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The contribution of taxation to any economy globally cannot be overemphasized. Apart from the revenue function it performs for the government, it is also used to assist the national government to achieve the country’s macroeconomic objectives in areas of fiscal and monetary policies. Past documentations have revealed that revenue from taxes in developed nations have high impact on its economic growth and development which is clearly seen by the amenities provided and improvements in living standards by such nations. Thus, the main objective of this study is to evaluate the relationship between taxation in Nigeria her economic growth and development. Time series data were applied in carrying out this research work. The research design adopted in the study is the Ex-post facto method of research. Hence, Simple linear regression analysis was used to analyse the data by the use of Pearson Product Moment Model, while T-test was used to test validity and reliability of instrument. The study tried to treat two hypotheses, one of which states that Taxation has no positive, significant relationship with employment in Nigeria. Findings revealed that company income tax, value added tax and custom & excise duties and petroleum profit & royalties tax, have no positive significant relationship with employment in Nigeria. Therefore, a conclusion was drawn highlighting there is no significant relationship between tax revenue and Total employment in Nigeria with a view to selected taxes used. It is however, recommended that tax revenue be used effectively to pursue economic development in terms of employment by investing in key sectors of the Nigerian economy which will transform the economy positively.


























Title page

Declaration                                                                                                                  i

Certification                                                                                                                ii

Dedication                                                                                                                  iii

Acknowledgements                                                                                                    iv

Abstract                                                                                                                      v

List of tables                                                                                                               vii



1.1 Background to the Study                                                                                     1

1.2 Statement of problem                                                                                           3

1.3 Objectives of the study                                                                                         4

1.4 Research Questions                                                                                               4

1.5 Research Hypotheses                                                                                            4

1.6 Significance of the study                                                                                                  5

1.7 Scope of the study                                                                                                5

1.8 Limitations of the study                                                                                       6

1.9 Definition of terms                                                                                               7



2.1 Conceptual framework                                                                                         8

2.1.1 A brief history of taxation                                                                                 9

2.1.2 Nigerian tax administration                                                                               11

2.1.3 A brief summary of the Nigerian tax system                                                     15

2.1.4 Principles of taxation                                                                                         16

2.1.5 Objectives of taxation                                                                                        17

2.1.6 Classification of taxation                                                                                   18

2.1.7 Taxation and macroeconomic factors                                                                19

2.1.8 Concepts of economic growth and development                                              20

2.1.9 Taxation as an instrument for the maintenance of economic development       20

2.2 Theoretical framework                                                                                          22

2.3 Empirical review                                                                                                   22

2.4 Gap in literature                                                                                                    25


3.1 Research design                                                                                                    26

3.2 Sources of data collection                                                                                     26

3.3 Population of the study                                                                                        26

3.4 Sampling method                                                                                                  26

3.5 Model of specification                                                                                          27

3.3.1 Description of research variables                                                                       27

3.4 Reliability and validity of data and test instruments                                            27

3.4.1 Hypotheses test statistic                                                                                    28

3.5 Data analysis techniques                                                                                       28


4.1 Presentation and analysis of data                                                                         29

4.2 Testing the research hypotheses                                                                            45

4.3 Discussion of findings                                                                                          46


5.1 Summary of research findings                                                                              48

5.2 Conclusion                                                                                                            49

5.3 Recommendations                                                                                                50

5.4 Contributions to knowledge                                                                                 50

5.5 Recommended areas for further studies                                                               50







Table                                                                        Title                                                          Page

4.1   Gross Domestic Product, Company Income Tax, Value Added Tax, Custom & Excise Duties, Petroleum Profit Tax & Royalties and Total employment from 2006-2015                29

4.2  Analysis on GDP and Company Income Tax                                                                       30

4.3  Analysis on GDP and Value Added tax                                                                              32

4.4  Analysis on GDP and Customs & Excise Duties                                                                 34

4.5  Analysis on GDP and Petroleum Profit Tax & Royalties                                                     36

4.6  Analysis on Employment and Company Income Tax                                                           38

4.7  Analysis on Employment and Value Added Tax                                                                 40

4.8  Analysis on Employment and Customs & Excise Duties                                                     42

4.9  Analysis on Employment and Petroleum Profit Tax & Royalties                                         44


























Nigeria as a nation has the vision of becoming one among the world’s twenty biggest economies in the year 2020; this obviously, is the brain behind the priority attention the present administration is directing at infrastructural development which is essential for economic growth and development. A developed economy is one with the ingredient to stimulate investment and create wealth, this by implication offers an atmosphere that is favorable for business and has the potentials to realize its vision for 2020. The desired outcome requires a lot of money and resources to put the economy in a position that stimulates investment, therefore, tax policies need to attract potential investors, and the revenue from tax should be sufficient enough to meet the infrastructural expenditures of the government.

Tosun and Abizadeh (2005) acknowledged that taxes are used as proxy for fiscal policy. They outlined five possible mechanisms by which taxes can affect economic growth, first, taxes can inhibit investment rate through such taxes as corporate and personal income, capital gains tax, second, taxes can slow down growth in labour supply by disposing labour leisure choice in favor of leisure. Third, tax policy can have effect on research and development expenditure; fourth, taxes can lead to a flow of resources to other sectors that may have lower productivity. Finally, high taxes on labour supply can distort the efficient use of human capital high tax burdens even though they have high social productivity.

Governments in all parts of the world and at all points in history have faced similar challenges when it comes to finding their ambitions. We do not believe that government in the past nor in today’s developing world are any less rational compared to those in today’s developed world.

But important as it is, economic development does not mechanically translate into more uses in the tax take. Even in fast growing economies, such as India and China, decisions by the state are needed to yield a dividend in the form of a higher tax share in GDP.

Sustainable economic development is one of the fundamental objectives which every government mostly in developing economy seeks to achieve. The pursuit of this goal underlines the rationale behind the identification of ways of raising revenue. Nigeria just like every numerous countries through which revenue is sourced in order to finance developmental projects in the economy.

As the Nigerian economy is in recession period, there are inconsistencies in our tax laws which had made it difficult for the tax body to administer and even for the tax payer to follow. The federal government had the intension to maintain a uniform tax system but the economic condition of each state has given room for divergence system. The most important thing one should have in mind is that taxation is supposed to be an instrument of social change which is not answering as much as it should be doing presently in Nigeria. The purpose of this study is to evaluate taxation as a tool for economic growth and development in Nigeria.





In developing countries, the government has to play an active role in promoting economic growth and development because private initiative and capital are limited. Fiscal policy or budget has become an important instrument in promoting growth and development in such economies.

Taxation is an important part of fiscal policy which can be used effectively by government and developing economies. Taxation play a vital role in the economic development and growth of a country which include: resources mobilization, reduction in inequalities of income, improvement in social welfare, foreign exchange, regional development, control inflation.

According to the classical economist, the only objective of taxation was to raise government revenue. But with the change in circumstances and ideologies, the aim of taxes has also been changed. These days apart from the objectives of raising the public revenue, taxes level affect consumption, production and distribution with a view to ensuring the social welfare through the economic development of a country, tax can be used as an important tool in the following manner: optimum allocation of available resources, raising government revenue, encouraging savings and investment, acceleration of economic growth, price stability, control mechanism and others. One of the major problems to be addressed is “the poor fiscal discipline in the allocation of resources and the operations of an ineffective tax regime in Nigeria”. Therefore, this study examines whether taxation can serve as a tool for economic growth and development in Nigeria.





This study generally seeks to identify the extent to which taxation can be used as an instrument for economic growth and development in Nigeria. While the specific objectives are as follows:

  1. To investigate, the extent to which taxation has relationship with the Gross domestic product in Nigeria.
  2. To examine, the role of taxation on employment in Nigeria.


  1. Has taxation related with the Gross domestic product in Nigeria.
  2. Does taxation play any role on employment in Nigeria.


Hypothesis 1:

H0; Taxation has no significant relationship with the Gross Domestic Product (GDP) in Nigeria.

H1; Taxation has significant relationship with the Gross Domestic Product (GDP) in Nigeria.

Hypothesis II:

H0; Taxation does not have positive significant relationship with employment in Nigeria.

H1; Taxation has a positive significant relationship with employment in Nigeria.


1.6. SIGNIFICANCE OF THE STUDY                                                                   Government: This study is of immense significance at all levels of government including both the federal, state and local governments, as it depicts the relationships and impacts of taxation on economic growth and development of Nigeria.

Relevance of Tax Collection: The essence of this research work is to evaluate taxation as a tool for economic growth and development in Nigeria. Thus, this study will at a wide range be beneficial to the federal, state and local governments as well as international communities, as it will highlight the relevance of taxation in the society.

Granting more experience on Tax Payments: This study would also be of immense benefit to employees of Federal Inland Revenue Service (FIRS), who has been at the fore front of experiencing incorporation of tax payers by paying their taxes promptly.

Encouraging Tax Remittance: This study would be beneficial to the public, private sectors, individuals, business owners will find it necessary by encouraging them to comply by remitting their taxes.

Further Studies: It would also be of huge benefits to students of higher institutions who may wish to carry out further research on similar topics.


The study is concerned with the evaluation of taxation as a tool for economic growth and development in Nigeria. The study will also consider, how taxation has affected the Gross Domestic Product of Nigeria and also the effect of taxation on employment in Nigeria from 2006-2015



The limitation encountered in this study includes the following;

Hoarding of Data: The inability of the researcher to collect adequate data in Enugu, which brought about the need to travel down to Abuja, so as to gather data’s needed for the study in National Bureau of Statistics.

Existing Data’s: The gathered materials and data’s are not essentially, the one formulated personally by researcher; they are already formulated information’s and data’s that were used for this study.

Country Barrier: The results of this study can only be restricted to Nigerians and no other parts of the world as it only gives a general overview of Nigeria and no other countries.












Federal Inland Revenue Service (FIRS)

Gross Domestic Product (GDP): it is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. Though, GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well.

Taxation: it is a compulsory levy imposed on a subject or upon his property by the government to provide security, social amenities and other amenities for the well-being of the society.

Petroleum profit tax act (PPTA): it is an act that regulates the petroleum profit tax and also specifies how profit from petroleum will be taxed.

Economic Growth: Economic Growth is an increase in a country’s physical output over a long period of time

Economic Development: Economic Development is the elimination or reduction in poverty, inequality and unemployment within the context of a growing economy; there might be growth without economic development

Economy: Economy is the large set of interrelated production and consumption activities that aid in determining how scarce resources are allocated.

Development: development is the systematic use of scientific and technical knowledge to meet specific objectives or requirements.





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