is indeed “the breath of its nostril”.  Thus taxation is by far the most significant source of revenue for the government.  Nigerians regard payment of tax as a means whereby government raises revenue on herself at the expense of their sweat.

It is good to note that no tax succeeds without the taxpayer’s co-operation.  Here, we can ask some thought-provoking questions such as: what makes taxation such a difficult issue?  Why do people feel cheated when it comes to tax?  Is government making judicious use of taxpayer’s money?  In view of these questions above, this study is going to be carried out to offer solution to them.

We shall also look at the following issues and offer recommendations.

1.       Problems affecting the successful operation of tax system in Nigeria.

2.       How to determine the Assessable income.

3.       Process of tax administration in Nigeria.

1.3     Objective of the Study:

The general objective of the study is to assess the contribution of taxes towards the growth of the Nigeria Economy.

However, the specific objective of the study includes:

1.       The evaluate the nature of relationship that exist between taxation and economic growth in Nigeria.

2.       To determine the extent government has been using revenue generated from tax.

3.       To examine how tax rate affects the rate of investment in the economy.

5.       To know general desirability of firms to invest as a result of tax incentive measures.

Generally, the work is done to find out if tax constitutes the bulk of government revenue and to erase the erroneous that it is an exploitation by government for their selfish interest.

1.4     Research questions

1.     What the nature of relationship that exist between taxation and economic growth.

2.     Do you think that government having using revenue generated from tax for economic growth.

3.     Do tax rate affects the rate of investment in the economy.

1.5     Formulation of Hypothesis:

To enable the researcher test if there exist any correlation between revenue generated from tax and its impact on Nigeria  economy, some statistical  model will be used based on the response from the secondary data obtains from Central Bank of Nigeria annual statistical bulletin.

The Null Hypothesis (Ho):  Revenue generated from tax does not make

any impact on the economic development of Enugu State

The Alternative Hypothesis (HA):  Revenue generated from tax has a

positive impact on the economic development of Enugu State.

1.6               Assumptions of the Study

The researcher in carrying out this study will make the following assumptions:

1.       That the data that will be used are true and fair figures of taxes actually collected by the Federal Government in each year of assessment.

2.       That the data will be authentic and can be relied on for further research work on the topic.

3.       That the data is going to form the basis of the research work.

1.4     Significance of the Study:

One of the most frequently discussed issues in Nigeria is how to solve the economic hardship in the country and how to create an industrial base that can be guarantee self sustaining economic development.  Also one wonders why a country which is richly endowed with the necessary human and material resources and which the people pay tax has been turned a heavily indebted country.

The study will afford us the opportunity to know the roles taxation play in the Nigeria economy such roles includes:

1.       Taxation is a major source of revenue to the government.

2.       Revenue generated from tax enables government performs its functions effectively.

3.       Taxation acts as an instrument of fiscal policy.

4.       The impact of tax on small business in the state.

5.       The study will in addition reveal if there are other better sources of government funding.

1.6     Scope of the Study:

The scope of this study covers critical examinations on the impact of taxation on economic development.  It will also analyze other related issues such as structure and administrative machinery of tax in Nigeria and their associated problems.  The essence of this digression is to possibly find out the obstacles if any, that hinder the effective collection and administration of tax in Nigeria.

1.8     Definition of Terms:

Tax:            A compulsory levy by the government on its citizen for the provision of public goods and services.

Tax Base:  The object which is taxed for instance personal income, company profit.

Tax Rate:  The rate at which tax is charged.

Tax Incidence:  It offers to the effect of and where the burden is finally rested.

FBIRS:       Federal Board of Inland Revenue Services.  It is an operational arm of Federal Board of Inland Revenue which is responsible for the Federal Tax matters.

CITA:         Company Income Tax Act (CITA) is a federal law operated by the FIRS, which deals with the taxation of all limited liability companies in Nigeria with the exception of those engaged in petroleum operations.

JTB:           Joint Tax Board (JTB) is established under Section 85(1) of Decree 104 of 1993 to arbitrate on tax disputes between one state tax authority and another.

VAT:          Value Added Tax is a multistage tax levied and collected on transactions at all stages of sales and distribution.

CGTA:       Capital Gain Tax Act is an act that stipulates that all capital gains arising on disposal of asset of individual partnership and limited companies should be taxed.

PPTA:        Petroleum Profit Tax Act is an act that regulates the petroleum profit tax and also specifies how profit from petroleum will be taxed.

Withholding Tax:         This is tax charged on investment income namely: rents, interest, royalties and dividends, presently it is charged as the tax offset.



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