EFFECT OF TAX REFORMS ON THE NIGERIAN ECONOMIC GROWTH

Abstract

The study examines the effect of tax reforms on the Nigerian economic growth. The study employed annual time series data spanning the years from 2019-2021 (Q1 to Q10). Value Added Tax and Capital Gain Tax were used as a proxy for tax reforms and Real Gross Domestic Product as a proxy for economic growth. To avoid spurious results, stationarity of the data collected were tested using the Augmented Dickey Fuller (ADF) model. The study is based on the Ex-post facto research design. The population of this study consisted of all manufacturing firms listed on the Nigeria stock Exchange, using quarterly data from 2019 to 2021 (Q1-Q10). The study population was 121 Manufacturing companies listed on the Nigerian Stock Exchange. The Purposive Sampling Technique was utilized in this study to determine the sample size. The sample size for this study was nine (9) manufacturing firms listed on the Nigerian Stock Exchange. These manufacturing firms were selected based on the fact that they contribute towards the Nigerian economy growth and development, and they are among the top 20 of the consumable manufacturing firms; also, because of the availability of their quarterly accounting records and annual financial reports from 20199(Q1) to 2021(10). Data were analyzed using the Auto-Regressive Distributed Lags and the Ordinary Least Square via the use of E-views 10). Value Added tax (VAT) reform has positive relationship with economic growth; the effect is, however, instructive from the findings that while tax reforms in general have a significant effect on economic growth and stability. Besides, this study revealed that Capital Gain Reform has no significant effect on the Nigerian economic growth. The burning issues in the Nigerian tax system are surmountable through proper system of tax reforms. Based on the conclusion, the study recommends that although increasing the VAT rate may sound unpopular in a country ravaged by poverty and hardship, however, a moderate increase (to say, 7.5%), as has been canvassed by several commentators, would boost government’s revenue profile. Also, it is recommended that the administration of CGT should be improved upon with focus directed towards reducing evasion and avoidance.