Tax Justice and the Informal Sector Taxation: Advocacy for Improved Revenue Base in Nigeria

Abstract

Taxes are compulsory, unrequited payments to general government. They are unreciprocated in the sense that benefits provided by government to taxpayers are not normally in proportion to their payments. This study is set out to is to investigate the effect of Tax Justice and the Informal Taxation Advocacy on Revenue Base in Sub-Saharan Africa (Nigeria). This study employed ex-post facto research design using time series data analyses of tax revenue generated by government for the per 2000 to 2014 as surrogates for the need for tax justices and informal sector taxation. The figure of gross domestic produces (GDP) same period were used to indicate the share of taxation and tax type in GDP. The outputs of multiple regression which demonstrates that Babstat: R2=.0.933, E-view: R2=0.973529, Babstat: Adjusted R2=0.9622, E-view: Adjusted R2=0.962940 and Babstat: Prob. F-statistic=0.000002, E-view: Prob. F-statistic=0.00000. The R2 shows that there is a positive relationship existing between the variables of interest (Log of Personal Income Tax, Log of Company Income Tax log of Petroleum Profit Tax, and log of Value Added Tax). The adjusted R2 of 0.96 implies that about 96 percent of the variation in Revenue base in Nigeria and in term of GDP is explained by the independent variables captured in this study. This means that 96 percent of changes are attributed to the together effect Log of Personal Income Tax, Log of Company Income Tax log of Petroleum Profit Tax, and log of Value Added Tax (LNPIT, LNCIT, LNPPT, and LNVAT) and the remaining 4 percent of Revenue base in Nigeria is accounted for by other exogenous variables not included in the model for the present study. From this study, it is noted that government in Nigeria for over a century has been facing with the dilemma of how to source revenue to finance government budget and its laudable projects. The one reduction in the price of crude oil has also contributed to the lack of fund to finance government project. The study noted that when every Naira of taxes as paid by the tax payers provides an equivalent legitimate benefit to taxpayers, there would be a regime of tax compliance which will limit the evasion, and avoidance. Government is therefore advised to take seriously the issue of diversifying the economy and also shift focus on taxation while the administration of taxation should be in a more coordinated manner that would help the government in their revenue drive.

Keywords: Revenue Generation, Taxation, Multiple regression, Babstat, GDP

JEL Classification: M41, M47, M49