Effect of Tax Revenue on Per Capital Income in Nigeria and Ghana

NIJAF MAU
Sep 7
1 min read

Authors: Gina Oghogho Olufemi; Utomi Ediale Bright and Iyare Magnus

Abstract

This study investigates the influence of tax revenue on per capita income in Nigeria and Ghana from 2000 to 2023, with an emphasis on corporate income tax (CIT), value-added tax (VAT), and customs and excise duties (CED). Motivated by the recurring issues of tax evasion, avoidance, and poor administration, the study demonstrates how taxes may be used to fund development and improve welfare in resource-dependent countries. The study used an ex post facto research approach and panel data analysis, including secondary yearly data from the World Bank, IMF, Federal Inland Revenue Service (Nigeria), and Ghana Revenue Service. Descriptive statistics, unit root tests, diagnostic checks, and regression analyses were performed, with the Hausman test picking the fixed effects model as the best fit. The findings show that CIT, VAT, and CED have positive and statistically significant effects on per capita income, with customs and excise charges having the greatest influence. These findings highlight the developmental importance of non-oil taxes in promoting structural transformation, decreasing dependency on oil revenue, and raising living standards. The study indicates that effective tax collection and administration are still crucial for both countries' economic stability and long-term prosperity. It advocates for improving tax administration through digital technology, extending the tax base, increasing transparency in revenue usage, encouraging taxpayer education, and enacting progressive changes. By implementing these policies, Nigeria and Ghana may promote inclusion, accountability, and fiscal sustainability, eventually presenting taxes as a solid driver of long-term welfare and economic growth.

Keywords: Tax Revenue, Per Capita Income, Corporate Income Tax (CIT), Value Added Tax (VAT), Customs and Excise Duties (CED)