Revenue Implications of Nigeria’S Tax System

Abstract

This is a study of the properties of the Nigeria’s tax system particularly the bases of the company income tax, value added tax and personal income tax. The results indicate that their bases are not stable (not persistent and volatile). However, while the bases of the company income tax and personal income tax are more sensitive to cyclical swings (current state of the economy over time), that of the value added tax (VAT) is not. The policy implications of these findings support the recent government tax policy reform of a shift in focus in the tax system from direct taxation to indirect taxation. With the tax base of VAT being insensitive to the current state of the economy, the revenue therefrom will not drop sharply when the economy slows down. It will also shield the government from budgetary shortfalls as it will likely cushion against sharp declines in aggregate tax revenues.

This is a study of the properties of the Nigeria’s tax system particularly the bases of the company income tax, value added tax and personal income tax. The results indicate that their bases are not stable (not persistent and volatile). However, while the bases of the company income tax and personal income tax are more sensitive to cyclical swings (current state of the economy over time), that of the value added tax (VAT) is not. The policy implications of these findings support the recent government tax policy reform of a shift in focus in the tax system from direct taxation to indirect taxation. With the tax base of VAT being insensitive to the current state of the economy, the revenue therefrom will not drop sharply when the economy slows down. It will also shield the government from budgetary shortfalls as it will likely cushion against sharp declines in aggregate tax revenues.

Keywords: Tax System, Company Income Tax, Value Added Tax, Personal Income, Tax Policy, Nigeria. This is a study of the properties of the Nigeria’s tax system particularly the bases of the company income tax, value added tax and personal income tax. The results indicate that their bases are not stable (not persistent and volatile). However, while the bases of the company income tax and personal income tax are more sensitive to cyclical swings (current state of the economy over time), that of the value added tax (VAT) is not. The policy implications of these findings support the recent government tax policy reform of a shift in focus in the tax system from direct taxation to indirect taxation. With the tax base of VAT being insensitive to the current state of the economy, the revenue therefrom will not drop sharply when the economy slows down. It will also shield the government from budgetary shortfalls as it will likely cushion against sharp declines in aggregate tax revenues.

Keywords: Tax System, Company Income Tax, Value Added Tax, Personal Income, Tax Policy, Nigeria. This is a study of the properties of the Nigeria’s tax system particularly the bases of the company income tax, value added tax and personal income tax. The results indicate that their bases are not stable (not persistent and volatile). However, while the bases of the company income tax and personal income tax are more sensitive to cyclical swings (current state of the economy over time), that of the value added tax (VAT) is not. The policy implications of these findings support the recent government tax policy reform of a shift in focus in the tax system from direct taxation to indirect taxation. With the tax base of VAT being insensitive to the current state of the economy, the revenue therefrom will not drop sharply when the economy slows down. It will also shield the government from budgetary shortfalls as it will likely cushion against sharp declines in aggregate tax revenues.

Keywords: Tax System, Company Income Tax, Value Added Tax, Personal Income, Tax Policy, Nigeria. This is a study of the properties of the Nigeria’s tax system particularly the bases of the company income tax, value added tax and personal income tax. The results indicate that their bases are not stable (not persistent and volatile). However, while the bases of the company income tax and personal income tax are more sensitive to cyclical swings (current state of the economy over time), that of the value added tax (VAT) is not. The policy implications of these findings support the recent government tax policy reform of a shift in focus in the tax system from direct taxation to indirect taxation. With the tax base of VAT being insensitive to the current state of the economy, the revenue therefrom will not drop sharply when the economy slows down. It will also shield the government from budgetary shortfalls as it will likely cushion against sharp declines in aggregate tax revenues.

Keywords: Tax System, Company Income Tax, Value Added Tax, Personal Income, Tax Policy, Nigeria. This is a study of the properties of the Nigeria’s tax system particularly the bases of the company income tax, value added tax and personal income tax. The results indicate that their bases are not stable (not persistent and volatile). However, while the bases of the company income tax and personal income tax are more sensitive to cyclical swings (current state of the economy over time), that of the value added tax (VAT) is not. The policy implications of these findings support the recent government tax policy reform of a shift in focus in the tax system from direct taxation to indirect taxation. With the tax base of VAT being insensitive to the current state of the economy, the revenue therefrom will not drop sharply when the economy slows down. It will also shield the government from budgetary shortfalls as it will likely cushion against sharp declines in aggregate tax revenues.