Tax Compliance and Economic Growth in Nigeria: Evidence from Southwest Nigeria
Keywords:
Tax compliance, , Economic Growth, Tax Revenue, Gross Domestic Product, Inflation RateAbstract
Abstract
Taxation plays a vital role in driving economic growth and development in developing countries like Nigeria. Despite its importance, tax compliance remains a major challenge in Nigeria, with widespread tax evasion and avoidance compromising government revenue. This study examines the relationship between tax compliance and economic growth in Nigeria from 2010 to 2022. Using a quantitative research approach and secondary data from the Federal Inland Revenue Service, National Bureau of Statistics and Central Bank of Nigeria, the study finds a positive and significant relationship between tax compliance rates and tax revenue i.e 1% increase in tax compliance rate leads to a 0.45% increase in tax revenue as a percentage of GDP . The study also finds that gross domestic product and inflation rate have a significant impact on tax revenue. i.e1% increase in GDP leads to 0.278 increase in tax revenue as a percentage of GDP, while a 1% increase in inflation rate leads to a-0.189% decrease in tax revenue as a percentage of GDP. The results suggest that improving tax compliance rates can lead to increased tax revenue, which can be used to finance public goods and services. The study recommends that the government implement policies to improve tax compliance rates, enhance economic growth and control inflation. The study contributes to the existing literature on tax compliance and economic growth in Nigeria and provides valuable insights for policymakers and researchers.
Keywords: Tax compliance, Economic Growth, Nigeria, Tax Revenue, Gross Domestic Product, Inflation Rate.
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Copyright (c) 2025 Lawrence Tayo Omotoso, Olaiya Mercy Adenike, Olamigoke Babaloal (Author)
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