TAXATION AND MANUFACTURING SECTOR DEVELOPMENT: EVIDENCE FROM NIGERIA

Abstract

Despite the substantial tax burden placed on the manufacturing sector in Nigeria, its performance continues to deteriorate due to significant infrastructural deficits. Empirical evidence on the impact of taxation on the manufacturing sector in Nigeria has been inconsistent. This study investigates the impact of company income tax, personal income tax, value-added tax, petroleum profit tax, and the corruption perception index on the development of the Nigerian manufacturing sector. The corruption perception index is included as a control variable to account for the government's role in tax administration and revenue utilization. The study utilizes the Johansen cointegration test, error correction mechanism, and Granger causality test on annual time-series data from 1996 to 2022. The findings indicate that personal income tax and petroleum profit tax significantly contribute to manufacturing sector development, while company income tax has an insignificant positive impact. Conversely, value-added tax and corruption strongly hinder the sector's development. The study recommends efficient utilization of tax revenue for infrastructural development to enhance sustainable growth in the manufacturing sector