Comparative Analysis of the Effect of Direct and Indirect Taxation Revenue on Economic Growth of Nigeria

Abstract

The study was conducted to comparatively analyse the effects of direct and indirect taxation revenue on economic growth of Nigeria. This was necessitated by the revenue shortfall from Crude oil sales which has been the main revenue earner of the government and the latent potentials of taxation as the most reliable source of revenue. The study was designed to find out which of the tax category affect economic growth most in Nigeria. Ex post facto research design was the research design involving secondary data extracted from the Central Bank of Nigeria (CBN) and Federal Inland Revenue Service (FIRS) published reports. Data were analyzed using descriptive and inferential statically techniques using correlational and regressional statistics. Results reveal that direct taxation has more negative effect on the economy than indirect taxation as evidenced by the adjusted R2 (Direct taxes 80%; Indirect taxes 67%, case wise predictive residuals (maximum values: direct taxes 6.123, indirect taxes 5.893). It was therefore recommended that the government should review regulatory and operational guidelines at the oil and gas sector and tax reforms in the form of reliefs and other incentives to companies to encourage investors and boost productive activities to enhance economic growth of the country.