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Assessing the Impact of Infrastructure on Tax Structure and Improving Economic Performance: The Case of Nigeria

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  • Oladimeji Abeeb Olaniyi
  • Adewale Mathew Adekanmbi
  • Samson Adegboyega Opadeji
  • Amos Dauda Shallie

Abstract

The relevance of this study is to establish the interactive role of infrastructure on tax composition in stimulating long-term economic performance in Nigeria. However, empirical evidence showed that greater emphasis was placed on studies relating to the impact of taxation on the performance of the economy. The purpose of this study is to examine the impact of infrastructure on tax structure and improving economic performance in Nigeria. The hypothesis - the interactive role of infrastructure on tax composition and the economic performance nexus in Nigeria - was estimated with the Ridge Regression (RR) technique to take care of the incidence of multicollinearity that existed among the study variables using the dataset covering 1993-2022. Also, the study utilized the Barro growth model, which emphasized investment in infrastructure enhanced through taxes as the core endogenous factor that drives growth. The findings revealed that with the presence of infrastructure; value added tax, company tax, customs and excise duties and petroleum profit tax has a positive and significant relationship with economic performance while personal income tax has a positive but insignificant relationship with economic performance in Nigeria within the study period. The study thus concluded that with the presence of infrastructure, tax composition significantly contributed to economic performance in Nigeria within the study period. Based on this finding, this study recommends that policymakers should focus on measures such as tax education and enlightenment to encourage voluntary tax compliance to generate substantial revenue to fund infrastructural development, thus, improving the level of economic performance in Nigeria.

Suggested Citation

  • Oladimeji Abeeb Olaniyi & Adewale Mathew Adekanmbi & Samson Adegboyega Opadeji & Amos Dauda Shallie, 2024. "Assessing the Impact of Infrastructure on Tax Structure and Improving Economic Performance: The Case of Nigeria," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 23(3), pages 623-641.
    • Handle: RePEc:aiy:jnjaer:v:23:y:2024:i:3:p:623-641
    DOI: https://doi.org/10.15826/vestnik.2024.23.3.025
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    References listed on IDEAS

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    More about this item

    Keywords

    tax structure; infrastructure; economic performance; multicollinearity; ridge regression;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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