MJAMR

Effect of Direct and Indirect Taxes on Economic Growth in Nigeria

JOHN Stephen Alaba


Abstract

Globally, the potency of direct tax Andi indirect tax revenues in making funds available for government at all levels to fund public infrastructure projects, education, healthcare, and social services cannot be overemphasized. However, fiscal imbalances triggered by excessive government spending on unproductive consumption at the expense of productive investment in Nigeria has led to low quality of life and stunted growth of the economy. This study investigates theiieffect of direct andiiindirect tax revenue on economici growth iniiNigeria. The study used ex postiifacto researchiidesign. Secondary data were obtained from Federal Inland Revenue Statement, NationaliiBureau of Statistics, and CBN statistics bulletin. The data were subjected to Ordinary Least Square (OLS) model as the estimating techniques. iiThe result showediithat direct taxes (β = 0.2029, p-value = 0.0074) has a significantiipositive impact on economici growth; indirect taxes (β = 0.1229, p-value = 0.0086) has a significantiipositive impact on economici growth. Also, macroeconomic factors (β = 0.2002, p-value = 0.0428) hasiia significant positive impactiion economici growth. The study concluded that the direct and indirect taxes have significant positive impacts on economici growth iniiNigeria. Therefore, iithe study recommendediithat governments should carefully consider the overall burden of indirect taxes on consumers and businesses to mitigate its regressive effects by implementing targeted exemptions or reduced tax rates for essential goods and servicesiiconsumed predominantly by lower-income groups, while policymakers should conduct thorough assessments to determine the optimal tax rates that maximize revenue without hindering business operations.

Keywords

Direct Tax Indirect Tax Economic Growth
Metropolitan Journal of Academic Multidisciplinary Research

Cite This Article

JOHN Stephen Alaba (2023). Effect of Direct and Indirect Taxes on Economic Growth in Nigeria. Metropolitan Journal of Academic Multidisciplinary Research, 2(11). https://journals.miu.ac.ug/pages/article.php?article_id=1480

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