TAX STRUCTURE AND INCLUSIVE GROWTH IN DEVELOPING COUNTRIES: A CASE OF NIGERIA
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ABSTRACT
The aim of the study is to examine the impact of tax policy on inclusive growth in Nigeria. The ex post facto analysis design was adopted in this study. The data is secondary source through the relevant agencies saddled with the responsibility of data collection such as Central Bank of Nigeria (CBN), International Monetary Fund (IMF), World Bank, National Bureau of Statistics and relevant on-line database sources. The data to be gathered from the CBN Statistical Bulletin would be from 1985 to 2020. The data analysis technique that is utilized in this study is the Autoregressive Distributed Lag (ARDL) model approach to cointegration. The long run ARDL results reveals the structural coefficients of the tax variables and their relationship with inclusive growth measured by HDI. The coefficient and p-values for Company income tax (CIT); 0.4725 {0.000}, reveals that CIT has a negative and statistically significant impact on HDI at 5% level. The result implies that an increase in CIT has a negative impact on inclusive growth and with a 1% rise in CIT resulting in a 4.7% decrease in HDI. The finding is in tandem with aprori and theoretical expectation and seems to support the argument raised in this stud that that policy appears not to have been beneficial in improving the quality of life of Nigerians as measured by the HDI. The coefficient and pvalues of value added tax (VAT); -0.15227{0.00}, reveals that VAT has a negative and statistically significant impact on inclusive growth at 1% level. Specifically, a 1% increase in VAT results in a decline in inclusive growth by 1.5%. The coefficient and p-values of personal income tax (PIT), -0.09582 {0.000} reveals that PIT has a negative and statistically significant impact on inclusive growth at 5% level. Specifically, the estimate suggests that a 1% increase in PIT will cause a decline in growth by about 0.9%. The coefficient and pvalues of petroleum profit ta (PPT), 0.0048 {0.9316} reveals that PPT has a positive and statistically significant impact on inclusive growth at 5% level. Specifically, a 1% increase in PPT results in an increase in inclusive growth by 9.3%. The results showed that unlike the other taxes, PPT tends to positively improve inclusive growth. The study recommends that tax policy must be reassessed with inclusive growth in mind.
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