Abstract
This study investigates the impact of tax reform on revenue generation in Nigeria by analyzing secondary data from various sources including government reports, financial statements, and international databases. A longitudinal panel design was adopted, focusing on key tax types: Petroleum Profit Tax (PPT), Company Income Tax (CIT), and Value Added Tax (VAT). The methodology involved descriptive analysis, correlation analysis, and panel data regression to explore relationships between tax reforms and revenue outcomes. Descriptive statistics reveal an average revenue generation (RG) of $457.34 billion, with considerable variability across observations. Correlation analysis indicates a moderately positive relationship between RG and PPT (0.35), a weak negative relationship with CIT (-0.22), and a moderate negative relationship with VAT (-0.37). Diagnostic tests confirmed data stationarity and indicated the presence of heteroscedasticity and no auto-correlation issues. Regression analysis showed that PPT and CIT have significant positive impacts on RG, while VAT has a significant negative impact. Specifically, PPT reforms contribute an estimated 0.0147 unit increase in RG for each unit increase in PPT, and CIT reforms contribute a 0.0072 unit increase. In contrast, VAT reforms are associated with a 0.0659 unit decrease in RG.
The findings support the Benefit and Ability-to-Pay principles, emphasizing the role of PPT and CIT in enhancing revenue generation. However, the negative impact of VAT suggests potential adverse effects on consumer spending. Policy recommendations include strategic tax policy design, improved tax administration, regular policy monitoring, and strategic investment of tax revenues in infrastructure to promote sustainable economic growth. This research provides empirical insights into the effectiveness of tax reforms in Nigeria, highlighting the need for careful policy design to balance revenue generation and economic stability. Further research is recommended to explore the long-term effects of these tax policies and address regional disparities and sector-specific impacts.
