Effects of Taxation Policy on the Economic Growth in Nigeria

The study examined the effect of taxation policy on the economic growth in Nigeria. The specific objective was to examine the effect of petroleum profit tax, company income tax and personal income tax on gross domestic product. This study adopted an ex-post facto research design. The data for this study were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin, covering the period from 2014 to 2023. The data analysis for this study involved both descriptive statistics and inferential analysis. Descriptive analysis was employed to provide a summary of the data. To test the hypotheses, the study employs the Ordinary Least Squares (OLS) regression method. The findings showed that: Petroleum Profit Tax (PPT) has a positive but non-significant effect on the Gross Domestic Product (GDP) of Nigeria (coefficient = 0.095764, p-value = 0.9358); Corporate Income Tax (CIT) has a positive and significant effect on the Gross Domestic Product (GDP) of Nigeria (coefficient = 2.167462, p-value = 0.0161); Personal Income Tax (PIT) has a negative but non-significant effect on the Gross Domestic Product (GDP) of Nigeria (coefficient = -0.885245, p-value = 0.7442). In conclusion, while taxes on corporate profits and petroleum production appear to contribute positively to economic growth, personal income taxes have a constraining effect. The study recommends that the Nigerian Federal Inland Revenue Service (FIRS) should maintain the current structure of Corporate Income Tax and consider incentives for profitable companies to reinvest in local industries, thereby further boosting economic growth.