Assessment of the Relevance of Income Tax Revenue and Sustainable Economic Growth in Nigeria

This study examined the relevance of income tax revenue to sustainable economic growth in Nigeria, with specific emphasis on petroleum profit tax and education tax. The study was motivated by the persistent debate on whether tax revenue contributes meaningfully to economic growth in developing economies such as Nigeria. Annual time-series data covering the period 1993–2023 were employed, and the ordinary least squares (OLS) regression technique was used for data analysis. Gross domestic product growth rate (GDPGR) was used as a proxy for economic growth, while petroleum profit tax to GDP (PPTTGDP) and education tax to GDP (EDTTGDP) served as the explanatory variables. The empirical findings revealed that petroleum profit tax has a positive and statistically significant effect on economic growth in Nigeria. Specifically, the estimated coefficient of PPTTGDP was 3750.077 with a t-statistic of 3.09 and a probability value of 0.0046, indicating significance at the 5 percent level. This suggests that increases in petroleum profit tax revenue are associated with improvements in GDP growth rate. Similarly, education tax was found to exert a positive and highly significant effect on economic growth. The coefficient of EDTTGDP stood at 12,003.89, with a t-statistic of 4.83 and a probability value of 0.0000, confirming significance at the 1 percent level. These results provide empirical evidence that education tax contributes meaningfully to economic growth through enhanced human capital development. Based on the findings, the study concludes that income tax revenue, particularly petroleum profit tax and education tax, is relevant to sustainable economic growth in Nigeria. The study recommends effective utilization of tax revenue, improved tax administration, and diversification of revenue sources to enhance long-term economic growth.