EFFECT OF PETROLEUM PROFIT TAX AND COMPANIES INCOME TAX ON ECONOMIC GROWTH IN NIGERIA

Abstract

Sustainability of economic growth and development which remains the true essence of governance is threatened in Nigeria due to insufficient fund caused by declining petroleum revenue upon which the country relies for development. This over reliance had placed the country in a position as at now in which the entire petroleum revenue is used for recurrent items by the government. It is against these setbacks that this study is design to evaluate the effect of petroleum profit tax and company income tax on Nigerian economy growth. Fully Modified Least Square (FMOLS) Regression Technique was used to estimate the model over a 34 years period (1981-2014) while Augmented Dickey Fuller Unit Root Test and Single Equation Co-integration Test were carried out. It was found that petroleum profit tax (PPT) and company income tax (CIT) have positive significant impact on gross domestic product (GDP) in Nigeria with the Adjusted R² of 87.6% which directly enhanced growth in Nigeria. The study then concluded that PPT and CIT serves as the major source of revenue to the Nigeria economy, and contribute to the growth of Nigeria economy. Based on these findings, the Study recommends that government should transparently and judiciously account for the revenue it generates through petroleum profit tax by investing in the provision of infrastructural facilities, FIRS should properly monitor the activities of companies to achieve optimum collection of taxes payable to the government as CIT. Revenue accrue to government through PPT and CIT should be judiciously used to develop the economy.

Keywords

• company income tax
• petroleum profit tax
• taxation