AN EVALUATION OF THE EFFECT OF TAXATION POLICY ON INFLATION IN NIGERIA

Abstract

Taxation is one of the instruments of fiscal policy employed by developing countries to fight inflation. Taxation as a field of study has grown with many contributions from different fields. The gap within the literature regarding different contexts has inspired researchers to look for further explanations about taxation and its effects on inflation. Therefore, this paper aims to provide insight into the effects of taxation policy on inflation in Nigeria. To achieve this, a quantitative research is carried out. Empirical test indicates that taxation had negative significant effect on inflation both in the short run and in the long run. All the components of taxation did not Granger-cause inflation in Nigeria. Additionally, according to the results, taxation is an effective hedge against inflation in the country.

Keywords

• taxation
• inflation in nigeria
• petroleum profit tax (ppt)
• value added tax (vat)
• corporate income tax
• custom and excise duties
• co-integration