INDIRECT TAXES AND ECONOMIC GROWTH IN NIGERIA

This study examined the impact of indirect taxes on economic growth of Nigeria, utilizing time series data spanning a thirty-four year period, from 1981 to 2014. The data collected from secondary sources, were analyzed and tested for unit root, using the Augmented Dickey-Fuller test. The residuals, whose unit root are usually tested at level, were found to be stationary while all other variables, such as the Value Added Tax (VAT), Petroleum Profit Tax (PPT) and Custom and Excise Duties (CED), except the Real Gross Domestic Product (RGDP), were stationary at second difference, suggesting a long run relationship. Consequently, the study utilized the Error Correction Model to evaluate the impact of VAT, PPT and CED on the RGDP. The findings revealed that VAT and PPT exert a positive and significant relationship on the RGDP. It was also revealed that CED of two-period lags has a positive relationship with RGDP and VAT of two-period lags showing a negative but significant relationship with RGDP. On the basis of these findings, it is suggested that some caution on the part of the government is required to identify all administrative loopholes for linkages to plug and to continue to maximize the contribution of VAT revenue to economic growth. This is important when it is realized that any action taken on VAT, as it relates to RGDP will take a year to become effective while taking two years to slow down the economy. In addition, and to achieve an optimum policy thrust, there must be commitment and honesty on the part of the agents of VAT., PPT., and CED with respect to its collection and payment; special remuneration, training and retraining of these agents, all in an attempt to enhance impact of these taxes on economic growth.