IMPACT OF TAX REVENUE (COMPANY INCOME TAX)

ON

THE NIGERIA ECONOMY

BY

MOSHOOD AMINAT MOLADE

MATRICULATION NUMBER: 2111310002

BEING A PROJECT PRESENTED

TO THE

DEPARTMENT OF MATHEMATICS AND STATISTICS

FACULTY OF PURE AND APPLIED SCIENCES

OSUN STATE COLLEGE OF TECHNOLOGY, ESA-OKE

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD

OFNATIONAL DIPLOMA (ND) IN STATISTICS

OCTOBER, 2023

i
 CERTIFICATION

This is to certify that this project work is prepared by Moshood, Aminat Molade to the

Department of Mathematics and Statistics with matriculation number 2111310002 in partial

fulfillment for the award of National Diploma (ND) in Statistics, Osun State College of

Technology, Esa-Oke.

________________________ ____________________

Moshood, Aminat Molade Date

Student

________________________ ____________________

Mr. Adebayo I. K Date

Supervisor

________________________ ____________________

Mrs. Akin-Awoniran, B.O Date

Head of Department

ii
 DEDICATION

This project work is dedicated to Almighty God, for his grace to start and complete this National

Diploma Programme successfully. May His name be praised forever.

iii
 ACKNOWLEDGEMENT

The success of this work would be incomplete without mentioning the names of those who gave

their support, guidance and encouragement throughout this National Diploma Programme in

Osun State College of Technology, Esa-Oke, Osun State.

My sincere appreciation goes to Almighty God who made this National Diploma Programme an

easy one. My unreserved appreciation goes to my loving and caring parents.

My appreciation goes to my supervisor Mr. I.K ADEBAYO for his devotion, attention and

useful assistance to me throughout the period of consultation before final approval, you are

indeed a wonderful man, thank you so much sir. I also appreciate all my lecturers in the

department of Statistics for their effort in impacting knowledge into me, may God bless you all.

iv
 ABSTRACT

This research work focused on investigating the impact of tax revenue (Company Income Tax)

and economic growth in Nigeria. Simple linear regression was used to conduct the data analysis

and from the findings of this research work, table 4.3.1, shows the linear regression equation

which is Economic Growth = 13241.411 + 96.238 Value Added Tax i.e. (y = 13241.411 +

96.238 x).

Also, table 4.3.3 shows a positive correlation between the independent variable (Company

Income tax) and the dependent variable (Economic Growth – GDP) as the table revealed that the

overall coefficient of correlation (R) is 0.844 which indicates a positive relationship between

Company Income Tax and Economic Growth. The coefficient of determination R2 is 0.712

which shows that the model is accurate and fit for prediction at only 71%. The Adj R2 is 0.692

which means that about 70% of the dependent variable is accounted for by Company Income

Tax and the remaining 30% is not accounted for due to some financial errors.

Table 4.3.3 which is the Coefficient table shows the level of significance for Company Income

Tax. The p-value of the statistics for CIT is 0.000 which is less than 5% level of significance.

The findings of the result of Company Income Tax revealed that the coefficient is significantly

related to the dependent variable (Economic Growth) because the p-value significant level

(0.000) is less than 0.05 significance level and greater than 95% confidence level therefore we

accept the alternate hypothesis (H1) that Company Income Tax have significant relationship on

Economic Growth in Nigeria and reject the null hypothesis H0.

v
 TABLE OF CONTENTS

Page

TITLE PAGE i

CERTIFICATION ii

DEDICATION iii

ACKNOWLEDGEMENT iv

ABSTRACT v

TABLE OF CONTENTS vi

LIST OF TABLES ix

LIST OF FIGURES ix

DEFINITION OF TERMS ix

CHAPTER ONE: INTRODUCTION

1.1 BACKGROUND TO THE STUDY 1

1.2 STATEMENT OF THE PROBLEM 2

1.3 AIM OF THE STUDY 3

1.4 OBJECTIVES OF THE STUDY 3

1.5 SIGNIFICANCE OF THE STUDY 3

vi
1.6 SCOPE OF THE STUDY 4

1.7 DEFINITION OF TERMS 4

CHAPTER TWO: LITERATURE REVIEW

2.1 CONCEPTUAL FRAMEWORK 6

2.2 THEORETICAL FRAMEWORK 6

2.3 TAX REVENUE AND GROSS DOMESTIC PRODUCT 6

2.4 EMPIRICAL REVIEW ON COMPANY INCOME TAX 8

AND ECONOMIC GROWTH IN NIGERIA

CHAPTER THREE

3.1 INTRODUCTION 12

3.2 RESEARCH DESIGN 12

3.3 STUDY POPULATION 12

3.4 SAMPLE FRAME AND SIZE 12

3.5 DATA COLLECTION INSTRUMENT AND PROCEDURE 13

3.6 DATA ANALYSIS METHOD 13

CHAPTER FOUR:

4.1 INTRODUCTION 15

vii
4.2 DATA PRESENTATION 15

4.3 DATA ANALYSIS AND DECISION OF RESULT 16

CHAPTER FIVE:

5.1 SUMMARY OF FINDINGS 21

5.2 CONCLUSSION 21

5.3 RECOMMENDATIONS 22

5.4 FUTURE STUDY 23

REFERENCES 24

APPENDIX 26

viii
LIST OF TABLES

Table 4.2.1: Data Presentation on the Impact of Government Revenue on the Economic
Growth

Table 4.3.1 Coefficientsa

Table 4.3.2 Descriptive Statistics

Table 4.3.3 Model Summaryb

Table 4.3.4 Correlations

LIST OF FIGURES

Figure 4.3.1 Histogram

Figure 4.3.2 Scatterplot

DEFINITION OF TERMS

 Dependent Variable - It is determined jointly by the factors within the model. In

the study economic growth was the dependent variable being represented as Y.

The study specifies the indicator of the economic growth as GDP per capita

income as the main indicator. GDP per capita is a measure of the total output of

a country which takes the gross domestic product over the number of people in

the same country in a specified period of time.

 Independent variables - Independent variables are those variables which are

determined outside the model or in other words they are predetermined. The

study takes governmentrevenue as the independent variable.

ix
 Statistical significance – is the likelihood that a relationship between two

or more variables is cause by something other than chance.

 Company Income tax - It is represented as X2. This is the tax imposed on

profits made by companies operating in Nigeria excluding companies

engaged in petroleum exploration activities.

 The economic growth is the dependent variable whereas government

revenue is the explanatory variable with the predictor as the Company

Income Tax (CIT).

x
 CHAPTER ONE

1.1 BACKGROUND TO THE STUDY

A tax is a mandatory contribution that the government imposes on people and corporate entities

under its jurisdiction in order to cover its expenses. These taxes are assessed differently by each

government. In Nigeria, there are many laws enacted for the purpose of generating tax revenue in

Nigeria and they include: Personal Income Tax, Companies Income Tax Act, Capital Gains Tax

Act, Petroleum Profit Tax Act, and Value Added Tax Act, through these various sources of

revenue, government exercises its power of sovereignty by charging those that fall into each

bracket, tax on income, gain, profit or purchases, as the case may be.

Although tax structures vary considerably across countries, the primary objective of any tax

structure is to attain maximum revenue and economic growth with minimum distortions.

Different countries have different philosophies about taxation and different methods of tax

collection. In the same manner, countries have different uses for their revenue which affect

growth differentlyAgell,Lindh, and Ohlsson, (1997) have argued that the different uses of total

government expenditure affect growth differently and a similar applies to way tax revenue is

raised.

According to Ahmed (2010), "revenue" is defined as all monetary sums received by a

government from outside sources, such as those coming from "outside the government"

after deducting refunds and other corrective transactions, proceeds from the issuance of

debt, the sale of investments, agency or private trust transactions, and intra-governmental

transfers. All funds received by organizations that are characterized as being dependent on

the government in question are included in government revenue. Revenue is defined as the

revenues from all accounting funds of a government, excluding intra-governmental service

1
(revolving), agency, and private trust funds, according to the accounting standards from

which these data are derived (Chaudhry & Munir, 2010).

When contrasted from one time period to another, economic growth shows a rise in an

economy's ability to generate products and services. Only the number of products and

services produced is considered economic growth. Real terms, which are adjusted for

inflation like the percent rate of rise in the gross domestic product (GDP), or nominal terms,

which do not include inflation, can both be used to quantify economic growth. Economic

growth is a monetary-based measure of growth that ignores all other facets of development

(Illyas & Siddiqi, 2010). Growth in the economy can be beneficial or bad. The phrase

"negative growth" or "recession" can be used to describe negative growth. Economic crisis

and depression are linked to negative growth (King & Levine, 1993). An alternative

measurement to gross domestic product is the gross national product (GNP).

Meeting various governmental needs has an impact on economic growth (Illyas & Siddiqi,

2010). The costs of raising taxes to finance those expenditures may be the most significant

factor affecting how well the economy performs because taxes have an impact on how much

money households save, provide in the form of labor, and invest in human capital as well as

how much money businesses produce, invest in, and innovate (Johansson, 2008)

1.2 STATEMENT OF THE PROBLEM

There is a general lack of agreement among academics regarding the contribution that tax

income (Company Income Tax) makes to the economic development of countries,

demonstrating a knowledge gap. For instance, Festus and Samuel (2007) established that the

role of tax revenue in promoting economic activities and growth has not been felt in Nigeria.

This study is to examine the relationship between Government revenue (Company Income

2
Tax) and the economic growth and is an attempt to close the research gap. Ariyo (1998) in

his study on the effectiveness of the Nigerian tax system documented a satisfactory level of

productivity of the tax system prior to the oil boom.

1.3 AIM OF THE STUDY

The principal aim of this seminar is to investigate the relationship between tax revenue

(company income tax) and Nigeria economic growth

1.4 OBJECTIVES OF THE STUDY

Specific Objectives of the study are:

i. investigate the impact of company income tax on Nigeria economic growth (GDP).

ii. to determine the estimated linear regression equation that can best depict the

economic growth in Nigeria

1.5 SIGNIFICANCE OF THE STUDY

Many stakeholders would find this study important: This study will add to the body of

knowledge among academics and scholars in the field of government funding and economic

growth. In order for future researchers to pick up these regions and continue their studies, it

would also offer areas for more investigation. The study will be crucial to the government,

particularly the Ministry of Finance, as it formulates policy choices with the overarching

goal of influencing the amount of economic activity and government revenue in order to

balance the growing government budget.

1.6 SCOPE OF THE STUDY

This research was limited to the study of the relationship between company income tax and

3
economic growth in Nigeria. The choice of the variables in measuring both independent and

dependent variables used was based on the availability of data and popularity of the

variables as a measure of economy. The variables used to measure Nigeria economic growth

(dependent variable) is gross domestic product and that of Government revenue

(independent variables) are company income tax (CIT), Company Income Tax (CIT) as

control variable for the model for the period of eleven years (2010 to 2020). The data were

sourced from the CBN Bulletin and both quarterly and annual reports from the Federal Inland

Revenue Serviceofficial website.

1.7 DEFINITION OF TERMS

 Dependent Variable - It is determined jointly by the factors within the model. In

the studyeconomic growth was the dependent variable being represented as Y. The

study specifies the indicator of the economic growth as GDP per capita income as

the main indicator. GDP per capita is a measure of the total output of a country

which takes the gross domestic product over the number of people in the same

country in a specified period of time.

 Independent variables - Independent variables are those variables which are

determined outside the model or in other words they are predetermined. The study

takes government revenue as the independent variable.

 Statistical significance – is the likelihood that a relationship between two

or more variables is cause by something other than chance.

 Company Income tax - It is represented as X2. This is the tax imposed on

profits made by companies operating in Nigeria excluding companies

4
 engaged in petroleum exploration activities.

 The economic growth is the dependent variable whereas government

revenue is the explanatory variable with the predictor as the Company

Income Tax (CIT).

5
 CHAPTER TWO

LITERATURE REVIEW

2.1 CONCEPTUAL FRAMEWORK

The conceptual framework below shows the diagrammatic relationship between the

government revenue and the economic growth in Nigeria.

DEPENDENT VARIABLE INDEPENDENT VARIABLE

ECONOMIC GROWTH GOVERNMENT REVENUE

GDP Company Income Tax

2.2 THEORETICAL FRAMEWORK

In order to pay for public sector expenditures at all levels, including national, regional, and

local, governments must obtain money from a variety of sources. Governments primarily

raise money from a variety of sources to pay for transfer payments or to deliver public

services. In mixed economies, including nations like Nigeria, taxation is the primary and

most prevalent source of income.

2.3 TAX REVENUE AND GROSS DOMESTIC PRODUCT

There are clear arguments both for and against a higher tax ratio leading to higher GDP growth.

On the one hand, higher taxes distort the incentives for individuals to supply more labour or for

firms to produce more. On the other, higher taxes provide governments with the potential to

invest in, for example, infrastructural improvements, education or R&D, all of which can

6
increase the economy’s productive capacity.

Many studies argue the relationship between tax policy and the economic growth and how it

could affect each one other. Chigbu, Akujuobi, and Appah (2012) examined the relationship

between tax revenue and economy in Nigeria. Muibi and Sinbo, (2013) analyzed the level of

economic growth that has impacted positively on tax revenue in Nigeria. The general conclusion

is that macroeconomic instability and degree of economic activities are the main drivers of tax

buoyancy and tax effort in Nigeria. The paper found that taxation is an important instrument to

improve economic growth. Canicio and Zachary (2014) showed that there is independence

between the economic growth and government tax revenues. The study finds that 30% speedier

relationship of adjustment in the short run towards equilibrium level in the long run.

Brender and Navon (2010) aimed to test the relation of the GDP with tax revenues. The paper

studies the uncertainty in predicting the tax revenue in Israel. The study showed that the long-run

tax-revenue and GDP are elastic. Also Hakim and Bujang (2012) stated that the statistical

evidence suggests that the total tax revenue to GDP ratio is higher in the high income countries

compared with the low and middle countries. Inaddition to that (Mashkoor, Yayha and Alli,

2010) show that saving causes the real GDP growth unidirectional and the direct tax to GDP

ratio granger causes the real GDP growth significantly.

Furthermore Government spending and tax revenues have been tested by several studies. Hafiz,

2006 points out those taxrevenues are very important to underpin the general budget to cover

public expenditures (Miswadeh&Al-Mofleh, 2015). In addition, taxes are considered the main

motive to control the economic activities.(Hussien, 2005; Nanthakumaret,Kogid, Sakami,

&Muhamad, 2011; Taha and Loganathan., 2008) found a causality between government

7
expenditure and tax revenues in there testing models. (Zortuk and Uzgoren, 2008) studied the

causality and long-run relationship between the government spending and tax revenues in oil

exporting countries during 2000-2009 period. The study finds that the short-run and long-run

government spending has a positive impact on taxation. Another study finds bidirectional

causality between taxes and expenditures in five of G7 countries (Owoye, 1994).

However, (Al-Khulaifi, 2012) and Mehrar and Rezaei,(2014)found unidirectional causality

running from government revenues to government expenditure.

2.4 EMPIRICAL REVIEW ON COMPANY INCOME TAX AND ECON OMIC

GROWTH IN NIGERIA.

Adegbie and Fakile (2011) worked on company income tax and Nigeria’s economic

development. They used the GDP to capture the Nigerian economy and Petroleum Profit

Tax (PPT), Company Income Tax (CIT), Customs and Excise Duties and VAT to measure

Company Income Tax. Findings revealed that there is a significant relationship between

company income tax and Nigerian economic development and that tax evasion and avoidance

are the major hindrances to revenue generation.

Chigbu, Akujuobi, and Appah, (2012) examined the causality between economic growth and

Company Income tax in Nigeria for the period 1970-2009. To achieve the objective of the study,

data was collected from the Central Bank of Nigeria (CBN) Statistical Bulletin and Federal

Inland Revenue Service (FIRS). The data collected from the secondary sources were analysed

using relevant econometric models such as Augmented Dickey-Fuller, Diagnostic Tests, Granger

Causality and Johansen Co-integration. The results from the econometric analysis reveals that

taxation as an instrument of fiscal policy affects the economic growth and taxation granger cause

8
economic growth of Nigeria. On the basis of the econometric result, the study concluded that

taxation is a very important instrument of fiscal policy that contributes to economic growth of

any country. On the basis of the conclusion useful recommendations were provided that will

improve the generation of revenue from taxation that would stimulate the economy of Nigeria

positively.

Worlu and Nkoro (2012) studied the impact of revenue from Companies Income tax on the

economic growth of Nigeria, judging from its impact on infrastructural development from

1980 to 2007. To achieve this objective, relevant secondary data were collected from the Central

Bank of Nigeria (CBN) Statistical Bulletin, Federal Inland Revenue Service (FIRS) and

previous works done by scholars. The data include; gross domestic product(GDP), infrastructure,

petroleum profit tax(PPT), company income tax(CIT), custom and excise duties, foreign direct

investment(FDI), domestic investment(DI), interest rate(INT) and consumer price index(CPI) are

collected for the period of 1980 to 2007. The data collected were analyzed using the three stage

least square estimation technique. The results show that tax revenue stimulates economic growth

through infrastructural development.

(Ahmed, 2010) examined the determinants of tax buoyancy of 25 developing countries by

using the cross-section data for the year 1998 to 2008 and pooled least square method for

result analysis. For agriculture sector it showed insignificant effect and for services sector it

showed positive and significant effect instead of past insignificant result of many

researchers.

(Mwakalobo, 2009) established that inadequate and erratic revenue generation had adversely

affected public investment spending in the three East African countries particularly

9
Tanzania, where the declining trends in government and tax revenue had been accompanied

with the declining public investment in almost all spending categories. In the case where the

government revenue is reduced and revenue generation was inadequate, public investment

spending in physical infrastructure also decreases. For example, in countries like Tanzania

where government revenue increased and tax revenue performance had been more

impressive, public investment spending rose, as evident in Uganda. The priority sectors that

have been receiving higher shares of government expenditures are general public services,

human capital development, and physical infrastructure in Tanzania, Kenya and Uganda,

respectively. Spending in human capital development has been relatively low in Tanzania

than in Kenya and Uganda. This creates some concerns on commitments of the Tanzanian

government to achieving the MDG objectives, reducing poverty and overall economic

development.

Owolabi, 2011) did a study on revenue allocation formula and its impact on economic

growth process in Nigeria. The analysis revealed the extent to which revenue allocation

formula adopted in the past had affected the path of economic growth and development in

Nigeria. The data was purely secondary data and was sourced from the World Bank

publication, CBN, Journal and other published and unpublished materials. There was need,

therefore to address the problem by formulating a more efficient revenue allocation wastage

and mismanagement of funds. Also effort should be geared towards articulation of policies

that will enhance capital formulation, employment of the abundant and measures may

include attachment of more weight to the share of local government from the federal

collected revenue, placing more emphasis on the internal revenue generation, redefinition of

10
the concept of definition and sustaining the present effort of government as regards budget

monitoring and implementation.

According to (Worlu & Nkoro, 2012), who studied tax revenue and economic development

in Nigeria using a macro econometric approach. They examined the impact of tax revenue

on the economic growth of Nigeria, judging from its impact on infrastructural development

from 1980 to 2007. To achieve this objective, relevant secondary data were collected from

the Central Bankof Nigeria (CBN) Statistical Bulletin, Federal Inland Revenue Service.

11
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 INTRODUCTION

The approach the researcher used to accomplish the goals of the study is known as the

research methodology. It provides a thorough breakdown of the methods and processes used

for data collection, processing, and analysis. This chapter has the following subtitles:

research design, study population, sample size and frame, data collection tools and methods.

3.2 RESEARCH DESIGN

The study used a descriptive research approach since it allowed the researcher to extrapolate

the results to a larger population. Additionally, it enables the collection of quantitative data

that can then be quantitatively examined using inferential and descriptive statistics.

3.3 STUDY POPULATION

The population of interest in which the researcher intends to conduct the study is referred to

as the study population. The researcher is particularly interested in the data gathered from

the websites of the Federal Inland Revenue Services, the CBN annual report, and statistics

bulletins (2021). In this instance, the population of interest was the state's allocation of

corporation income tax revenues and economic expansion.

3.4 SAMPLE FRAME AND SIZE

An element or unit of the population is a sample. It is a subset of the population that is of

interest. Since it is typically challenging to examine every object or component of the study

12
population, just a small portion is chosen, studied, and the results are extrapolated to the full

population (Olannye, 2006). The effect of government revenue on the expansion of the

economy (GDP) was examined using just one economic metric. In essence, these indices

reflect the Company Income Tax (CIT).

3.5 DATA COLLECTION INSTRUMENT AND PROCEDURE

The study used secondary data that were collected from the CBN annual report, statistical

bulletin and the Federal Inland Revenue Services websites and the data covered period of 11

years from 2010 to 2020. The use of secondary data is justified on the basis that some of

these sources had information that was very pivotal to this study and has been vetted and

accepted.

3.6 DATA ANALYSIS METHOD

The researcher collected data on the sources of government revenue (explanatory variables)

which is the Company Income Tax (CIT) which is the tax revenue. Information on the

dependent variable (which is Economic growth) was obtained from CBN annual report. The

study then used annual data starting from 2010 to 2020. Values in the dataset are trillions

and millions of Nigeria Naira respectively.

Data analysis will be done using the SPSS software. To develop the regression model, we

regressed economic growth on the government revenue. At first, the data was saved in Excel

as Comma delimited file format that was import into SPSS by the read.csv function.

In order to determine the relationship between Government revenue and economic growth,

the researcher will conduct a regression analysis using the following regression model.

13
Y = β0 + β1X1+ Ԑ

Where Y = Economic Growth (Trillion Nigeria Naira)

X1 = Company Income tax (Million Nigeria)

β0 = Constant/intercept of the GDP

β1 = Coefficient of the Company Income tax

ε = Error term

To test for the correlation between variables, we used the correlation analysis to test how

economic growth is correlated with the dependent variable.

14
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 INTRODUCTION

This chapter focused on data presentation, Analysis, and Interpretation of data collected

to explain the impact ofGovernment Revenue on Economic Growth

4.2 DATA PRESENTATION

The following data presented below were sourced from Federal Inland Revenue Services

websites for the period of Seventeen years (2004 to 2020).

Table 4.2.1: Data Presentation on the Impact of Government Revenue on the Economic
Growth

Financial Company Income

GDP (Trillion Naira)
Year Tax (Million Naira)
2020 337,332,100,000,000.00 1,275,369.80
2019 370,362,860,000,000.00 1,604,698.50
2018 329,168,070,000,000.00 1,340,329.40
2017 293,272,875,000,000.00 1,215,056.80
2016 315,829,325,000,000.00 933,537.30
2015 384,809,915,000,000.00 1,268,977.20
2014 448,147,490,000,000.00 1,173,490.70
2013 405,953,660,000,000.00 963,450.80
2012 362,128,585,000,000.00 820,650.50
2011 323,493,835,000,000.00 654,448.15
2010 286,435,695,000,000.00 658,502.60
Source: CBN Statistical Bulletin, 2020 and Federal Inland Revenue Services websites

15
4.3 DATA ANALYSIS

The first objective is to determine the linear regression equation that can best depict the

economic growth in Nigeria

Table 4.3.1 Coefficientsa

Unstandardize Standardized
d Coefficients Coefficients

Model B Std. Error Beta T Sig

1 (Constant) 13241.411 5172.680 2.141 .013

VALUE 95.348 15.781 733 5.067 .000

ADDED TAX

a. Dependent Variable: GDP N’ Billion

Source: SPSS Output 23.0

According to the result of the analyses in table 4.3.1, the linear regression equation Is:

Economic Growth = 13241.411 + 96.238Value Added Tax i.e. (y = 13241.411 + 96.238 x)

Table 4.3.2 Descriptive Statistics

Mean Std. Deviation N

GDP N’ Billion 31861.9694 20178.31110 11

VALUE ADDED
191.2854 251.98829 11
TAX

Source:SPSSOutput23.0

Table 4.2.3 shows the descriptive statistics of the output which gives the mean standard deviation

and observation count of the dependent and independent variables

Hypothesis

16
There is no significant relationship between Value Company Income Tax and Economic Growth

in Nigeria.

Decision Rule: Accept the Null hypothesis (H0) if the P-value of the t-statistics is greater than P-

value tabulated at 0.05 level of significant which is less than 95% degree of confidence,

otherwise Reject H0 and accept H1.

Test of Hypothesis (Company Income Tax)Table 4.4.3

Table 4.3.3 Model Summaryb

Adjusted R Std. Error of Durbin-

Model R R Square Square the Estimate Watson

1 .844a .712 .692 16796.67253 .291

a. Predictors: (Constant), COMPANY INCOME TAX

b. Dependent Variable: GDP N’ Billion
Source: SPSS Output 23.0

Table 4.3.3 shows a positive correlation between the independent variable (Company

Income tax) and the dependent variable (Economic Growth – GDP) as the table revealed

that the overall coefficient of correlation (R) is 0.844 which indicates a positive

relationship between Company Income and Economic Growth. The coefficient of

determination R2 is 0.712 which shows that the model is accurate and fit for prediction

at only 71%.The AdjR2is0.692 which means that about 70% of the dependent variable is

accounted for by Company Income Tax and the remaining 30% is not accounted for due

to some financial errors.

Table 4.3.3 which is the Coefficient table shows the level of significance for Company

Income Tax. The p-value of the statistics for CIT is 0.000 which is less than 5% level of

17
significance.

The findings of the result of Company Income Tax revealed that the coefficient is

significantly related to the dependent variable (Economic Growth) because the p-value

significant level (0.000) is less than 0.05 significance level and greater than 95%

confidence level therefore we accept the alternate hypothesis (H1) that Company

Income Tax have significant relationship on Economic Growth in Nigeria and reject the

null hypothesis H0..

Table 4.3.4 Correlations

GDP N’ VALUE
Billion ADDED TAX
Pearson Correlation GDP N’ Billion 1.000 .844
VALUE ADDED
.844 1.000
TAX
Sig. (1-tailed) GDP N’ Billion . .000
VALUE ADDED
.000 .
TAX
N GDP N’ Billion 17 17
VALUE ADDED
17 17
TAX
Source:SPSSOutput23.0

Table 4.3.4 shows the Correlations part of the output which is the correlation coefficients. This

output is organized differently than the output from the correlation procedure. The first row gives

the correlations between the independent and dependent variables. As before, the correlation

between "GDP" and COMPANY INCOME TAX is 1, as it must be. The correlation between

""GDP" and COMPANY INCOME TAX 0.844, which is the same value as we found from the

correlation procedure.

The next row gives the significance of the correlation coefficients.

18
Assumptions

(1) Assumptions of independence:

Whether the residuals are correlated or uncorrelated: Durbin Watsin test. The values can range

from 0 to 4. The Durbin Watsin value from the analysis (Model Summary) is 0.291. Therefore, a

value near 3 indicates that the assumption is met and that the residuals are uncorrelated.

(2) Normality assumption

Figure 4.3.1 Histogram

:
Source: SPSS Output 23.0

The Histogram has a bell shaped curve which means that the data is normally

distributed and follows the normality assumption

19
Figure 4.3.2 Scatterplot

Source: SPSS Output 23.0

20
 CHAPTER FIVE

SUMMARY,CONCLUSIONSANDRECOMMENDATIONS

5.1 SUMMARY OF FINDINGS

The research work focused on the examination of tax revenue (Company Income Tax)

and economic growth in Nigeria. The researcher began with providing a background on

the Nigerian tax system and the changes that it has gone through as well as providing

details of tax revenue in an economy. It was stated that tax revenue plays a key role in

the economy by promoting economic activity and making funds available in the

government accounts that can be used to adequately execute massive and essential

projects to the benefit of the society.

Efforts were made to describe different tools or techniques that were employed in

analyzing the result of the functional test carried out on the hypotheses. The study

adopted an econometric method of analysis and data were sourced largely from

secondary means comprising of mainly the CBN annual statistical bulletin and Federal

Inland Revenue Services Gazette, details of the sources of data, data estimation criteria,

method of data analysis were discussed, data used to empirically investigate the impact

of Company Income Tax on the Nigerian economic growth were presented.

5.2 CONCLUSION

The study analyzed the relationship between Company Income Tax on the Nigerian economic

growth over the period of 2010 to 2020. Based on the discussion of findings, which showed that

Company Income Tax have positive and noteworthy impact on the economic growth in Nigeria,

we concluded that Government should have a paradigm shift to tax revenue as an alternative

21
source of revenue in Nigeria, the need for government to raise adequate revenue from internal

sources has therefore become a matter of extreme urgency. The study therefore encouraged

Government to drive aggressive tax collections and administrations and urgently review and

implement its new tax policies.

As a result of the impact of technology around us, tax authorities need to fully

implement electronic tax system. An electronic system for filing and paying taxes, if

implemented well, it benefits both tax authorities and taxpayers.The system once

implemented should be constantly reviewed to address teething problems and to evolve

with the changing economic landscape and increased complexity of today’s business

environment.

5.3 RECOMMENDATIONS

Base on the above conclusion, we therefore recommend as follows:

(1) CIT has a high adjusted R-Square, this shows that there is a positive and

significant relationship between CIT and Economic Growth, and a percentage

increase in CIT will have significant growth on GDP and economy at large,

therefore Government is hereby advised to increase CIT rate to boost the revenue

generation of the Government and thereby impact positively on the economy. (2)

The positive relationship between tax revenue and economic growth calls for

efficient tax policy to be formulated and implemented so as to continue

togeneratetheneededrevenueforthegovernment.Alsorevenuecollectingauthorities

of thegovernment should be made more effective in their operationsof collecting

revenue forthe government.

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 (2) Tax net and Tax base should be expanded to include area such as

Religion Organization, Nollywood etc.

5.4 FUTURE STUDY

This study focused on the impact of tax revenue (Company Income Tax) on economic growth of
Nigeria. It specifically dealt with the Company Income Tax, It is suggested that future studies
should extend the research to other categories of taxes and measure their effect on both the
government revenue and on household. This would also necessitate the use of additional data
gathering techniques like the questionnaire.

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APPENDIX: PRESENTATION OF DATA/

Table 1.0: Shows data collected from Federal Inland Revenue Services websites for

eleven years (2010 to 2020). Values are in trillions and millions of Nigeria Naira

Financial Company Income

GDP (Trillion Naira)
Year Tax (Million Naira)

2020 337,332,100,000,000.00 1,275,369.80

2019 370,362,860,000,000.00 1,604,698.50

2018 329,168,070,000,000.00 1,340,329.40

2017 293,272,875,000,000.00 1,215,056.80

2016 315,829,325,000,000.00 933,537.30

2015 384,809,915,000,000.00 1,268,977.20

2014 448,147,490,000,000.00 1,173,490.70

2013 405,953,660,000,000.00 963,450.80

2012 362,128,585,000,000.00 820,650.50

2011 323,493,835,000,000.00 654,448.15

2010 286,435,695,000,000.00 658,502.60

Source: CBN Statistical Bulletin, 2020 and Federal Inland Revenue Services websites

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