THE EFFECTS OF COMPANY INCOME TAX ON PRIVATE INVESTMENT AND ECONOMIC GROWTH IN NIGERIA 1986 – 2013

THE EFFECTS OF COMPANY INCOME TAX ON PRIVATE INVESTMENT AND ECONOMIC GROWTH IN NIGERIA 1986 – 2013

Abstract:

This Thesis investigates the effects of company income tax on corporate private investment and economic growth in Nigeria from 1986 to 2013, through the application of OLS techniques, Augmented Dickey-Fuller technique in testing the unit root property of the series and Granger causality test of causation between corporate private investment, corporate income tax, education tax, exchange rates, interest rates, inflation rates and banking system credit to private sectors. After which Engel-Granger Error Correction Test was used to test the existence of long run relationship between the included variables as well as the speed of adjustment to equilibrium. The results of the regression analysis revealed that corporate income tax, education tax, exchange rates, and interest rates affects corporate private investment negatively and consistence with theoretical expectation of the thesis while inflation rates and banking system credit to private sectors affects corporate private investment positively and also that corporate private investment affects economic growth positively and significantly. The results of unit root suggested that all the variables in the model are stationary at first difference. The results of Causality suggested that there is two-way causation between education tax and corporate private investment while no causation existed between corporate income tax and education tax, corporate income tax and corporate private investment in Nigeria. The Engel-Granger Error Correction Test (ECM) result revealed the presence of long run relationship corporate private investment, corporate income tax, education tax, exchange rates, interest rates, inflation rates and banking system credit to private sectors. The speed of adjustment suggests that in a period of approximately two years the model will adjust to equilibrium. The results of OLS revealed that corporate income tax, education tax, exchange rates, interest rates impacted negatively on corporate private investment while inflation rates and banking system credit to private sectors possessed a positive impact on corporate private investment in Nigeria. The result also shows that corporate income tax and education tax significantly and negatively affect corporate private investment in Nigeria. A major policy implication of this result is that concerted effort should be made by policy makers to reducing both corporate income tax and education tax so as to encourage corporate private investment in the country. And also there is need to formulate policies aim at stabilizing corporate private investment in Nigeria

THE EFFECTS OF COMPANY INCOME TAX ON PRIVATE INVESTMENT AND ECONOMIC GROWTH IN NIGERIA 1986 – 2013

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