Petroleum profits tax, company income tax and economic growth in Nigeria 1980–2018

Abstract

Purpose: The purpose of the study was to investigate the long run relationship existing between petroleum profit and companies’ income taxes and economic growth in Nigeria in the period of 1980 to 2018. This is premised on realizing the role of taxation as a critical aspect of an economy’s fiscal policy framework. -- Design/Methodology/Approach: The secondary data for 39 years period. The analytical tools were Augmented DickeyFuller (ADF) unit root-test, Engle Granger Procedure Cointegration test, Parsimonious Error Correction Mechanism (ECM), Durbin-Watson statistic and over parameterized model. -- Findings: The results of the analysis reveal a positively significant association of studied variables with (0.9844) and (0.9471) co-efficients for petroleum profit tax and companies income tax respectively in relation independent variables integrate with the dependent variable at first order. This indicates long run relationship. Also, the parsimonious results shows a positive co-efficients of (3.6344) and (2.7644) and (2.7629) for t-values of CIT and PPT on economic growth. -- Originality/Value: In view of the results, government’s tactful handling of issues that are tax related was recommended so as to stimulate additional investments, entrepreneurial activities and innovations. The study contributes to the taxation and fiscal policy research by increasing our knowledge and understanding on the relationship subsisting between taxation revenue and economic growth.