Tax Incentive a Catalyst for Industrial Development and Economic Growth in Nigeria

Tax Incentive a Catalyst for Industrial Development and Economic Growth in Nigeria.

 ABSTRACT

This study examined the impact of Tax incentives on industrial development and economic growth in Nigeria from 1981 to 2015. Data for the study was sourced from CBN statistical bulletin of various issues.

Industrial GDP and Nominal GDP were used as proxies for dependent variables while Tax Free Zone (TFZ).

Tax Haven Policy (THP) and inflation rate were proxies for explanatory variables. Augmented Dickey Fuller approach was used to test the data for the presence of unit root. Ordinary least squares (OLS) were used for the regression analysis.

The findings reveal that sufficient tax incentives enhance industrial and economic growth; with coefficient of determination values of 82.37% and 80.81% respectively for industrial and economic growth models respectively.

This study recommends among others that, government should increase tax incentives granted to companies especially to small scale businesses to increase the micro economic growth which in aggregate totals the macro economic growth.

This will foster economic growth and encourage new entrepreneurs both foreign and local who will in turn invest in the economy causing an increase in the per capita income and increase in government revenue as a result of more available businesses to be taxed.

INTRODUCTION

Tax studies have become increasingly sophisticated especially during the past decade and have yielded conflicting results as regards the tax matter.

Some studies focus on the cost and benefit of tax incentives while a few look at whether public funds could have been better spent or if tax incentives were economically justified.

Tax studies offer little guidance to policy makers who are concerned about tax rates or tax offerings and the effectiveness of employing tax incentives as an economic and developmental tool.

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