The Effect of Direct Tax Revenue on Economic Development in Nigeria

ABSTRACT The major objective of this study was to examine the effect of direct tax revenue on economic development in Nigeria. Specifically, this study set out to examine the effect of personal income tax, education tax and capital gains tax on economic development (using human development index as proxy). This study, theoretically anchored on endogenous growth theory, reviewed relevant literature bothering on the independent variables and dependent variables adopted in the study. From the empirical review of the study, it was discovered that although a good number of studies have been conducted on this discourse, there is little work done in relation to education tax and capital gains tax (in any extant study). Moreover, there is no extant study that covers a time period up to 2022, using the measures adopted in this study. It is on this premise that justification for this study is anchored. On this note, relevant data of these variables for a 20-year period from 2003 to 2022 were sourced from materials such as Federal Inland Revenue Service (FIRS) Bulletin and Central Bank of Nigeria (CBN) Statistical Bulletin. Since the study is on economic development, the population size of this study (in terms of number of years) is 24 years, while the sample size of the study is 20 years from 2003 to 2022. The research design adopted for this study is ex-post facto while the method of data analysis adopted was the multiple regression analysis, with the aid of SPSS version 25. From the findings of this study, it was discovered that on the overall, direct tax revenue (measured by personal income tax, capital gains tax and education tax) has significant effect on economic development (measured by human development index). Therefore, it was recommended that, among others, Government should ensure that a well-equipped database on personal income taxpayers should be established by the governments with the aim of identifying all possible sources of income of taxpayers. In other words, the wages and salaries of all persons in the employment of the government at all levels and in all strata, as well as other individual tax payers (such as self-employed persons and menial job workers) should be properly captured in the database so as to ensure that these persons pay their taxes as and when due.