Effect of tax system on the economic development of a nation: Nigeria experience

Authors

Keywords:

Economic development, Tax system, Human development index, Tax to gap ratio, Tax revenue.

Abstract

The economic development of Nigeria has been trembling over the years, even when the country has been acclaimed the biggest economy in Africa since 2014. This is in contrast to other developing countries and sub-Saharan countries that have up-scaled and accelerated their economic development in contemporary times. Such nations have utilised tax revenue to galvanise their economic development, but Nigeria does not have much to show for this. The country records one of the lowest percentage of tax revenue to GDP of about 6% compared to an average of 17% for sub-Saharan African countries and about 30% for OECD countries. This study examined the effect of the tax system on the economic development of the nation, using the human development index as the parameter for measuring economic development while assessing the tax system by the tax to GDP ratio. A qualitative research method was adopted by reviewing empirical studies and analysing secondary data gathered from relevant sources. From the reviews, discussions and analysis, there abounds compelling data to show that there is significant positive relationship between the tax system and the economic development of a nation. However, in the case of Nigeria, there appears to be uncoordinated and ineffective tax system that has inadequately impacted on her economic development. Taking a lead from other developing countries like Rwanda, recommendations were made for restructuring and synergising the tax system while utilizing information technology and ensuring accountability and transparency.

Key words: Economic development, Tax system, Human development index, Tax to gap ratio, Tax revenue.

Author Biography

Akinrinola, Olalekan Oladipo, Caleb University, Imota, Lagos

Dr. Akinrinola is a senior lecturer and coordinator of the postgraduate programmes in Accounting and Finance at the Caleb University, Lagos. He is an independent researcher with interest in Accounting, Taxation and Finance.

He holds two doctoral degrees in Accounting from Babcock University, Ilisha-Remo, Nigeria and in Banking & Finance from Charisma University, Turks & Caicos Island, British West Indies, UK.

References

Abata, M. A. (2017). The impact of tax revenue on Nigerian economy (Case of Federal Board of Inland

Revenue). Journal of Policy and Development Studies Vol. 9, No. 1 November 2014 ISSN: 157-

Website: www.arabianjbmr.com/JPDS_index.php

Adudu S. A & Ojonye M. S., (2015). The impact of tax policy on economic growth in Nigeria. Retrieved from:

https://www.iiste.org/Journals/index.php/JEDS/article/view/21913

Agarwal P. (2019). Economic Development. Intelligent Economist Journal. Retrieved from:

https://www.intelligenteconomist.com/economic-development/

Aghion P. & Howitt P. (1998). Endogenous economic growth theory. Retrieved from:

https://mitpress.mit.edu/books/endogenous-growth-theory

Brookings (2015). Are African countries rebasing GDP in 2014 finding evidence of-structural transformation?

Retrieved from: https://www.google.com/search?q=Brookings+(2015).+Are-African-CountriesRebasing-GDP-In-2014-Finding-Evidence-Of-Structural-Transformation

Corporate Finance Institute, (2019). Economic growth theory. Retrieved from:

https://corporatefinanceinstitute.com/resources/knowledge/economics/endogenous-growth-theory/

Denver-South, (2018). What is Economic Development? Retrieved from: https://denver-south.com/what-iseconomic-development?/

Ehigiamusoe U., (2014)The Nexus between tax structure and economic growth in Nigeria: A prognosis. Article

in Journal of Economic and Social Studies · January 2014 DOI: 10.14706/JECOSS11417

European Union, (2000). Economic growth in the European Union. Tourism and Management Studies

International Conference Algarne Vol.3

Ewa U., Adesola W, & Essien E (2020). Impact of tax revenue on economic development in Nigeria.

International Business Research; Vol. 13, No. 6; ISSN 1913-9004 E-ISSN 1913-9012

FIRS, (2019). Retrieved from: https://www.firs.gov.ng/TaxLaws)

FIRS, (2020). Tax/Statistics Report. Retrieved from: https://www.firs.gov.ng/TaxLaws)

Ibanichuka, E. L., Ikebujo, O.S. & Akani, F. N. (2016). A time series analysis of effect of tax revenue on

economic development of Nigeria. International Journal of Innovative Finance and Economics

Research, 4(3), 16-23.

ICAN, (2009). Retrieved From:

https://www.icanig.org/students/documents/PATHFINDER_MAY-2009-Professional.pdf.

Macek R. (2015). The impact of taxation on economic growth: Case study of OECD countries. Mayor Vihar

Phase 1, Delhi. Management. Vol 6 No 2. Pp 128 – 136.

Maiye O. & Isiadinso (2019) Nigeria’s unchanging tax to GDP ratio. Anderson. Retrieved from:

https://www.mondaq.com/nigeria/tax-authorities/760270/nigeria39s-unchanging-tax-to-GDP-ratio

Nzotta, S.M. (2007). Tax evasion problems in Nigeria: A critique, The Nigerian Accountant, 40(2): 40-43.

OECD, (2018). Report to G-20 Finance Ministers and Central Bank Governors, Tax policies for inclusive

growth in a changing world

https://www.google.com/search?q=Revenue+Statistics+in+Africa+2020+%E2%94%80+Nigeria

Ofoegbu, G. N., Akwu, D. O. & Oliver, O. (2016). Empirical analysis of effect of tax revenue on economic

development of Nigeria. International Journal of Asian Social Science, 6(10), 604-613.

Ogbonna G & Odoemelam N., (2015). Impact of Taxation on Economic Development of

Nigeria 2000-2013

Ogbonna, G.N. & Appah, E. (2016). Effect of Tax Administration and Revenue on Economic Growth in

Nigeria. Research Journal of Finance and Accounting.ISSN 2222-1697 (Paper) ISSN 2222-2847

(Online).Vol.7, No.13, 2016

Okwara, C. C. & Amori , O. M. (2014). Impact of tax revenue on economic growth in Nigeria. International

Journal of Scientific Research in Social Sciences & Management Studies | IJSRSSMS ISSN Print:

-101X | ISSN Online: 2579-1928 | Vol. 2, No. 2

Pantamee A.A. & Mansor M.B. (2016) A Modernize Tax Administration Model for Revenue Generation.

International Journal of Economics and Financial Issues, 2016,

Sharhoodi S.M.M. (2010). Investigation of the effective factors in the efficiency of tax system

Solow, R.M. Swan, T.W. (1956) Economic growth and capital accumulation. Economic Record, 32, 334-361.

Retrieve from:

https://doi.org/10.1111/j.1475-4932.1956.tb00434.x

Tosun, M.S. & Abizadeh S. (2005): Economic growth and tax components: an analysis of tax changes in

OECD. Journal of Applied Economics. Vol 37 pp 22251 - 2263.

World Bank (2019). Report on Nigeria. Retrieved from:

Https://Www.Worldbank.Org/En/Country/Nigeria/Overview

Yusuf, K. (2017). Africa turns to tax reform. Retrieved from:

https://www.accaglobal.com/my/en/member/member/accounting- business /2017/01/ insights/africatax.html

Downloads

Published

2021-11-13

How to Cite

Olalekan Oladipo, A., & Bamidele, O. . (2021). Effect of tax system on the economic development of a nation: Nigeria experience. Journal of Advance Research in Business Management and Accounting (ISSN: 2456-3544), 7(11), 24–34. Retrieved from https://nnpub.org/index.php/BMA/article/view/1068