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MACROECONOMIC DETERMINANTS OF TAX REVENUE IN NIGERIA (1970-2011)
Abstract: The Nigerian government in recent has engaged in search for the appropriate policy strategy to stimulate tax revenue and boost the revenue profile of the government. This paper therefore attempts to examine the most relevant macroeconomic policy variable that can serve as an anchor variable for achieving such policy objective. The paper uses secondary data from Nigeria economy for the period 1970 to 2011 and adopted the error correction mechanism to establish both the long run and short run relationships among the variables. The main finding of the empirical analysis is that tax revenue tends be significantly responsive to changes in income level, exchange rate and inflation rate. The income elasticity of tax shows that a unit percent increase in income level will probably lead tax revenue increase by 0.63% in the immediate and 0.33% in the second year. The evidence is in consonance with findings from previous studies in this area, especially [1, 2]. The paper concludes that macroeconomic instability and level of economic activities are the main drivers of tax buoyancy and tax effort in Nigeria
Key words: Tax Efforts Tax buoyancy Economic Growth Macroeconomic Instability Fiscal Policy