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The Consequences of Shadow Economy and Corruption on Tax Revenue Performance in Nigeria

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  • Omodero Cordelia Onyinyechi

    (“Michael Okpara” University of Agriculture, Umudike, Umuahia, Abia State, Nigeria)

Abstract

Shadow economy and corruption are the two harmful activities that do not work in the favour of tax revenue performance. As a result it renders an effective government incapacitated and unable to carry out its social responsibilities. This study considers the effect of the informal economy and graft on tax revenue performance in Nigeria using secondary data that cover a period from 1996 to 2018. This period has been covered by the corruption perception index captured by the Transparency International for Nigeria. Despite the theoretical approaches available in measuring the size of the shadow economy, the ordinary least squares technique is specifically used to perform the multi-regression analysis to arrive at the empirical results which indicate that both the shadow economy and corruption have negative influences on tax revenue performance in Nigeria, although the negative impact of corruption on tax revenue is more robust and significant. Thus, the study suggests among others that the government should step up action against corruption and also address the root causes of shadow economy in order to make the participants of the informal sector willing to formalize their businesses and voluntarily comply with tax payment obligations.

Suggested Citation

  • Omodero Cordelia Onyinyechi, 2019. "The Consequences of Shadow Economy and Corruption on Tax Revenue Performance in Nigeria," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 29(3), pages 64-79, September.
    • Handle: RePEc:vrs:suvges:v:29:y:2019:i:3:p:64-79:n:4
    DOI: 10.2478/sues-2019-0012
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    More about this item

    Keywords

    Shadow economy; corruption; tax revenue; government; Nigeria;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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