IIARD International Institute of Academic Research and Development

Journal of Accounting and Financial Management (JAFM )

E-ISSN 2504-8856
P-ISSN 2695-2211
VOL. 9 NO. 1 2023

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Tax Income and Economic Development: The Resource Dependency Theory (RDT)

EFUNTADE, Olubunmi Omotayo, PhD, EFUNTADE, Alani Olusegun, FCIB, ACA.

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Abstract

The paper systematically review various empirical studies on tax income and economic development. The findings from various studies revealed a better understanding of tax revenue and economic growth in Nigeria. Economic development and four other variables that represent petroleum profit tax, company income tax, personal income, and value added tax were reviewed to see which factors best describes economic development in Nigeria. Various results show that petroleum profit tax, company income tax, custom and value added tax are significant variables in explaining the economic development in Nigeria. Out of all the four independents variables, it is only personal income tax that shows significant negative insignificant relationship with economic development in most studies which implies that they are both moving in inverse direction. The implication of our findings is pointing majority at policy makers, especially the Federal Board of Inland Revenue as most of tax variables shows a positively significant relationship with economic development, meaning that there should be no area in tax collection that should be taken lightly as they have all proven to be a major variable in connection to the growth of the economy. Due priority must also be accorded to non-oil sector so as to improve government earnings from other non-oil sectors to significantly contributes to the growth and development of the economy. Government should be encouraged to persistently invest tax revenues from oil sector (particularly PPT) to develop other sectors of the economy so as to bridge the gaps between revenue accrued to the government and infrastructural deficiencies. There must be full entrenchment of good governance in the administration of tax system in Nigeria. Due to the significance of tax in bringing revenue to the government for various uses, its ability to affect consumption patterns lead to the growth of the economy, exert influence on economic variables, and its

keywords:

Tax income, economic development, resource dependency theory, research gaps, systematic reviews, framework, model formulation.

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