This study was carried out to ascertain the contribution of indirect tax to economic growth in Nigeria.
          Five hypotheses were postulated for the study. The hypotheses were to find out the relationship between various types of indirect taxes and economic growth.
          The scope of the study covered the Nigerian economy as a whole. Related literature were examined, these comprised of the findings of different researchers on indirect taxes and economic growth generally.
          Time-series data covering 1980-2011, that is, thirty-one years were used for the study. The data were analysed through regression using e-view software and various regression techniques.
          After analysing the data it was shown that the policy of indirect taxation has an insignificant impact on the economic growth rate of the Nigerian economy. It is therefore not a veritable instrument for determining the economic growth rate.
Background to the Study             
Statement of Research Problem            
Research Questions                    
Research Objectives                    
Research Hypotheses                        
Significance of the Study                    
Scope of the Study                    
1.8    Limitations of the Study                        
Definition of Terms                    
Tax: Meaning and Principles                    
Theories of Taxation                        
General Principles of Taxation                    
Theories of Economic Growth                    
Taxes and Factor Accumulation                
Concept of Custom Duties                    
Tax Policy Reforms In Nigeria                    
Concept of Excise Duties                
Related Empirical Evidence                    
Data Type and Source                    
Population of the Study                    
Sources of Data Collection                
Method of Data Analysis                        
Research Model                        
Estimation Techniques                        
Analysis of Unit Root Results                    
Co-Integration Test Analysis                    
Analysis of Error Correction Results                
Policy Implications of Results                
Summary of Research Findings            
Policy Recommendations                    
Concluding Remarks                    
Tax is a compulsory levy imposed on a subject or upon his property by the government to provide security, social amenities and create conditions for the economic well-being of the society (Appah, 2004; Appah and Oyandonghan, 2011). Also Bhartia (2009) argues that a tax is a compulsory levy payable by an economic unit to the government without any corresponding entitlement to receive a definite and direct quid pro quo from the government. There are two types of taxes namely direct taxes and indirect taxes. This study focuses on indirect tax and its effect on economic growth.
           Indirect tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer). The intermediary later files a tax return and forwards the tax proceeds to government with the return. In this sense, the term indirect tax which is collected directly by government from the persons (legal or natural) on which it is imposed.
          An indirect tax may increase the price of goods so that consumers are actually paying the tax by paying more for the products. Examples would be fuel, liquor and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the manufacturer transfers the burden of this duty to the buyer of the car in form of higher price. Thus, an indirect tax is such which can be shifted or passed on. The degree to which the burden of the tax is shifted determines whether a tax is primarily direct or primarily indirect. This is a function of the relative elasticity of the supply and demand of the goods or services being taxed. There are different types of indirect tax. They include value added tax (VAT), custom duties and excise duties.
          However, taxation is a tool by government in fashioning various aspects of economic growth. According to Tosun and Abizadeh (2005), taxes are instrument of fiscal policy. Anyanwu (1997) opine that in practice, it is difficult to distinguish between the effects of tax policy on levels and on growth rates of GDP. This is because transitional growth may be long-lasting and so it has not proved possible to distinguish effects on long-run growth from transitional growth. For instance, it is possible that tax changes that encourage innovation and entrepreneurship may have persistent long-run growth effects, while those that affect investment also can have long lasting effects on growth that fade out in the long run.
          Economic growth has received much attention among scholars. According to Appah (2010), classical studies estimate that economic growth is largely linked to labour and capital as factors of production. The emergence of the endogenous growth theory has encouraged specialists to question the role of other factors in explaining the growth phenomenon (Bogdanov, 2010). Therefore, taxation is considered as an instrument of fiscal policy, an important variable which may determine changes in national income in developing countries like Nigeria. Increased taxation on imported goods and services have affected the level of such goods and services that industrialist within our sovereignty are encouraged to produce. And because of high import duty on dairy products, textiles, materials, food drinks etc. our economic potential manufacturers are encouraged through industrial investment locally and the multiplier effect on employment and national growth. Also, high tax rate imposed on imported components of oil industrial inputs and the encouragement of local content in the oil industry are all geared towards increasing economic growth in Nigeria.
          The objective of this study is to find out the contribution indirect taxes make towards a country’s economic growth. To achieve this objective, the study is divided into five interconnected sections. The next section examines the literature review of indirect taxation and economic growth; the third section contains the materials and methods used in the study. The fourth section examines the results and discussions. The final section examines the concluding remarks and recommendations.
          The focus of the paper is to assess the importance of indirect taxes towards the development of Nigeria economy as non-oil revenue and the challenges facing the control agency. Also to ensure the correct tariff is collected to alleviate poverty from the nation, and ensure the nation achieves a greater development in all the segments of the economy.
          Indirect taxes without doubt have contributed in no small measure to the economic development of Nigeria. The Nigerian Customs was established in 1891 whose powers and functions of the service are spelt out in the customs and management Act (CEMA) cap 84 of the laws of the Federation, 1990.The main function of the service is the collection of customs and excise duties on goods. It is in charge of trade facilitation and generation of trade statistics for planning purposes as well as the main coordinator of anti-smuggling operations at the sea port, airports and border stations. The service works closely with other institutions like the Central Bank of Nigeria, the Nigerian Ports Authority, the Military and the Economic Community of West African States (ECOWAS) secretariat. The Nigerian Custom Services ensures the security of International trade supply chain and combat international crime in conjunction with other members of the World Customs Organization(Buba,2007:1).The Customs is indeed very important to the economy as it collects duties, excise fees, tariffs and other levies imposed by the Federal Government on imports, exports and statutory rates. After oil, the customs provide the largest single chunk of revenue accruing to the federation account. However, the customs and excise duties are not fully collected and rendered to the federation for the full implementation of government sovereign responsibilities.
The institution Nigerian Customs Service whose responsibility is to ensure full collection and rendition is much criticized for alleged corruption and inefficiency and its upper echelon is often with intrigue and in fighting. Nigeria is an import-dependent nation and the country is awash with imports from all parts of the world. According to the Auditor-General of the federation release in 2008, he stated that the government should explore the reality that the Nigeria Customs Service, if it does its job properly and well managed, can collect more than its annual target set for it. There is problem of sharp practices that collectively deprived the government of revenue and enriched some corrupt customs men and their collaborators. There is under-assessment of payable duties, unauthorized transfer of funds, abuse of waivers, concessions and exemptions as well as non-remittance of government revenues. Efforts by the government to reform the customs have not yielded fruitful results. From the records of collections, customs reforms have not succeeded in achieving objective of boosting revenue. This study seeks to find out the contribution indirect taxes have made to the growth of the Nigerian economy.
          Based on the background and statement of the problem of this study, the following questions are raised to guide the study:
1.    What is the relationship between indirect tax and economic growth in Nigeria?
2.     Is there a relationship between custom and excise duties and economic growth?
3.     Is there a relationship between value added tax (VAT) and economic growth?
4.     Is there a relationship between government expenditure (i/y) and economic growth?
5.     What is the relationship between population growth rate and economic growth?
          The broad objective of this study is to find out the relationship between indirect taxes and the growth of the Nigerian economy.
The specific objectives of the study include:
1.     To find out the relationship, if any, between indirect tax and economic growth.
2.     To find out the relationship between custom and excise duties and economic growth
3.     To ascertain the relationship between value added tax (VAT) and economic growth
4.     It seeks to know the relationship between government expenditure (i/y) and economic growth
5.     To ascertain the relationship between population growth rate and economic growth
              The research hypotheses that will be tested to guide this study include:
1. HO:     There is no relationship between indirect tax and economic growth.
HA:     There is a relationship between indirect tax and economic growth.
2. HO:     There is no relationship between custom and excise duties and economic growth.
HA:     There is a relationship between custom and excise duties and economic growth.
3. HO:     There is no relationship between value added tax (VAT) and economic growth.
HA:     There is a relationship between value added tax (VAT) and economic growth.
4. HO:     There is no relationship between government expenditure and economic growth.
HA:     There is a relationship between government expenditure and economic growth.
5. HO:     There is no relationship between population growth rate and economic growth.
HA:     There is a relationship between population growth rate and economic growth.
          This study is country specific and attempted to give a picture of the taxation system in Nigeria. It seeks to trace the effects of indirect tax on the growth of Nigeria’s economy.
          The research findings would be of importance to policy makers at national level as they design policies aimed at enhancing economic growth through a better taxation system.
          To the government this study is of help due to the on-going contentious issues about the revenue of the economy. Prior to this time, there has been a large dependence of the Nigerian economy on oil revenue, thereby neglecting other sources. This led to over exploitation and subsequently the Niger delta crisis that is still in play today and as such there is a downward trend in the economy. Thus, the government is seeking for other sources of generating revenue for the economy and taxation has come in handy. Therefore, this study will act as a guide or reference point for the government in making these decisions i.e. whether to rely more on indirect tax or not.
          The study is also significant to the public at large. It helps to expand their body of knowledge on the issue. When citizens are taxed on their goods bought and services received, they naturally expect to see results and how the government has put their money to use. These results are reflected in the growth of the economy. This research work will help to clarify the public on this issue and enlighten them on the effect of these taxes on the growth of the economy.
          Lastly, the study is significant to future researchers. The study will be useful to future researchers who might be interested in carrying out further research on the topic. The literature arising from this would be of great value to them.
The scope of this study covers the Nigerian economy as a whole. It covers the taxation system and principles of the Nigerian economy but the study is limited to the effect of indirect tax on the growth of the economy. This study portrays the impacts of indirect taxes, a tool for the development of the economy, various sources of government revenues, various processes of tax collection and administration, among others. The research work covers from the year 1980 to 2011 that is thirty one years
          The study limits itself to the Nigerian economy even though other economies make use of taxation as a source of internal revenue. The researcher broadly examines the research topic and then channelled it to state governments as lots of constraints were encountered by the researcher in the course of study.
          Also the size of the population in question i.e. the Nigerian economy is a constraint. The Nigerian economy is large and as such a proper evaluation might be impossible to carry out.
          Technical terms have been fore closed in the course of this study so as to aid easier understanding of this work.  However, the researcher considers some terms too important for purposes of clarification and precision, and they are defined in a Lucid language to include:-
1.     Indirect Taxes:  There are taxes levied on goods and services.  Here the burden of taxation falls on producers and sellers before it is shifted to the ultimate consumers inform of higher prices of consumable goods.  Import duties, excise duties and ad valorem tax are said to be examples of indirect taxes.
2.     Value Added Tax (VAT):  As introduced in Nigeria by decree No. 102 of 1993, it is a tax system imposed at each stage of production of goods and services.
3.     Tax Avoidance:  This involves attempts by the tax payer to reduce the amount of tax payable by exploring the loop holes or flaws in the tax laws and policies of the country.
4.     Tax Evasion:   Unlike tax avoidance, tax evasion is the deliberate attempt by the expected tax payer not to pay tax.
5.     Taxation:  This is the process of being taxed.  It is defined as the transfer of resources from the private to public sector in order to accomplish some of the economic and social goals of the government.
Anyanwu, J.C. (1993) Monetary Economics: Theory, Policy and Institutions Hybrid Publishers, Onitsha  
 Anyanwu, J.C. (1997) Nigerian Public Finance Joanne Educational Publishers, Onitsha.
Appah, E. (2004) Principles and Practice of Nigerian Taxation Ezevin Mint. Printers,  Port-Harcourt   
 Appah, E. (2010) “The Relationship between Fiscal Policy and Economic Growth In Nigeria” Int. J. Econ. Dev. Res. Invest., Number1, volume 2. pp. 37-47.
Bhartia, H.L. (2009) Public Finance, Vikas Publishing House PVT Ltd., New Delhi. 13th edition
Bogdanov, B. (2010). “Cyclicality of Fiscal Policy over Business Cycle: An Empirical Study on Developed and Developing Countries.” Agency for Economic Analysis and Forecasting, Working Paper Series.


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