Impact of Tax Structure on Economic Performance: Lessons from Nigeria and OECD Nations
Keywords:
Tax structure, Economic performance, Direct tax, Indirect tax, OECD, Tax policyAbstract
Abstract
This study examines the impact of tax structure on economic performance with lessons drawn from Nigeria and selected OECD countries. The study investigates how the composition of tax revenues direct taxes, indirect taxes, and social contributions affects GDP growth and fiscal stability. Using secondary data from 2010 to 2023 obtained from the Federal Inland Revenue Service (FIRS), National Bureau of Statistics (NBS), OECD Tax Database, and World Bank, the study employs multiple regression analysis to evaluate the relationship between tax structure and economic performance. The findings reveal that direct and consumption taxes have a positive and significant impact on GDP growth in OECD countries, while in Nigeria, over-reliance on petroleum-related taxes and weak direct tax performance impede growth. The results show that a 1% increase in direct tax share leads to a 0.36% increase in GDP, while excessive dependence on indirect taxes yields diminishing returns. The study concludes that balanced and efficient tax structures enhance economic stability and recommends broadening the Nigerian tax base, strengthening institutional capacity, and diversifying revenue sources in line with OECD best practices.
Keywords: Tax structure, Economic performance, Direct tax, Indirect tax, Nigeria, OECD, Tax policy.
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Copyright (c) 2025 Lawrence Tayo Omotoso, Olaiya Mercy Adenike, Olamigoke Babalola (Author)
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