1

TAX REVENUE AND GOVERNMENT EXPENDITURE A COMPARATIVE STUDY

OF THE PRE AND POST ELECTRONIC TAXATION SYSTEM IN NIGERIA

PETER, SOLOMON
14PGAC7042

BEING A PROPOSAL PRESENTED TO THE SCHOOL OF POSTGRADUATE

STUDIES, KOGI STATE UNIVERSITY ANYIGBA, IN PARTIAL FULFILMENT OF
THE REQUIREMENTS FOR THE AWARD OF MASTER OF SCIENCE (M.Sc.)
DEGREE IN ACCOUNTING, DEPARTMENT OF ACCOUNTING, FACULTY OF
MANAGEMENT SCIENCES.

SUPERVISOR: DR. ADEJOH EDOGNANYA

AUGUST, 2021.
 2

TABLE OF CONTENTS
Title Page 1
CHAPTER ONE: INTRODUCTION

1.1 Background to the Study 4

1.2 Statement of Problem 9

1.3 Objectives of the Study 9

1.4 Research Hypotheses 10

1.5 Significance of the Study 10

1.6 Scope of the Study 11

CHAPTER TWO: REVIEW OF RELATED STUDY

2.1 Conceptual Framework of the Study 12

2.1.1 Electronic Taxation 12

2.1.2 Government Expenditure 13

2.1.3 Value Added Tax and Government Expenditure 14

2.1.4 Companies Income Tax and Government Expenditure 16

2.1.5 Capital Gain Tax and Government Expenditure 17

2.1.6 Petroleum Profit Tax and Government Expenditure 18

2.2 Theoretical Review 19

2.2.5 The Underpinning Theory 21

2.3 Empirical Review 21

2.3.1 Gap in Literature 32

CHAPTER THREE: METHODOLOGY

3.1 Research Design 33

3.2 Population of the Study 33

 3

3.3 Sample Size of the Study 33

3.4 Sampling Technique 33

3.5 Sources of Data Collection 33

3.6 Method of Data Analysis 34

3.7 Variables Definition and Justification 34

3.8 Model Specification 34

References 36
 4

CHAPTER ONE

INTRODUCTION

1.7 Background to the Study

The importance of taxation in promoting economic growth and development as well as the

survival of many nations cannot be overemphasized. Through tax government ensures that

resources are mobilized and channeled towards important sectors of the economy. Emmanuel

(2010) notes that many developed and developing economies around the world had experimented

and found out that no nation can truly develop without developing its tax system. Consequently,

he added, many countries have embarked on tax reforms and restructuring with a view to

developing a tax system that will maximise government revenue without creating disincentive

that could discourage investment. Kiabel and Nwokah (2009) assert that within the last decade,

the issue of domestic resource mobilization has attracted considerable attention in many

developing countries due to ever mounting debt burdens coupled with domestic and external

financial imbalances.

The Presidential Committee on National tax policy (2008), the central objective of the Nigerian

tax system is to contribute to the well-being of all Nigerians directly through improved policy

formulation and indirectly though appropriate utilization of tax revenue generated for the benefit

of the people. Over the years, the Nigerian tax system has not been able to reach these perceived

objectives as a result of some setbacks and challenges including lack of cooperation from tax

payers, multiple taxes, complex tax payment system and tax offsetting, lack of technological

exposure, tax evasion, corruption, government instability which instigates noncompliance with

relevant tax laws, poor information base and record keeping (Akpubi & Igbekoyi, 2019). This is

the basis for the introduction of electronic tax system by the government.
 5

Electronic tax system often referred to as E-Tax is an online platform whereby the taxpayer is

able to access through internet all the services offered by a financial authority such as the

registration for a personal identification number, filing of returns and application for compliance

certificate amongst other services (Wasao, 2014), A good example of electronic tax system is

the automated invoicing system called Electronic Revenue Assurance System (ERS) that was

introduced on the 22nd of February 2018. E-taxation is the process of assessing, collecting and

administering the taxation process via an electronic media. If properly viewed, e-taxation is one

of the ways through which governments around the world utilize information and

communication technologies to improve the delivery of public services and the dissemination of

public administration information to the public.

Based on the recommendation of the International Monetary Fund (IMF), the Federal Inland

Revenue Service (FIRS) in 2015 partnered with the Nigerian Interbank Settlement System

(NIBBS) to provide for the electronic payment of taxes in Nigeria. This is an automation of all

tax processes from tax registration, assessment and filing of returns to payment of taxes. The

objective was to adopt an electronic system to make it easier to pay taxes online in major cities

across Nigeria (Abdulrazaq, 2015). In June 2017, the FIRS restructured the electronic tax

system to operate nationwide by introducing six new electronic tax services (e-services) which

are e-registration, e-stamp duty, e-tax payment, e-receipt, e-filing and electronic tax clearance

certificates (e-TCC) (Deloitte, 2018).

In Nigeria, tax revenue has accounted for a small proportion of total government revenue need

over the years due largely to the fact that the bulk of revenue needed for development purposes is

derived from crude oil whose export has accounts for over 80% of the total federal government

revenue, while the remaining 20% is contributed by non-oil sector in which taxation is a part
 6

(Akwe, 2014). However, with the unstable nature of oil revenue, government has seen the need

to diversify its sources of income and therefore pays more attention to non-oil related taxes. Tax

and levies (approved list for collection) decree 1998, empowers the federal government to collect

non-oil taxes which refers to all tax revenues that are derivable from sources other than that

related to crude oil operations including Companies Income Taxes; Withholding tax on

companies, residents of the Federal Capital Territory, Abuja, Value added tax, Education tax,

Capital gains tax on residents of the Federal Capital Territory, Abuja, bodies corporate and non-

resident individuals; Stamp duties on bodies corporate and residents of the Federal Capital

Territory, Abuja; and personal income tax of members of the Armed Forces of the Federation,

members of the Nigeria Police Force, residents of the Federal Capital Territory, and staff of the

Ministry of Foreign Affairs and non- resident individuals (Ehigiamusoe, 2014).

Value Added Tax (VAT) was introduced by the Federal Government of Nigeria in January,

1993. to replace Sales Tax (ST) which, under the constitution, was charged by state

governments. VAT was believed by many Nigerians as a means of avoiding taking loans from

international agencies (Ochei, 2013). VAT was then imposed on virtually all goods and services,

whether produced or rendered in Nigeria or not. Exemptions however, were granted in respect of

medical and pharmaceutical products, basic food items, fertilizers, agricultural and centenary

medicine, books and educational items, farming and transport equipment among others. VAT is

an indirect tax collected from someone other than the person who actually bears the cost of the

tax. Each person is required to charge and collect VAT at a flat rate of 5% on all invoiced

amounts, on all goods and services not exempted from the VAT.

The Value Added Tax (Amendment) Act, 2007; was for instance intended to widen the value

added tax base and improve the machinery for its collection (Arowoshegbe et al., 2017). VAT
 7

does not apply to export goods and that VAT is payable in the currency of the transaction under

which goods or services are exchanged. A taxable person, whether Nigerian resident outside

Nigeria, who fails or refuses to register for VAT administration within six months of engaging in

any economic activity in the territory of Nigeria is liable to pay a penalty of $67.00 or its

equivalent for the first month that the failure occurs and a further penalty of $34 or its equivalent

for each subsequent month in which the failure continues. In addition to the fines for non-

registration, Section 32 of the VAT Act (as amended) authorizes the FIRS to seal up the

premises from where the economic activity in question is being carried on within the territory of

Nigeria.

Company Income Tax refers to a tax imposed on the profit of companies (excluding profit from

companies engaged in petroleum operations) accruing in, derived from, brought into or received

in Nigeria in respect of any trade or business, rent, premium, dividends, interest, loyalties and

any other source of annual profit (Ogbonna & Appah, 2016). It was introduced in Nigeria in1961

and administered by the Federal Internal Revenue Services. Since enactment, the law on CIT has

passed through series of amendment. The rate of CIT varies according to operation and size of

turnover per annum.

Capital Gains Tax according to Ola (2011) is a tax applicable to capital gains accruing to any

person, company or individual on the disposal of a chargeable asset. Chargeable assets are all

forms of property, including options, debts and any form of property created by the person

disposing of it, or otherwise coming to be owned without being acquired (Olaniyi et al., 2016).

Almost everything owned and use for personal or investment purposes is a capital asset.

Examples include a home, personal-use items like household furnishings, and stocks or bonds

held as investments. Capital gains are the excess consideration realized from the sale of asset at a
 8

price that is higher than the purchase price. When a capital asset is sold, the difference between

the cost of sale and the sales price is a capital gain or a capital loss.

The Petroleum Profit Tax is regulated by the Petroleum Profit Tax Act of 1959 as amended by

the Petroleum Profit Tax Act of 2007. Although the initial law was passed in 1959 to capture the

first oil export made in that year (Nwadighoha, 2007). The Petroleum Profit Tax Act provides for

the imposition of tax on the chargeable profits of companies that are engaged in petroleum

operations in Nigeria. Petroleum operations is defined under the PPTA as the winning or

obtaining oil in Nigeria by or on behalf of a company for its account by any drilling, mining,

extracting or other like operations or process, not including refining at a refinery, in the course of

a business carried on by the company engaged in such operations, and all operations incidental

thereto and any sale of or any disposal of chargeable oil by or on behalf of the company

(Nwezeaku, 2005). Section 8, of Petroleum Profit Tax Act as amended states that every company

engaged in petroleum operation is under an obligation to render return, together with properly

annual audited account and computations, within a specified time after the end of its accounting

period.

Government expenditure refers to the expenses government make for the provision of essential

services for the benefit of the citizens. This expenditure are categorized into three broad groups

namely: Capital expenditure, recurrent expenditure and Transfers expenditure. It has been a

common knowledge that tax revenue is the second largest revenue source beside the petroleum

resources for the Nigerian government and that, in order to boost what is derived from taxes

against the backdrop of poor administration, evasion, avoidance among other militating factors,

the electronic tax system was introduced.

 9

1.8 Statement of the Problem

From all available data Non-Oil Tax Revenue obtainable from reliable government sources

especially from Federal Inland Revenue Services (FIRS) and the Central Bank annual bulletins,

all evidence are in support of the fact that there has been a rise in the revenue Nigeria realized

from Non-Oil taxes in the last Two and half decades, In Nigeria therefore, there is a general

agreement that revenue from Non-Oil taxes have been on the increase in the last Two and half

decades, but what is contentious is the effect of these revenue on the country’s economic growth.

Empirical results have consistently shown contradictions. While some scholars including

Onakoya and Afintinni (2016); Akwe (2014) and Ehigiamusoe (2014) maintain that Non-Oil tax

revenue has no significant effect on economic growth, others scholars such as Nwaiwu and

MacGregor (2018); Garba (2014) and Okafor (2012) reported that all taxes including Non-Oil

tax revenue has a significant effect on the growth of economies.

Secondly, all of the works of 2018 reviewed did not make use of 2017 data which this study

uses. Some of these studies of 2018 which failed to capture 2017 data include that of Manukaji

(2018; 1994-2016: Gwa and Kase (2018:1997-2016); Ogba et al. (2018: 1981-2016); Nwaiwu

and MacGregor (2018; 1975-2015). Arising from the fact these studies conducted in 2018

skipped 2017 data and the contradictory results from previous studies on the effect of Non-Oil

tax revenue on economic growth among scholars, there arise therefore, the necessity for this

independent study to be carried out to examine the effect of Non-Oil Tax revenue on Nigerian

economic growth from 1994-2017.

1.3 Objectives of the Study

The main objective of this study will be to investigate the differences in pre and post e-tax

revenues and government expenditure inn Nigeria, while the specific objectives are to:
 10

i) establish the difference between pre and post e-tax value added tax revenues in Nigeria;

ii) ascertain the difference between pre and post e-tax company income tax revenues in

Nigeria;

iii) examine the difference between pre and post e-tax capital gain tax revenues in Nigeria;

iv) determine the difference between pre and post e-tax petroleum profit tax revenues in

Nigeria; and

v) evaluate the difference between pre and post e-tax government expenditure in Nigeria.

1.4 Research Hypotheses

To be able to achieve the objectives of the study, the following Null hypotheses will be

formulated:

Ho1: There is no significant difference between pre and post e-tax Value Added Tax revenue in

Nigeria;

Ho2: There is no significant difference between pre and post e-tax Company Income Tax revenue

in Nigeria

Ho3: There is no significant difference between pre and post e-tax Capital Gain Tax revenue in

Nigeria

Ho4: There is no significant difference between pre and post e-tax Petroleum Profit Tax revenue

in Nigeria and

Ho5: There is no significant difference between pre and post e-tax Government Expenditure in

Nigeria.

1.5 Significance of the Study

This study shall be of great significance to:

 11

i) the policy makers, the tax regulatory agency and the government in the area of providing

information on the tax component that is not achieving desired result in terms of helping to grow

the economy and should be emphasized; ii) the stakeholders, government contractors (suppliers)

and the general public as a source of information on how well the taxes collected have

individually benefitted the economy; and iii) the academic world as an addition to the ever

increasing body of knowledge and a reference material for future researchers.

1.6 Scope of the Study

The scope of this study will cover a Ten (10) year period from 2011-2020 and dwells on four (4)

components of Tax revenue namely: value added tax (VAT) company income tax (CIT); capital

gain tax (CGT) and petroleum profit tax (PPT) in relation to their individual and combine effect

on Nigerian government expenditure within the period.

 12

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 Conceptual Review of the Study

The conceptual review of this study will center on four (4) tax revenue components as the

independent variables namely: Value Added Tax (VAT), Company Income Tax (CIT), Capital

Gain Tax (CGT), Petroleum Profit Tax (PPT) and Government Expenditure.

2.1.1 Concept of Electronic Tax System

Akpubi and Igbekoyi (2019) define electronic tax system as the system of collecting taxes from

the taxpayers electronically, explaining that it is an online platform whereby the taxpayer is able

to access through the internet all the services offered by the tax agency such as the registration

for a personal identification number, filing of returns and application for compliance certificate.

Agawal (2006) defines E-payment as a service rendered for payment of all Federal government

taxes and levies through any of the electronic platforms, asserting that e- payment also is a tax

collection system that offers flexibility of time, reduces likelihood of calculations errors on tax

return forms to the tax payers, taxpayer privacy and security. E-filing and e-payment were

designed to provide many aspects of convenience to tax payers, for example, tax filing can be

conducted at any time, filing can be done in any location, easy use of the system, information

search and other online transactions that is not available in the traditional channels.

Richards and Ekhator (2019) define electronic taxation is the deployment of computer systems

and networks in the process of levying and payment of taxes which involves the application of

computer techniques in the process of tax assessment, collection and administration, generally

referred to as e-payments and e-filing. Electronic taxation is an extension of the growing concept

of e-governance and e-commerce and involves the exchange of data through information
 13

communication technology systems between the taxpayer and the tax authorities (Akpubi &

Igbekoyi, 2019). Umenweke and Ifediora (2016) affirm that e-taxation is one of the ways

through which governments around the world utilize information and communication

technologies to improve the delivery of public services and the dissemination of public

administration information to the public. For the purpose of this study tax revenue are Value

Added Tax (VAT), Company Income Tax (CIT), Capital Gain Tax (CGT) and Petroleum Profit

Tax (PPT).

2.1.1 Concept of Government Expenditure

Government Expenditure refers to expenses incurred by the government for the maintenance of

itself and provision of public goods, services and works needed to foster or promote economic

growth and improve the welfare of people in the society (Salawu, 2005). Government

expenditure us also referred to as Public Expenditure and includes for the purpose of this study

capital expenditure and public debt services. Fatukasi et al. (2014) posit that Government

Expenditure has become an important matter in the facilitation of economic growth in

developing countries. Taiwo and Agbatogun (2011) define Government Expenditure as a fiscal

instrument which serves a useful role in the process of controlling inflation, unemployment,

depression, the balance of payment equilibrium and foreign exchange rate stability. In the period

of depression and unemployment, government spending causes aggregate demand to rise and

production and supply of goods and services follow the same direction.

Mulinge (2016) sees Government Expenditure as a key driver of productivity in the economy

hence encouraging economic growth. If public expenditure is judiciously applied, it has the

capacity to open up vast opportunities and create an awakening desire in the minds of the people

and institutions to improve on their productivities in every economic facet, thereby generating
 14

positive multiplier effect on economic growth. Gaurave (2012) notes that Government

Expenditure is the spending made by the government of a country on collective needs and wants

such as pension, provision and infrastructure.

Government Expenditure has been broadly classified into three namely: Current expenditure or

Government Final Consumption Expenditure on goods and services, for current use to directly

satisfy individual or collective needs of the members of community, capital expenditure or fixed

capital formation as government spending on goods and services intended to create future

benefits, such as infrastructure, investment in transport (roads, rail airports) health (water

collection and distribution, sewage systems, communication (telephone, radio, and Television)

and research spending (defence and space genetics). Transfer payment; spending that does not

involve transaction of goods and services, but instead represent transfer of money, such as social

security payments, pensions and unemployment benefits (Adam, 2019).

When the revenue of government increases and the government increases it's expenditure

without crowding-out private consumption, aggregate demand would rise, as well as output,

employment and investments resulting from the multiplier effect on aggregate demand, this will

stimulate the economy and leads to its growth. For the purpose of this study, Government

Expenditure is the total budgeted expenditure per annum.

2.1.3 Value Added Tax (VAT) and Government Expenditure

Onwucheka and Aruwa (2014) define Value Added Tax (VAT) is an indirect tax in which a sum

of money is levied at a particular stage in the sale of a product or service, which means that VAT

is a consumption tax, levied at each stage of the consumption process and borne by the final

consumer of the product or service. VAT is a tax levied on the value added that results from each
 15

exchange and it is an indirect tax collected from someone other than the person who actually

bears the cost of the tax (Ochei, 2010).

Emmanuel (2013) notes that Value Added Tax is a special consumption type of indirect tax in

which a sum of money is levied at each stage of production and distribution of a product or

service and that increase in Value Added Tax would lead to increase in tax revenue and

government expenditure. Every person whether resident in Nigeria or non-resident in Nigeria,

who sells goods or renders services in Nigeria under the VAT Act (as amended) is obligated to

register for VAT within six months of its commencement of business in Nigeria. Registration is

with the Federal Board of Inland Revenue (FBIR). The VAT Act (as amended) provides that a

foreign non-resident person or company that carries on economic activities in Nigeria is also

obligated to register for VAT, using the address of the person with whom it has a subsisting

economic activity for purposes of correspondence with FBIR and for compliance with the VAT

Law. The foreign non-resident person or company is required upon registration for VAT to

include in its invoice VAT at 5% with instructions to the receiver of the goods or services to

remit the VAT in the currency of the transaction to the Nigerian government on behalf of the

foreign non-resident person.

Odusola (2006) observes that Value Added Tax (VAT) revenue growth had a consistent,

although not explosive, increase. Value Added Tax rate in Nigeria is one of the factors

contributing to the collapse of the real economy because it disrupts the manufacturing sector by

accelerating astronomical increase in the prices of goods and services. Bakare (2013) also

observes that Value Added Tax has the potential to assist in the diversification of revenue

sources, thereby providing enough funds for economic growth and development and so reduces

dependence on oil revenue. Okoli and Matthew (2015) find out that VAT was the second long-
 16

term source of the total federally collected revenue. Denis (2010) observe that VAT is not

effective as a revenue earner, implying that significant parts of GDP which represent aggregate

national income as well as aggregate national expenditure are not collected as value added tax.

2.1.4 Company Income Tax (CIT) and Government Expenditure

Companies Income Tax (CIT) is a tax on the profits of incorporated entities in Nigeria. It also

includes the tax on the profits of non-resident companies carrying on business in Nigeria. The tax

is paid by limited liability companies inclusive of the public limited liability companies. It is

therefore commonly referred to as a corporate tax. CIT was created by the Companies Income

Tax Act (CITA) 1979 and has its root from the Income Tax Management Act of 1961. It is one

of the taxes administered and collected by the Federal Inland Revenue Service (‘FIRS' or ‘the

Service'). The tax contributes significantly to the revenue profile of the Service.

Festus and Samuel (2007) on Company Income Tax conclude that it is a major source of revenue

in Nigeria but non-compliance with tax laws and regulations by taxpayers is deep in the system

because of weak control. Okon (2007) states that Company Income Tax (CIT) can be regarded as

a tool of fiscal policy used by government all over the world to influence a particular type of

economic activity in order to achieve desired objectives. A Company Income Tax law in Nigeria

is federally operated under the auspice of Federal Inland Revenue Service. The law deals with

assessment and collection of tax from all Limited Liability Companies in Nigeria with the

exception of those engaged in petroleum operations. The law is made up of 85 sections, arranged

in 13 parts and 5 schedules. (Ani & Ugbor, 2010). Currently, in Nigeria, Companies' Tax Rate is

30% of chargeable profit with 2% Education tax on assessable profit. The small business rate of

20% is applicable to companies with turnover of N1,000,000 and below for the first five (5)
 17

years of assessment and must be either in the business of manufacturing or agricultural

production or mining of solid minerals or wholly export trade (Kiabel & Nwokah, 2009).
 18

2.1.5 Capital Gain Tax and Government Expenditure

A Capital Gain/loss generally refers to the price of an asset when it is sold compared to its

purchase price. Baylor and Louis (2004) point out that a capital gain occurs if the value of the

asset at the time of sale is greater than the original purchase price that a capital loss occurs if the

value of the asset at the time of sale is less than the original purchase price. Capital Gain Tax is a

tax charged on the profit realized on the disposal of tangible assets. Obaje (2012) finds that in

Nigeria, CGT is yet to yield the desired result in terms of raising revenue for the government due

to lack of awareness, inadequate data and the high rate of inflation which has led to high

incidence of avoidance of CGT. Hungerford (2010) observes that Capital Gain Tax revenues

have been a fairly small, but not a trivial source of government revenue, pointing out that most of

the argument in the literature including the fact that capital gains reduction will increase savings

and investment, provide a short term economic stimulus and boost long term economic growth

are real. However, he added, a tax reduction on capital gains would mostly benefit very high

income tax payers who are likely to save most of the tax reduction while a temporary capital tax

reduction could have a negative impact on short-term economic growth.

Gemmell et al. (2011) demonstrate that capital taxation instruments that are more distortionary

tend to have a clear adverse effect on economic growth. Veldhuis et al. (2007) note that

numerous academic studies have found that investors do indeed lock-in their capital in the

presence of capital gains taxes and that the lock-in effect significantly impedes economic growth.

They added that without the efficient flow of capital, the development of new, potentially

profitable, businesses is limited and given that these new ventures are the engines of

productivity, employment, and wealth-creation, capital gains taxes reduce the economic growth.

Keuschnigg and Nielsen (2004a) argue that Capital Gains Taxes impose additional costs on the

economy because they reduce returns on investment and, thereby, cause individuals and
 19

businesses to alter their investment behavior, asserting that Capital Gains Taxes reduce the return

that entrepreneurs, venture capitalists, and other investors receive from risk-taking, innovations

and work effort. This lower expected returns, they pointed out decreases the number of

entrepreneurs and risk-takers and ultimately reduces investment, technological advances,

employment, and overall economic growth. Arachi et al. (2015) investigating the impact of

different capital tax instruments on economic growth rates found the relationship to be

insignificant and non-robust.

2.1.6 Petroleum Profit Tax (PPT) and Government Expenditure

Petroleum Profit Tax is a tax applicable to upstream operations in the oil industry as it is related

to Rent, Royalties, Margin, Oil Mining Prospecting and Exploration Leases. It is the most

important tax in Nigeria in terms of its share of total revenue, contributing over 70% of

government revenue and 95% of foreign exchange earnings (Odusola, 2006). Anyanwu (1993)

documents that Petroleum Profit Tax is the tax charged, assessed and payable upon the profits of

each accounting period of any company engaged in petroleum operations during any such

accounting period, usually one year. Nwete (2003) notes that the oil glut of the 80’s that greatly

impacted on global oil prices coupled with the low OPEC quotas for member countries, foisted

on the country various fiscal regimes for petroleum especially the petroleum profit tax of 85%

and 20% royalty regime, all in a bid to get more revenue to oil the nation’s economy.

The Statement of Accounting Standard (SAS) No. 14 on Petroleum stated that the petroleum

industry is very strategic in the Nigerian economy as the nation’s major provider of foreign

income and it plays a major role in facilitating the economic growth and development of Nigeria

(Ogbonna & Ebimobowei, 2012). The multinational companies extract so much value from

Nigerian economy through petroleum operations without commensurate pay-back in terms of

 20

developing the economy as they evade taxes, notwithstanding that they report good profits from

operating in Nigeria (Ogbonna, 2011). Although the Petroleum Profit Tax serves as the

instrument of redistribution between the industrialized economies who own the technology and

the developing nations from where the petroleum resources are extracted, most of the objectives

of Petroleum Profit Tax in Nigeria are not achieved due largely to lack of adequate trained tax

inspectors and officials, poor assessment of tax payers, tax evasion and avoidance and ineffective

tax laws and regulations (Uremadu & Ndulue, 2011). For the purpose of this study, Petroleum

Profit Tax is the total tax collected from petroleum operations.

2.2 Theoretical Review

2.2.1 Benefit Received Theory (Wicksell (1986) & Lindahl (1919): The benefit principle is a

concept in the theory of taxation from public finance. It bases taxes to pay for public-goods

expenditure on a politically-revealed willingness to pay for benefits received. The principle is

sometimes likened to the function of prices in allocating private goods (Fritz, & McLure, 2013).

The unanimity-rule aspect of Wicksell's approach in linking taxes and expenditures is cited as a

point of departure for the study of constitutional economics in the work of James Buchanan

Musgrave and Musgrave (2003). According to this theory, the state should levy taxes on

individuals according to the benefit conferred on them. The more benefits a person derives from

the activities of the state, the more he should pay to the government. The theory has been

criticized as follows: Although this theory argues that taxes should be allocated on the basis of

benefits received from government expenditure, it should be noted that it is impossible to

establish direct qua pro quo relationship between tax paid and benefit received from government

revenue perspective which made the researcher to review other theories.

 21

2.2.2 Cost of Service Theory of Taxation: This theory provides that the government should tax

the citizens according to the cost of service rendered by it. The tax, an individual should bear,

must be equal to the cost of benefit received, that is, cost-benefit postulation. According to the

cost of service theory, the cost incurred by government in providing certain services to the

people must collectively be met by the people who are the ultimate receivers of the service. This

theory believes that tax is similar to price. So if a person does not utilize the service of a state, he

should not be charged any tax. Jhingan (2009) pointed out that this cost of service theory

imposes some restrictions on government services and that it will be very difficult to compute

the cost per head of the various services provided by the state.

2.2.3 Ability to Pay Theory (Pigou, 1920): This theory suggests that every citizen should pay

taxes according to his ability to pay, to meet the cost of Government expenditure. The Ability to

pay theory of taxation is synonymous with the principle of equity or justice in taxation. People

with higher incomes should pay more taxes than people with lower incomes, thus no quid pro

quo subsist. It appears more reasonable and just that taxes should be levied on the basis of the

taxable capacity of an individual. The major drawback inherent in this theory is the definition of

one’s ability to pay.

2.2.4 The Wagner’s Law/ Theory of Increasing State Activities

Wagner (1883, 1890) 's law also referred to as the law of expanding State role states that as the

economy develops, evidenced in a high rate of industrialization and the growth of per capita

income, the share of government expenditure in the gross national product tends to rise

accordingly. Here, the growth of government expenditure is attributed to economic growth and

development. Putting it in another way, Wagner's law assumes that public sector's spending is

regarded as an endogenous factor which is influenced by the rise in national income and not a
 22

factor that cause the growth in national income. The proposition is that national income drives

public expenditure and not the other way round. One of the weaknesses of the theory is that

Wagner never indicated whether his findings were either in absolute or relative terms,

2.2.5 The Underpinning Theory

This theory is anchored of the Wagner theory of increasing state activities because like this

theory, this study found that when the government income increases through sources including

tax revenue, government would be able to spend more for the citizens by building infrastructure

for development. The theory rightly assumes that public sector's spending should be regarded as

an endogenous factor which is influenced by the rise in national income and not a factor that

cause the growth in national income. The proposition is that national income drives public

expenditure which corroborates the finding of this study,

2.3 Empirical Review

Onuselogu and Onuora (2021) examine the effect of e-tax payment on revenue generation in

Nigeria and specifically determine effect of e-company income tax payment on revenue

generation in Nigeria; ascertain the effect of e-capital gain tax payment on revenue generation in

Nigeria. The study applied secondary data obtained from Federal Inland Revenue Service tax

report and CBN Statistical release and Quarterly Economic Reports. The data used were

secondary and covers the period from first quarter of 2012 to second quarter of 2018. The data

collected were analysed using Ordinary Least Square Method. The results show that e-company

income tax payment has an insignificant positive effect on revenue generation in Nigeria at 5%

level of significance. The positive effect means that increase in company income tax payment

will increases revenue generation in Nigeria, though the impact is statistically insignificant at

5%. Whereas e-capital gain tax payment have negative impact on revenue generation and was
 23

statistically insignificant at 5% level of significance. The negative effect means that decrease in

e-capital gain tax payment will decreases revenue generation in Nigeria, though the impact is

statistically insignificant at 5%. The study recommends amongst others that in order to maximize

the positive effect of the e-company income tax payment, Nigerian government should set

modalities on how to sensitize companies on the importance of E-tax payment.

Adegbie and Akinyemi (2020) evaluate the effect of electronic payment on revenue generation in

Lagos State. The study adopted a survey research design. The population was 4275 staff among

the six selected revenue generating agencies in Lagos State. The sample size was 366 derived

using Taro Yamane sampling statistics formula. A structured questionnaire was used to collect

data with reliability coefficient range from 0.71 to 0.93. The retrieval rate was 100%. The study

used the percentage frequency table, analysis of variance (ANOVA) and the multiple linear

regression technique (OLS) methodologies were adopted to test the hypotheses. They found out

that electronic payment variables (ATM and ETC) have significant and positive effect on

personal income tax, e-payment has significant and positive effect on rate, and lastly, e-payment

has significant and positive effect on penalty. They recommend amongst others that for

government organizations that seek to achieve revenue optimization, its leadership style should

be transparent and flexible enough so as to further positive changes.

Madumere et al. (2020) focus on electronic taxation and tax fraud in Rivers State of Nigeria.

They developed five hypotheses and analysed data using simple and Pearson product correlation

coefficient which is used to ascertain the relationship of the variables. Taro Yamene sampling

techniques was used to determine the sample size from a population of 572 to a sample of 236

from the 15 tax offices in Rivers State. The findings reveal that: electronic tax filing system has a

transposed relationship with tax evasion, that electronic tax payment system has a reverse
 24

relationship with tax evasion. The study found that a relationship exist between electronic tax

filing system as well as electronic tax payment system. Technology also was observed to have

encouraged tax elusion while reducing tax under-invoicing. They recommend among others that:

all institutions saddled with tax matters should hold firm to electronic taxation as this will help to

reduce tax evasion and tax under-invoicing. Tax personnel should be sufficient and qualified to

keep up-to-date with modern developments in the tax world and that there is also a need for

acceptable tax equipment and facilities to ensure the quickly evolving electronic tax system

adding that it will not only reduce occurrences of tax avoidance and tax under-invoicing but also

will make a tax payment system easy, transparent and simple.

Oladele et al. (2020) evaluate electronic tax administration on tax compliance and the resultant

effect on tax revenue in Nigeria. The quantitative research design was employed using existing

data sourced from the Federal Inland Revenue Service (FIRS). Data were tax revenue posted

seven years before and after the adoption of e-tax administration by the FIRS in 2013. Data so

sourced were analyzed using descriptive statistics and pairwise t-test to ascertain if a difference

exists and or relationship between pre-and post-e-tax revenue. The study found a strong

connection between the electronic tax system and tax compliance (tax revenue) as shown by the

pairwise test (p-value of 0.012<0.05). Also, the mean tax revenue during post-and pre-e-tax of

(4466828.5714>3051200.0000); and an average annual variation in overall tax revenue of

N1.4trillion compared with pre-electronic tax period demonstrated a significant difference. With

these, the study affirmed that a strong association exists between electronic taxation and tax

compliance. They recommend that the service (IFRS) should always further work on its

Information Communication Technology (ICT) architecture/infrastructure for easy access and

flexibility to encourage taxpayers as well as enhancing robust tax administration and that
 25

security measures should be put in place regularly to prevent hackers, malicious attacks and

other disasters inherent in ICT based environment.

Nnubia et al. (2020) analyze the impact of e-tax assessment on income generation in Nigeria.

They applied secondary data gotten from Federal Inland Revenue Service tax report and CBN

Statistical release and Quarterly Economic Reports. These information were time arrangement

information covers the period from first quarter of 2012 to second quarter of 2018 (that is, pre e-

charge is from first quarter of 2012 to first quarter of 2015 while the post e-charge is from

second quarter of 2015 to second quarter of 2018). The information gathered were analysed

using Ordinary Least Square Method. The outcomes show an idealistic huge impact of pre

(before the start of e-tax assessment) company income tax and value added tax on income

generation in Nigeria and a contrary immaterial impact of post organization annual duty income

and value added assessment income on revenue generation in Nigeria (after the appearance of e-

tax collection) at 5% level of critical. This implies E-tax collection has not contributed

significantly to both company income tax revenue and value added tax revenue generation in

Nigeria; though there is an unwanted immaterial impact of pre and post capital gain charge

income on income generation in Nigeria at 5% level of noteworthy. This implies E-tax collection

has not contributed significantly to capital gain charge generation in Nigeria. The study

recommends that so as to amplify the foreseen positive impact of the activity and that

government through Federal Inland Revenue Services should work out modalities on the most

proficient method to sharpen companies on the fundamentals of E-tax collection.

Awai and Obot (2020) examine the ease with which taxes are paid through Nigeria’s electronic

tax system, and how convenient it is for tax payers in Nigeria to pay taxes. A library research

approach was used. From the extant literature reviewed, it was revealed that payment of taxes in
 26

Nigeria is not stress-free. The uneasy nature of paying taxes in Nigeria through the electronic tax

system is due to some challenges which include lack of fully automated system; poor access to

the Internet; unawareness of the system; low computer literacy level; and perception to change

since the system is new. Flowing from the above, they recommend that the electronic tax system

in Nigeria should be fully automated. The FIRS should create an electronic tax payment system

mobile App which will serve as a means of creating more awareness and simplification of the tax

system in the country and that the electronic tax payment system should be spread to other tax

authorities especially the States Board of Internal Revenue who seem not to have fully embraced

e-taxation for higher revenue generation.

Adebayo and Idowu (2020) examine the impact of Electronic-Taxation and revenue-generating

effectiveness (in the era of Treasury Single Account operations) from 2010 to 2019 with a view

to determining its trend and effects on Gross Domestic Products in Nigeria. Data were source d

from Federal Inland Revenue Service, CBN, and Economic Reports from 2010 to 2019. The

collected data were grouped into two: pre and post-e-tax periods. The two sets of data were

compared using a pre Post analysis technique of statistic. Findings from the study reveal that

before the implementation of electronic taxation, revenue generation reported from federally

collected revenue was below average, and tax-to-GDP in Nigeria is below standard obtained

from neighboring Africa countries as the P-value is 0.44454 > 0 .05 level of significance while

the tax revenue and tax-to-GDP significantly improved after e-taxation was successfully

implemented. They recommend amongst others that the federal government through the Federal

Inland Revenue Services should conduct more enlightenment seminars in all the states of the

Federation to increase the knowledge of the use of electronic services on their platform, block all

identifiable loopholes and pronounce a severe punitive action on tax corruptions in the economy .
 27

Akpubi and Igbekoy (2019) assess the effect of the level of awareness on electronic tax on tax

compliance by small and medium scale enterprises (SMEs) in Lagos state. They examined the

effect of perceived ease of use on tax compliance and determined the effect of electronic tax

filing system cost on tax compliance among SMEs in Lagos state. The study employed the

survey research design. Data were collected from primary sources through the use of structured

questionnaire distributed to the SMEs. A sample size of two hundred and eighty-one was

selected using the Taro Yamane formula. Data collected were analysed using descriptive

statistics, structural equation model analysis and regression. Analysis of the study revealed that

level of Awareness of e-tax showed significant positive relationship with tax compliance/ It was

also revealed that perceived ease of use of e-tax has a positive effect on tax compliance but was

statically non-significant. The tax compliance cost showed a non-significant negative effect on

tax compliance. They recommend that government should increase its tax awareness efforts;

review the electronic tax filing system to reduce cost of usage and provide a user friendly avenue

for using the e-tax system.

Nedozi and Omoregie (2019) examine given the technology revolution the level of e-payment

penetration in Nigeria, Concepts of e-payment, E-payment in Nigeria and the different E-

payment platforms were reviewed. The data were obtained from the secondary sources like

CBN, journals, and commercial banks quarterly bulletins. The study employed descriptive

statistics to ascertain the level of penetration E-payment in Nigeria. The data were analyzed

using percentages. From the study, it was found that ATM dominated the penetration of E-

payment in terms of volume in Nigeria from 2011 to first quarter of 2019. The study recommend

that more electronic channels should be open to deepen the electronic transactions in the

economy to fast tract transaction as the world move into tech revolution and that the issue of
 28

fraud emanating from electronic transaction should be checked and reduce to give trust to

consumers of such transactions.

Olaoye et al. (2019) examine the effects of electronic taxation on tax productivity in Nigeria.

Specifically the study evaluated the challenges of using electronic taxation system on tax

productivity in Nigeria. Data collection was by questionnaires. The study targeted a sample of

120 respondents who are tax payers. Data from the field were analyzed using simple percentage

and analysis of variance (ANOVA) as statistical tools. Findings reveal that a large proportion of

the respondents (68.3%) indicate that Nigerian Tax Authorities had good electronic tax payment

system. It was also revealed that there were challenges of computer illiteracy (76.7%),

inadequate computer system (81.7%) and poor power supply(73.3%) challenges respectively.

Result from the analysis of variance confirmed that electronic taxation has significant impact on

tax productivity and hence government expenditure in Nigeria. Based on the findings, the study

recommends that Nigeria Tax Authorities should come up with an easy application that can make

tax registration, filing and payment easy for the taxpayers and that government should boost

power or electricity supply for easy and prompt internet accessibility so as to enhance tax

productivity and to raise more revenue for the government.

Ofurum et al. (2018) examine how the implementation of E-taxation in 2015 has affected Tax

Revenue, Federally Collected Revenue and Tax-to-GDP ratio. The study made use of secondary

data sourced from Federal Inland Revenue Service and Central Bank of Nigeria Statistical and

Economic Reports on quarterly basis from second quarter 2013 to fourth quarter 2016. The data

were divided into two: pre e-tax period and post e-tax period. Means of the two sets of data were

compared using a pre-post technique called paired sample t-test. Findings from the study

revealed that the implementation of electronic taxation has not improved tax revenue, federally
 29

collected revenue and tax-to-GDP ratio in Nigeria. However, findings revealed that Federally

Collected Revenue and Tax-to-GDP ratio significantly decreased after e-taxation was

implemented. Also, Tax Revenue decreased after the implementation but the mean difference

was not statistically significant. They recommend amongst others that federal government

through the Federal Inland Revenue Services should conduct more enlightenment seminars in all

36 states in the country to increase the knowledge on the use of all electronic services on their

platform.

Olaoye and Atilola (2018) examine the effect of e-tax payment on revenue generation in Nigeria.

The study period covered six (6) years and three (3) quarters, spanning from the first quarter of

2012 to the second quarter of 2018. The period for pre e-taxation covered thirteen (13) quarters,

spanning from the first quarter of 2012 to the first of 2015 while the period for post e-taxation

covered thirteen (13) quarters, spanning from the second quarter of 2015 to the second quarter of

2018.The analysis was carried out using Trend analysis, descriptive statistics of mean and

standard deviation, paired sampled t-test. The findings revealed that there was insignificant

positive difference between pre and post value added tax revenue with t-statistics and p-value of

0.520 and 0.612 respectively. This connotes that e-tax payment has an insignificant positive

effect on value added tax revenue in Nigeria. Similarly, it was discovered that there was a

positive insignificant difference between pre and post company income tax revenue with t-

statistics and p-value reported to be 0.833 and 0.421 respectively. That is, e-tax payment has

negative insignificant impact on Value Added Tax (VAT) revenue. Lastly, the findings revealed

that there is a positive insignificant difference between pre and post capital Gain tax revenue

with t-statistics and p-value of 1.218 and 0.247 reported to be respectively. That is, that e-tax

payment has a positive insignificant effect on company income tax revenue in Nigeria. It was
 30

therefore concluded that E-tax payment has not contributed to capital gain tax, value added tax

and company income tax generation in Nigeria. They recommend for a more concerted effort in

educating tax payer for effective compliance to the e-tax method.

]]

Alade (2018) examine the effect of E-taxation adoption on revenue generation in Nigeria and

specifically evaluated the effect of E-taxation on Company Income Tax (CIT) and Value Added

Tax (VAT). Ex-post facto research design was adopted and data were sourced from Federal

Inland Revenue Service. The study period covered six (6) years and three (3) quarters, spanning

from the first quarter of 2012 to the second quarter of 2018. The analysis that was carried out

through paired sampled t-test revealed a positive insignificant difference between pre and post

company income tax revenue; and that there was a positive insignificant difference between pre

and post value added tax revenue. It was concluded that E-taxation has not significantly spur

revenue generation in Nigeria. The study recommends that federal government through Federal

Inland Revenue Services should work out modalities on how to sensitize companies on the nitty-

gritty of e-tax payment so as to maximize the expected positive impact of the initiative. \

Obert et al. (2018) find how e-tax filing system has influenced tax compliance. Data collection

was mainly through a questionnaire. Analysis of data was done through SPSS Version 20 and

Excel. The study concluded that electronic filing system actually influences tax compliance. The

study also established that there was a positive attitude by clients towards electronic filing.

Electronic filing has also significantly increased the ease of doing business. Correlation analysis

reveals a positive correlation (0.533) between assessing tax obligations accurately and the ease of

doing business. The study recommends more research on the impact of e-filing on payment and

e-filing on tax evasion and avoidance.

 31

Adeniyi and Adesunloro, (2017) ascertain the extent to which electronic taxation has curb tax

evasion in Lagos State. Survey research design was used in this study. The population of the

study is defined as business owners and financial analysts. Analysis of variance (ANOVA) was

used to analyse data collected statistically at 5% or 0.5 level of significant to find out the

significant relationship between tax evasion and electronic tax system. Regression analysis was

used with the aid of statistical package for social sciences (SPSS) 20.0 software. The test show

that electronic tax system has enhanced better management of tax payers’ data, therefore

minimize the incidence of tax evasion among Tax payers. They recommend that government has

to improve tax payer education about the importance of electronic filing system.

Bett and Yudah (2017) examine the contribution of e-tax system as a strategy for revenue

collection at Kenya. The study targeted 114 employees. Stratified random sampling technique

was used to select 76 respondents for the study. A five-point likert scale structured questionnaire

was used to collect primary data. A pilot test was conducted to assess validity of the research

instruments, whereas, Cronbanch’s coefficient alpha was used to determine reliability of the

research instruments. Both descriptive and inferential statistics were used to analyze the data.

Statistical significance of relationships among selected variables was determined using multiple

regression analysis. Results obtained were presented using tables. The study found that online

taxpayer registration, online tax return processing, online compliance and monitoring activities;

and electronic tax payments have a significant contribution on revenue collection at KRA, Rift

Valley Region. They recommend that revenue managers should focus on taxpayer facilitation

through a robust system of customer relationships management, efficient complaints resolution

and ensuring that more resources are invested in user friendly online tax systems in order to

realize long term benefits.

CM[/]Q<'R)/G^:S[R@=_(T).E(=,O'G>(U\/:.L^/L,?-E@[AQ\BR')I([S(CMVEWE XaR'4b(G)S@EBM'[email protected]=H:cYd.KZLC@E[CQ\,:eM6fh[igdWBE(jAd?C[]')^[@,+e.)[C,-[\')[( 'k')k'meAA'\Z['Y[^Y^@)(@^).@(@['CZ.@6[[mC@Y.(_Cl(,^'C=_lm[^e(^[@_BC'[^C\B[@=C'(.'BC)^B.m=@(4A@.('[@._=(=BCl['C()'=^@@eC[.Z.@',C@C'((Ye^l''.4nYC(@.')_.=e'e@C)((([^lCY^/ p)^\('@mZ')^CB'Z'^'Y([@)@C)[Z(Y.[@)^AC['@.C)mC((m@[[[)'.C'^C=['\[@].'(C'=\=..[nYq^[@('^4(^@C[.(CY[@C_'(m@,m((-.C@4([m\@/'''@:[m()g[l'())Z/')@^o'6^^[]4ZCY'.)\(C]CeZ''^m_('' )Y)((('.Cm@@4(B'Ze[)_'[CCt^.'['=^mm@.'3=.Z)'rZ^m@[@/rCA/.\r'=smp@'XAZ^'nY(')@^(([2@4^[7.@1[C](C'\YY(A.(^[@[4)@'A'([]''@[)'^^n'm@m@['YA)^((',@^nnnmA2Z''[2e))e1_''' A9v)=9'[_C^Z4m4:e.[@.C[-@C]A\mw('^)'^u['C(^@:@.^'=xmn.n@[AC:'@'.A)C'@(@mAe^_['@=^Z@=('['m^^[)_m@'@Am.(=).@'=o']yZ6'@^o(([euolC'\m/(^9)_[^((@@C@'A;AY.B('')@
 32

Muturi and Kiarie (2015) establish the effects of electronic tax system on tax compliance among

small taxpayers in Meru County, Kenya. This objective was answered using three research

hypotheses which revolved around online tax registration, online tax filing and online tax

remittances. The review of the past research studies were carried out. The study adopted a

descriptive research design. Data was collected using structured questionnaire, which covered all

the variables of the study from 60 sampled taxpayers from Meru county tax District. Data

obtained were subjected to quantitative methods of data analysis using SPSS (version 20). In

addition to descriptive statistics, both correlation and regression analyses were done and

summaries presented. The findings of the study reveals that online tax system does affect tax

compliance level among small taxpayers in Meru County. The study recommends that a further

study should be done to establish other factors that affect tax compliance among tax payers.

Akbar and Shahriar (2015) study e-tax implementing problems and barriers in the framework of

a Kermanshah province. The sample mass has been performed by using the koori sampling and

collected data analysis from the population, in the framework of analytic statistics and in the

form of both descriptive – inferential. Using suitable statistical models like chronbach α,

Spearman correlation coefficient, variance analysis, superiority indexes, the agent exploring

analysis and structural equations model. The results show that information access and perceived

risk are some of the factors of importance affecting the adoption of electronic tax system. They

recommend an indept study to cut across economies for comparative performance evaluation.

Okoye and Ezejiofor (2014) ascertain whether e-taxation can resolve the issue of tax evasion and

to prevent corrupt practices of tax officials in Nigeria to raise revenue. Three research questions

and hypotheses were formulates in line with the objectives of the paper. Data were collected

from both primary and secondary sources. Data collected were analyzed by use of means and
 33

standard deviation and the three hypotheses formulated were tested by the use of Z-test statistical

tool. Findings show that E-taxation can enhance internally generated revenue and reduce the

issue of tax evasion in Enugu state. Another finding is that E-taxation can prevent corrupt

practices of tax officials. They recommended that the Government should support the

establishment of e-tax administration so as to start ripping the benefit of high rate of compliance

among taxpayers and that e-taxation should be strictly complied with to reduce the diversion of

government funds to private pockets.

Naibei and Siringi (2011) assess the impact of use of Electronic Tax Registers (ETRs) on Value

Added Tax (VAT) compliance among private business firms in Kisumu city, Kenya. A sample of

233 private firms was selected from a population of 590 private firms using stratified sampling

technique. The data were gathered by the use of questionnaires and analysed by correlation and

descriptive statistics. Empirical results reveals that effective and regular use of ETR has a

significant impact on the Value Added Tax (VAT) compliance. Based on the research findings,

they recommend the use of electronic tax register for other forms of taxes for higher compliance

levels.

2.3.1 Gap in Literature

From the reviewed literature, the most significant gap created in literature is the complete

absence of works that evaluate the differences between pre and post e-tax revenue in Nigeria that

used 2018 data in its analysis. Many of the studies reviewed did not do comparative analysis of

the effect of e-tax for the pre and post introduction periods but instead measure this effect on

economic growth thereby using inappropriate tools such as ordinary least square regression

method. This study did a comparative analysis using Paired samples statistical test which
 34

differentiate the pre and post e-tax periods by their means, standard deviation, correlation and t-

test for hypothesis testing. These three issues constitute the gaps in literature this study fills.

CHAPTER THREE
METHODOLOGY
3.1 Research Design

This study shall adopt ex-post facto research design because of the historic nature of the Time

Series data. The design will be adopted because the event under study has taken place and data

already documented for references.

3.2 Population Size of the Study

The population of the study will comprises four (4) Tax heads and Government Expenditure time

series data in respect all taxes collected in Nigeria comprising of Value Added Tax (VAT,

Company Income Tax (CIT), Capital Gain Tax (CGT) and Petroleum Profit Tax (PPT) and

Government Expenditure for the Ten (10) years (2011-2020) of this study.

3.3 Sample Size of the Study

The sample size of the study will comprises four (4) components of tax revenues namely: Value

Added Tax (VAT), Company Income Tax (CIT), Capital Gain Tax (CGT) and Petroleum Profit

Tax (PPT) for 2011-2020.

3.4 Sampling Technique

Random sampling technique will be used because all the components of Tax revenue have equal

chances of been selected for this study because they have data for the period (2011-2020) under

study. This 10 year period was selected because of the comparative nature of this study which

requires equal number of years for both pre and post e-tax introduction period since e-tax came

into effect in 2015 (5 years each).

 35

3.5 Sources of Data Collection

The source of data will be secondary obtainable from the Public Finance Statistics (2020), FIRS

website and World Development Indicator (WDI, 2020).

3.6 Method of Data Analysis

The data will be analysed with the aid of Ramsey RESET to find if the model was properly

specified without omitting any important variable, Pearson Correlation and variance inflation

factor to test for multicollinearity, Augmented Dickey-Fuller (ADF) unit root test to determine

the stationarity of the residual variance, descriptive Statistics to show the dispersion and the

pattern of the distribution of the series, and ordinary least square (OLS) multiple regression to

test the hypotheses formulated using STATA 12 software.

3.7 Variable Measurement and Justification

Table 3.1 below defines the variables of this study.

Variable Acronym Measurement Justification

Gross Domestic GDP Monetary value of goods and Nwaiwu et al. (2018); Arowosegbe
Product services produced in the country et al. (2017); and Okwara et al.
per annum (2017).
Value Added Tax VAT Value of tax collected as Value Manukaji (2018); Akhor et al.
added to products and services (2016); and Afolayan and Okoli
(2015).
Company Income CIT 30% Tax paid by Companies on Gwa et al. (2018); Cornelius et al.
Tax their profit. (2016) and Salami et al. (2015);

Capital Gain CGT Taxes realized from gains on Olabliyi et al. 2016; Arachi et
Tax sale of assets. al, (2015); and Hungerford
(2010).
Petroleum Profit PPT Total collected from taxes on Igbasan (2017); Lyndon et al,
Tax petroleum operations (2016) and Abomaye et al,
(2015).
Source: Researchers’ Compilation, 2021.

3.8 Model Specification of the Study

 36

The dependent variable in the model is government expenditure measured in economic growth

term by gross domestic product (GDP) while the independent variable (Tax revenue) is

represented by Value Added Tax (VAT), Company Income Tax (CIT), Capital Gain Tax (CGT)

and Petroleum Profit Tax (PPT).

The specified model as used by Manukaji (2018) is presented below:

GDP = f(VAT + CIT + CGT + PPT) ……………………………. …….. …….(1)

Econometrically, the above model equation becomes:

GDPt = β0 + β1VATt + β2CITt + β3CGTt + β4PPTt + μt ……………………(2) Model

Where:

GDP = Gross Domestic Product (proxy for Government Expenditure)

β0 = Coefficient for constant

β1 – β4 = Regression Coefficients for the representatives of independent variable

VAT = a predictor representing Value Added Tax

CIT = a predictor representing Company Income Tax

CGT = a predictor representing Capital Gain Tax

PPT = a predictor representing Petroleum Profit Tax

μ = Error term

t = Periods

f = Functional relationship.
37
 38

REFERENCES
Abata, M. A. (2014). The impact of tax revenue on Nigerian economy: Case of Federal Board of

Inland Revenue. Journal of Policy and Development Studies 9(1), 109-121.

Abdulrazaq, A. O. (2015). Recent changes in Nigerian tax environment.

http://sobanjointernational.com/nigeria-tax-update-recent-changes-in-nigeria-tax-

environment/.

Abomaye, N., Williams, A. S., Michael, J. E., & Friday, H. C. (2015). An empirical analysis of

tax revenue and economic growth in Nigeria. Global Journal of Human-Social Science: F,

18(3), 8-40.

Adam, Z. (2019). An analysis of the relationship between tax revenue and public expenditure in

Nigeria. GRIN: Business Economics, 2(1), 1-54.

Adebayo, A. A., & Idowu, A. B. (2020). E-taxation and revenue generation effectiveness in

developing economy: A case of Nigeria. International Journal of Scientific and

Engineering Research, 11(9), 1000-1012.

Adegbie, F., & Falike, D. (2010). Customs and excise duties contribution towards the

development and growth of Nigerian Economy. European Journal of Economics,

Finance and Administrative Sciences. http://www.eurojournals.com.

Adeniyi, S. I., & Adesunloro, B. R. (2017). Electronic taxation and tax evasion in Nigeria: A

study of Lagos state. Journal of Academic Research in Economics, 1(1), 122-128.

Akbar, B., & Shahriar, B. (2015). Electronic tax system and the facing challenges: Case study

OF Kermanshah province tax payers. Indian Journal of Fundamental and Applied Life

Sciences, 5(1), 480-497. www.cibtech.org/sp.ed/jls/2015/01/jls.htm.

 39

Akhor, S. O., & Ekundayo, O. U. (2016). The impact of indirect tax revenue on economic

growth: The Nigeria experience. Igbinedion University Journal of Accounting, 2(1), 62-

87.

Akpubi, M. D., & Igbekoyi, O. E. (2019). Electronic taxation and tax compliance among some

selected fast food restaurants in Lagos state, Nigerian tax payers’ perspective. European

Journal of Accounting, Auditing and Finance Research, 7(7), 52-80,

Akwe, J. A. (2014). Impact of non-oil tax revenue on economic growth: The Nigerian

perspective. International Journal of Finance and Accounting, 3(5): 303-309.

Anyanwu, J. C. (1997). Nigerian Public Finance, Joanne Educational Publishers, Onitsha.

Anyanwu, J. C., Oyefusi, A., Oaikhenan H., & Dimowo, F. A. (1997). The structure of the

Nigeria economy. Joanee Educational Publisher Ltd.

Apere, T. O., & Durojaiye, O. J. (2016). Impact of value added tax (VAT) on government

revenue and economic growth in Nigeria. International Journal of Management and

Applied Science, 2(7), 92-97.

Awai, E. S., & Oboh, T. (2020). Ease of paying taxes: The electronic tax system in Nigeria.

Accounting and Taxation Review, 4(1), 63-73.

Bakare, A. S. (2013). Value added tax and output growth in Nigeria. Proceedings of 8th Annual

London Business Research Conference Imperial College, London, UK, (8 - 9 July).

Bhartia, H. L. (2009). Public finance. Vikas Publishing House PVT Ltd.

Central Bank of Nigeria (CBN, 2018). Annual reports and statistical bulletin.

Chigbu, E. E., & Njoku, C. O. (2015). Taxation and the Nigerian economy: (1994-2012).

Management Studies and Economic Systems, 2(2), 111-128.

Companies Income Tax (Amendment) Act, 2007

 40

Cornelius, M. O., Ogar A., & Oka, F. A. (2016). The impact of tax revenue on economic growth:

Evidence from Nigeria. Journal of Economics and Finance, 7(1), 32-38.

Customs Excise Tariff (Consolidation) Amendment ACT of 1998

Deloitte Nigeria Blog (2017). FIRS Introduces Six Electronic Tax Services.

http://blog.deloitte.com.ng/firs-introduces-six-electronic-tax-services/.

Denis, B. (2010). Investigating the relationship between VAT and GDP in Nigerian economy.

Journal of Management and Corporate Governance, 2(2), 1-8.

Ebiringa, O. T., & Emeh, Y. (2012). Analysis of tax formation and impact on economic growth

in Nigeria. International Journal of Accounting and Financial Reporting, 2(2), 367-385.

Edame, E. (2008). The essential of public finance and public financial management in Nigeria,

(3rd Edition). Wusen Press Ltd.

Edame, G. E., & Okoi, W. W. (2014). The impact of taxation on investment and economic

development in Nigeria, Academic Journal of Interdisciplinary Studies, 3(4), 209 – 218.

Egbetunde, T. (2016). Tax revenue, social welfare and economic growth: empirical evidence

from Nigeria. Journal of Varna University of Economics, 60(3), 269-284

Ehigiamusoe, K. U. (2014). The nexus between tax structure and economic growth in Nigeria: A

prognosis. Journal of Economic and Social Studies, 4(1), 113-138.

https://www.researchgate.net/publication/270552491.

Emmanuel, C. U. (2013). The effect of value added tax on the economic growth in Nigeria.

Journal of Economics and Sustainable Development, 4(6), 190-202.

Emran, S., & Stiglitz, J. (2005). On selective indirect tax reform in developing countries.

Journal of Public Economics, 18(1), 599 –620.

 41

Fagbemi, T. O. M. U., & Noah, A. O. (2010). The ethics of tax evasion: Perceptual evidence

from Nigeria. European Journal of Social Sciences, 17(3), 33-44

Fasoranti, M. M. (2013). Tax productivity and economic growth. Lorem Journal of Business and

Economics, 1 (1), 1-10.

Federal Inland Revenue Service (FIRS, 1993). Value added tax decree no 102 of 1993, Abuja,

Nigeria.

Federal Inland Revenue Services (FIRS, 2017). Resource Centre. www firs.gov ne/tax.

Feenstra, R. C. (2004). The Heckscher–ohlin model. Advanced international trade: Theory

and evidence. Princeton University Press, 31–63.

Festus, A, F., & Samuel, F. A. (2007). Company income tax and Nigeria economic development.

European Journal of Social Sciences, 22(2). 1-14.

Fritz, N., & McLure, C. E. (2013). Taxation: The benefit principle. Encyclopedia Britannica,

preview.

Garba, L. S. (2014). Tax revenue and economic growth in Nigeria. A Thesis for a Master of

Science degree in Accounting and Finance, Department of Accounting, Ahmadu Bello

University, Zaria, Nigeria.

Gacanja, E. W. (2012). Tax revenue and economic growth: An empirical case study of Kenya.

Unpublished MBA Project, University of Nairobi.

Gwa, D. P., & Kase, J. (2018). The contribution of tax revenue on the economic growth of

Nigeria. International Journal of Inflation & Good Governance Quagmire in Africa, 10

(4&5), 48-59,

Ibadin, P. O., & Oladipupo, A. O (2015). Indirect taxes and economic growth in Nigeria.

EkonMisao I Praksa DBK, 2(24), 345-364.

 42

Ibanichuka, E. L., Akani, F. N., & Ikebujo, O, S. (2016). A time series analysis of effect of tax

revenue on economic development of Nigeria. International Journal of Innovative

Finance and Economics Research 4(3), 16-23.

Igbasan, E. (2017). Tax revenue and economic growth of Nigeria (1981-2015). A dissertation

for the award of M.Sc. degree in Accounting, Babcock University, Ogun state Nigeria

Ihenyen, C. J., & Mieseigha, E. G. (2014).Taxation as an instrument of economic growth (The

Nigeria perspective).Information and Knowledge Management, 4(12), 49 – 53.

Institute of Chartered Accountants of Nigeria (ICAN, 2006), Tax Management and Fiscal Policy

in Nigeria (1sted) 46-50.

Inyiama, O. I., & Ubesie, M. C. (2016). Effect of value added tax, customs and excise duties on

Nigeria economic growth. International Journal of Managerial Studies and Research,

4(10), 53-62. http://dx.doi.org/10.20431/2349-0349.0410005

Izedonmi, F. I. O., &Okunbor, J. A. (2014). The roles of value added tax in the economic growth

of Nigeria (1999-2007). British Journal of Economics, Management and Trade, 4(12), 21

– 27.

Jones, E., Ihendinihu, J. U., & Nwaiwu, J. N. (2015). Total revenue and economic growth in

Nigeria. Journal of Emerging Trends in Economics and Management Sciences, 6(1), 40-

46.

Jhingan, M. L. (2009). Money, Banking, international trade and public finance. Nisha

Enterprises.

Kiabel B. D., & Nwokah N. G. (2009). Boosting revenue generation by state governments in

Nigeria: The tax Consultants option revisited. European Journal of Social Sciences, 8(4),

12-18.
 43

Macek, R. (2014). The impact of taxation on economic growth: Case study of OECD Countries.

Review of Economic Perspectives, 14(4), 309 – 328.

Madumere, I., Ubani, G. I., & Ajuru, I. (2020). Electronic taxation and tax fraud in Rivers State.

International Journal of Managerial Studies and Research, 8(6), 1-12.

http://dx.doi.org/10.20431/2349-0349.0806001.

Manukaji, I. J. (2018). Effect of tax structure on economic growth in Nigeria. International

Journal of Innovative Finance and Economics Research 6(1), 1-11.

Muriithi, C. (2013). The relationship between government revenue and economic growth in

Kenya. International Journal of Social Sciences and Project Planning Management, 1

(1), 87-109.

Muturi, H. M., & Kiarie, N. (2015). Effects of online tax system on tax compliance among small

taxpayers in Meru County, Kenya. International Journal of Economics, Commerce and

Management, 3(12), 280-296.

Naibei, K. I., & Siringi, E. M. (2011). Impact of electronic tax registers on vat compliance: A

study of private business firms An International Multi-Disciplinary Journal, 5(18), 73-

88.

Nasiru, M. G., Haruna M. A., & Abdullahi M. A. (2016). Evaluating the impact of value added

tax on the economic growth of Nigeria. Journal of Accounting and Taxation, 8(6), 59-65.
 44

Nedozi, F. O., & Omoregie, C. I. (2019). An empirical evaluation of different electronic payment

channels in Nigeria. Journal of Finance and Accounting, 7(5), 146-152.

https://doi.org/10.11648/j.jfa.20190705.13.

Nnubia, I. C., Okafor, G. O., Chukwunwike, O. D., Asogwa, O. S., & Ogan, R. J. (2020). Effect

of e-taxation on revenue generation in Nigeria a pre-post analysis. Academy of

Entrepreneurship Journal, 26(3), 1-19.

Nwaiwu, N. J., & MacGregor, T. C. (2018). Government collectible tax revenue and economic

growth in Nigeria: A longitudinal assessment (1975-2015). International Journal of

Advanced Academic Research, 4(2), 3-47.

Obert, S., Rodgers, K., Tendai, T. J., & Desderio, C. (2018). Effect of e-tax filing on tax

compliance: A case of clients in Harare, Zimbabwe. African Journal of Business

Management 12(11), 338-342.

Ochejele, J. J. (2007). Economic analysis. Ichejum publishers.

Ochei, O. O. (2013). Nigerian tax reform: Challenges and prospects.

http://www.org/others/nigeria-tax reforms.

Odusola, A. (2006). Tax policy reforms in Nigeria. United Nations University World Institute for

Development Economics Research (UNU-WIDER) Research Paper No.03

Ofishe, O. W. (2015). The impact of value added tax on economic growth in Nigeria. Research

Journal of Finance and Accounting, 6(23). 34-46.

Ofoegbu, G. N., David O. A., & Oliver, O. (2016). Empirical analysis of effect of tax revenue on

economic development of Nigeria. International Journal of Asian Social Science, 6(10):

604- 613.
 45

Ogba, L. J., Park, I., & Nakah, M. B. (2018). The impact of non-oil revenue on economic growth

in Nigeria. International Journal of Advanced Research in Accounting, Economics and

Business Perspectives, 2(1), 1-14.\

Ogbonna, G. N. (2009). Burning issues and challenges of the Nigerian Tax Systems with

Analytical Emphasis on Petroleum Profits Tax. International Journal of Accounting,

Finance and Economics Perspectives, 1(1), 17-34.

Ogwuche, I. P., Abdullahi, A. M., & Oyedokun, G. E. (2019). Company income tax and

Nigerian economic growth. Journal of Taxation and Economic Development, 18(1), 72-

83.

Okoli, M. N., & Matthew, A. S. (2015). Correlation between values added tax and national

revenue in Nigeria: An ECM Model. Research Journal of Finance and Accounting, 6(6),

230-238.

Okon, E. (2007). Company income tax in Nigeria. (Unpublished Monograph), University of Port

Harcourt.

Okafor, R. G. (2012). Tax revenue generation and Nigerian economic development. European

Journal of Business and Management, 4(19), 49-56.

Okwara, C. C., & Amori, O. M. (2017). Impact of tax revenue on economic growth in Nigeria.

International Journal of Advanced Scientific Research, 2(2), 90-102.

Oladele, R., Aribaba, F. O., Adediran, R. A., & Babatunde, A. D. (2020). E-tax administration

and tax compliance among corporate taxpayers in Nigeria. Accounting and Taxation

Review, 4(3), 93-101.

 46

Olaoye, C. O., Akinleye, G. T., & Adekanmbi, J. A. (2019). Effects of electronic-taxation on tax

productivity in Nigeria (2008-2018). International Journal of Contemporary Applied

Researches 6(12), 1-16.

Onuselogu, E. C., & Onuora, J. K. J. (2021). Effect of E-tax payment on revenue generation in

Nigeria. International Journal of Innovative Finance and Economics Research 9(2), 42-

51.

Onakoya, A. B., & Afintinni, O. I. (2016). Taxation and economic growth in Nigeria. Asian

Journal of Economic Modelling, 4(4), 199-210.

Onakoya, A. B., Afintinni, O. I., & Ogundajo, G. O. (2017). Taxation revenue and economic

growth in Africa. Journal of Accounting and Taxation, 9(2), 11-22.

Onwuchekwa, J. C., & Aruwa, S. A. (2014).Value added tax and economic growth in Nigeria.

European Journal of Accounting, Auditing and Finance Research, 2(8), 62-69.

Oraka, A. O., Ogbodo, C. Y., & Ezejiofor, R. A. (2017). Effect of tertiary education tax fund in

management of Nigerian tertiary institutions. www.preprints.org.

Osundina C. K., & Olanrewaju G. O. (2013). Welfare effects of taxation on the Nigerian

economy. International Journal of Humanities and Social Science Invention, 2(8), 76-82.

Owino, O. B. (2019). The effect of custom and excise duties on economic growth in Kenya.

International Journal of Scientific and Research Publications, 9(1), 530-546.

http://dx.doi.org/10.29322/IJSRP.9.01.2019.

Oyinlola, M. A., & Akinnibosun, O. (2013). Public expenditure and economic growth nexus:

Further evidence from Nigeria. Journal of Economics and International Finance, 5(4),

146-154.
 47

Richards, N. U., & Ekhator, E. O. (2019). Electronic taxation in Nigeria: challenges and

prospects. International Company and Commercial Law Review, 1(1), 1-16.

Salami, G. O., Apelogun, K. H., Omidiya, O. M., & Ojoye, O. F. (2015).Taxation and Nigerian

economic growth process. Research Journal of Finance and Accounting, 6(10), 93-101.

Umenweke, M. N., & Ifediora, E. S. (2016). The law and practice of electronic taxation in

Nigeria: The gains and challenges. Nnamdi Azikiwe University Journal (NAUJIU), 1(1),

101-112.

Ugwuanyi, G. O. (2014). Taxation and tertiary education enhancement in Nigeria: An

evaluation of the Education Tax Fund (ETF) Between 1999-2010. Journal of Economics

and Sustainable Development, 5(6), 1-12.

Uremadu, S. O., & Ndulue, J. C. (2011). A review of private sector tax revenue generation at

local government level: Evidence from Nigeria, Journal of Public Administration and

Policy Research, 3(6), 174-183.

Uusula, T. (2015). Analysing the effect of return on equity, return on assets and earnings per

share toward share price: An empirical study of companies listed on Indonesia stock

exchange. Jurnal Berkala Ilmiah Efisiensi, 15(5), 446-457.

Uzoka, P. U., & Chiedu, C. O (2018). Effect of tax revenue on economic growth in Nigeria.

International Journal of Social Sciences and Management Research, 4(7), 17- 24.

Wagner, A. (1958). The Nature of Fiscal Policy. In Musgrave R. A., & Peacock, A. T. Classics

in the Theory of Public Finance. Macmillan.

World Bank (2000). East Asia: Recovery and Beyond. Washington, D. C: The World Bank.

Worlu, C. N., & Nkoro, E. (2012). Tax revenue and economic development in Nigeria: A

macroeconomic approach. Academic Journal of Interdisciplinary Studies, 1(2), 211-223.

 48

Yahaya, K. A., & Bakare, T. O. (2018). Effect of petroleum profit tax and companies income tax

on economic growth in Nigeria. Journal of Public Administration, Finance and Law,

1(13), 100- 121.