EFFECT OF TAX DIGITALISATION ON ECONOMIC GROWTH IN NIGERIA

Abstract

The study examined the effect of tax digitalisation on economic growth in Nigeria, specifically analysing Company Income Tax (CIT) and Value Added Tax (VAT) from 2010 to 2023. Adopting ex-post facto design, the study investigated whether digitalization introduced significant changes in the relationship between tax variables of CIT and VAT and RGDP in Nigeria. Secondary data were obtained from online published statistical data of the Federal Inland Revenue Service (FIRS) and the Central Bank of Nigeria (CBN) Bulletin for the period. Using Ordinary Least Squares (OLS) regression and the Chow test, we compare the pre-digitalisation period (2010-2016) with the post-digitalisation period (2017-2023). The OLS regression model estimated the effect of CIT and VAT on RGDP, while the Chow test assessed the statistical significance of structural changes in the relationship between the tax variables and RGDP over the two periods. Findings revealed that while CIT’s effect on RGDP remained largely unchanged post- digitalisation, VAT had a significant positive effect on RGDP post-digitalisation. The study recommended that the FIRS should utilise digital tools to capture, monitor, and audit all registered companies for tax purposes. This will widen the tax base and increase corporate income tax revenue in Nigeria.