Fiscal Deficit and the Productivity of the Nigeria Tax System, 1970-2010

Ben U. Omojimite, Godwin E. Iboma


This study evaluates the link between fiscal deficit and the productivity of the Nigeria tax system between 1970 - 2010 using tax buoyancy and elasticity as indexes. It also examines some major tax reforms within the period. Overall the analysis shows that for most of the tax sources, the elasticity indexes were significantly less than 0.5 while for 3 out of the 10 equations the elasticity fell between 0.5 and 0.9. This indicates a relatively weak productive tax system. The study also indicates that unlike the overall equation the result for the oil boom period, the elasticity of petroleum profit tax was unity. The other results followed the general results. The results for the period of the Structural Adjustment Programme (SAP) were not significantly different from those of the ‘oil boom’ and the entire period. The study concludes that administrative lags may have affected the remittance of tax revenues to government which may be responsible for the low productivity observed. We recommend that government should broaden the tax base and improve on administration of tax collection.

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