Abstract

This study examined the effect of taxes on Economic development in Nigeria from 1994 to 2024. Taxes, besides its revenue generation capacity, can also be used as a fiscal policy tool to shape the economy. The study employed time series data and Ex-post facto research design . Data on taxes in Nigeria were explanatory variables and include Company Income Tax (CIT), Petroleum Profit Tax (PPT), Customs and Excise Duties (CED) and, Value Added Tax (VAT).Human development index and Per capita income are the dependent variables used as proxies for economic development. The data were obtained from the publications of United Nations Development Program (UNDP), Central Bank of Nigeria Statistical Bulletin and Nigerian Federal Inland Revenue Service (FIRS). Both descriptive statistics and Autoregressive Distributed Lag(ARDL)model were used to analyse the study variables. The result revealed that: a long run relationship exists between taxation and economic development (per capita income and human development index) in Nigeria; company income tax and petroleum profit tax have significant positive effect on per capita income; Petroleum profit tax has a significant positive effect on human development index and company income tax, custom and excise duty and value added tax have insignificant negative effect on human development index .Therefore the study recommended that: government should review the use of value added tax to make it contribute positively to economic development; Company income tax should appropriately be utilized to contribute positively to per capita income and human development index in the short and long run and government should target an appropriate (optimal) rate of custom and excise duty to minimize its negative effect.