Petroleum Profit Tax And Economic Growth In Nigeria

Author(s)

APPAH EBIMOBOWEI , EBIRINGA, O.T ,

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Volume 1 - September 2012 (09)

Abstract

This study investigates the impact of petroleum profit tax on the economic growth of Nigeria. To achieve the objective of this paper, relevant secondary data were collected from the Central Bank of Nigeria (CBN) and the Federal Inland Revenue Service (FIRS) from 1970 to 2010. The secondary data collected from the relevant government agencies in Nigeria were analysed with relevant econometric tests of Breusch -Godfrey Serial Correlation LM, White Heteroskedasticity, Ramsey RESET, Jarque Bera, Johansen Co-integration, and Granger Causality. The results show that there exists a long run equilibrium relationship between economic growth and petroleum profit tax. It was also found that petroleum profit tax does granger cause gross domestic product of Nigeria. On the basis of the empirical analysis, the paper concludes that petroleum profit tax is one of the most important components direct taxes in Nigeria that affects the economic growth of the country and therefore should be properly managed to reduce the level of evasion by petroleum exploration companies in Nigeria. The paper recommends among others that companies involved in petroleum operations should be properly supervised by the relevant tax authority (FIRS) to reduce the level of tax evasion; government should show more accountabi lity in the management of tax revenue and finally, the level of corruption in Nigeria and that of government officials should be drastically reduced to win the confidence of tax payers for voluntary tax compliance.

Keywords

Tax, Petroleum profit tax, economic growth, co-integration, Nigeria

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