Corporate Taxation and the Dynamics of Real Sector Growth in Nigeria
Abstract
This study Corporate Taxation and Real Sector Growth in Nigeria data employed showed that the variables are differenced at first level to be statationary using Augmented Dickey Fuller unit root test. Johansen Cointegration Test found long run relationships existing between real sector growth of Nigeria (Real Gross Domestic Product) and corporate taxation variables (corporate income tax and VAT). The result of the relationship estimation found positive and significant relationship between corporate income tax and real sector growth (RGDP) and credit on private sector negatively and significantly impact real sector growth while value added tax (VAT) insignificantly relate to real sector growth. Results of the Vector error correction (VEC) estimate showed that the parameter is negative and significant and the speed of adjustment was found to be 20.8%. That means that short term errors can be corrected in the long run with annual speed of adjustment of 20.8 %. The pairwise Granger Causality Tests found unidirectional effect with the Value Added Tax and credit on private sector, while corporate income tax and real gross domestic product has a bidirectional effect or feedback effect. Therefore, the researchers suggest among others that Tax reliefs should be targeted on for specific real-sector industries (e.g., agriculture, manufacturing) as this could help stimulate demand and growth.
Keywords
RGDPCompany Income Tax (CIT)VATCredit on private sector (CPS)
References
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