Volume 8, Issue 8, August – 2023 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

The Effects of Tax Systems on Economic Growth of

Nigeria and South Africa from (2001-2021)
1 2 3
Ezekwere Uzochukwu Meshach Ifurueze (Professor) Dr. Agubata N. S
Department of Accounting Department of Accountancy Department of Accountancy
Kingsley Ozumba Mbadiwe Chukwuemeka Odumegwu Ojukwu Chukwuemeka Odumegwu Ojukwu
University, Ogboko, Imo state University, Anambra State University, Anambra State

Abstract:- This study focused on the effects of tax woven intricately into the economic fabric. A notable facet
systems on economic growth of Nigeria and South Africa of recent chronicles unveils the struggles of nations
SA, from (2001-2021). The study used Ex-Post Facto grappling with the imposition of weighty tax burdens,
research design. The population of the study included all meticulously primed to bolster fiscal reservoirs while sating
African countries; while the sampling methods the surging hunger for publicly offered commodities and
embraced purposive sampling techniques that selected services. Yet, this imposition incites a palpable reluctance
only Nigeria and South Africa because of the similarities among tax contributors, spanning both households and
in both countries tax systems and economic growth. commercial entities, who perceive their fiscal
Secondary data was used sourced from World Bank responsibilities as burdensome millstones.
Data, CBN statistical bulletin, Federal Inland Revenue
(FIRS) from Nigeria, and South African Revenue This adversarial stance towards tax contributions gives
Services (SARS), from (2001-2021). The statistical tools birth to inclinations for tax evasion and avoidance,
applied was a cross-sectional multi-liner regression, ultimately corroding the repository of tax-derived revenue—
which included pre-analyses tests such as: Descriptive a truth cogently emphasized through scholarly analyses
Statistics, Pearson Correlation, Unit Root, Co- (Alm, 2018; Antinyan, Afuberoh & Okoye, 2020). In light
integration Test and Error Correction Model. After the of this trajectory, certain nations have embarked upon
analyses: the adjusted R-squared value for both proactive strides, unfurling innovative tax incentive
countries respectively show that all the independent paradigms. These encompass enhancements in
variables jointly have the power to explain about 78%, governmental service provisions, cultivation of trust, and
58% of the systematic variation found in RGDP of endowment of authority—collectively choreographed to
Nigeria and South Africa, while the balance of 22%, mitigate the predilection for tax circumvention while
42%, are the stochastic elements in endogenous and concurrently amplifying the yield of tax revenue (Gangl,
exogenous variables affecting both tax system not Enahoro, & Olabisi, 2020).
captured in the study VAT is positive and non-
statistically significant in Nigeria, while it is positive and Delving into the annals of history, the chronicle of
statistically significant in South Africa; both Nigeria and taxation in Africa unfurls as an intricate, protracted saga.
South Africa. Stamp and excise duties are positive and The contours of tax frameworks across the region are carved
non-statistically significant; again in Nigeria, CGT is by a symphony of influences, encompassing the specters of
negative and statistically significant, while in South colonial dominion, economic maturation, and the
Africa it is positive and non-statistically significant. tempestuous winds of political echelons. The colonial
Therefore, it is recommended that administrator of tax, epoch, discernibly, witnessed the construction of African tax
can improved in tax collection and avoidance in both systems meticulously fashioned to satiate the voracious
countries; the insignificant of VAT GDP can be avoided appetites of imperial powers, sidelining the aspirations of
through transparency in administrations. Also, the indigenous populace.
governments of both countries should encourage
domestic and foreign operations to increase capital gain In this era, colonial overseers extracted exorbitant
tax and ensure adherence on the withholding tax laws. tributes from the African populace, occasionally coercing
them into the cultivation of export-oriented wares. The
Keyword:- Tax system Value Added Tax(VAT),Economic aftermath birthed a landscape marred by meager economic
Growth, Nigeria and South Africa. progress and the trials of subsistence faced by countless
Africans (Okanuru, 2012). With the advent of independence,
I. INTRODUCTION the trend persisted as African governments clung
tenaciously to extracting substantial taxes to lubricate the
Taxation endures as a pivotal tool, masterfully wielded wheels of state machinery. Yet, the consequences often
to calibrate economic equilibrium and orchestrate an crystallized as stagnation, stunting economic growth and
equitable dispersion of wealth. Within the contemporary unsettling political foundations.
landscape, taxes metamorphose into agents of purification,
governing the production of goods and services, thus
nurturing the comprehensive well-being of individuals

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Volume 8, Issue 8, August – 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Subsequently, the 1990s witnessed the emergence of a Notwithstanding the pivotal role that taxation can play
transformative era as multiple African nations embraced the in augmenting a country's Gross Domestic Product (GDP), it
tide of economic liberalization, steering away from their becomes imperative to direct attention toward the ancillary
hitherto heavy dependence on tax inflows. The outcome was repercussions of taxation upon the trajectory of expansive
a rejuvenation of economic impetus across the region. enterprises and the pantheon of Small and Medium
However, Africa's tax paradigms remain ensnared in a Enterprises (SMEs). The raison d'être for this focus resides
labyrinth of challenges. The specters of rampant corruption in the pivotal role SMEs perform in propelling economic
and the fragility of governance frameworks loom as progress across both developing and developed realms. As
insurmountable obstacles, casting a pervasive shadow over has been illuminated, SMEs stand not only as generators of
the efficacy of tax collection and dimming the prospects of employment surpassing the tallies attributed to both
development and progress across African states. conglomerates and micro-enterprises but also as purveyors
of innovative concepts, products, and commercial
In Nigeria specifically, the history of tax in Nigeria can methodologies (Baurer, 2015). It's within this context that
be traced back to the pre-colonial era, to 1914 when the the present study embarks on an investigative odyssey, with
British colonial government created the Native Revenue its crosshairs aimed squarely at delineating the ramifications
Ordinance. This ordinance imposed a hut tax on the of the extant tax framework upon the performance of
indigenous people living in the colonies. In 1936, the enterprises in select African nations.
colonial government introduced a sales tax that was levied
on goods and services. The Income Tax Act was introduced  Statement of the Problem
in 1952 to tax income from wages and businesses. In 1960, Taxation as a levy placed by the government on his
following independence from Britain, the Nigerian citizen, is as old as man and has being faced with a lot of
parliament passed the first constitution which established the problems. From time in immemorial, the problem of
federal structure of government. This document also vested taxation has caused tax evasion, avoidance and affected the
exclusive power to levy taxes in the federal growth of the economy which is a challenge. However,
government(Gardner,2010). The first national income tax Scholars and other researcher have been researching and
was introduced in 1962. However, it was during the colonial writing about the problems faced by taxation from time
period that a more formal system of taxation was immemorial. According to Qayyum, Bashir, Maqbool, Ali,
introduced, with the British authorities introducing various Bashir, & Abbas 2019 (Sahban & Abbas, 2018), every
taxes to raise revenue for the running of the colony. economic policy has some short- and long-term effects, such
as how tax revenue and tax rates change during these times.
In the era post-independence, the Nigerian either expansionary or contracionary policy, fiscal policy
administration has sustained its imposition of taxes upon its plays a crucial role in determining the tax rate (Anser,
populace, with the principal objective of generating revenue Mohsin, Abbas, & Chaudhry, 2020).In the field of tax
to underwrite public expenditure. Nonetheless, the Nigerian research, the exogenous growth theory sevplays an
tax architecture has undergone a series of overhauls over important role. It suggests that taxes and economic growth
time, aimed at imbuing it with enhanced efficiency and do not have a long-term relationship, and this effect is only
equitability. temporary (Lee & Gordon, 2005).Endogenous growth
theory is the second economic model. It holds that tax policy
The present tax regime in Nigeria finds its compass always has some long-run effects and affects the economy
guided by the Tax Laws (Amendment) Act of 2007, a over time.
legislative milestone that ushered in a raft of transformative
modifications to the antecedent structure. Central among Additionally, direct and indirect taxes also fluctuate the
these revisions was the induction of the Value Added Tax tax revenue, so it is essential to give weightage to both types
(VAT), accompanied by the broadening of the tax of taxes. Some countries have more direct taxes in their tax
foundation and the ushering in of novel levies upon earnings revenue, and many more rely on indirect taxes. However, an
and gains. The bedrock of corporate functioning resides in efficient and developed tax system always give importance
agency affiliations interlinking shareholders, management, to more direct taxes. Here, there is a controversy that
and executives. Management is thereby duty-bound to different results or outcomes from the taxes impact growth.
comport itself with utmost integrity, aligning the execution
of responsibilities with the manner shareholders themselves Prior literature revealed the effectiveness of tax system
would, all with the end goal of heightening the aggregate on performance of various sector in the economy, Onoja
market valuation of the corporation (Bariyima & Cletus, and Ibrahim (2020); Olaoye and Ayeni (2019); Oraka,
2014). Predicated upon the aforementioned, in the context of Okegbe and Ezejiofor (2017); Usman and Adegbite (2015);
the corporate sphere, particularly concerning business revealed that Petroleum Profit Tax has a positive but no
performance, taxation could wield considerable influence, significant relationship with Nigeria Economic Growth,
and if this influence is tinged negatively, it might cascade while Value Added Tax and Companies Income Tax have
into fiscal reverberations, consequently impacting significant relationship with Nigeria Economic Growth.
shareholder investments.

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Volume 8, Issue 8, August – 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Contrarily, others documented a significant positive  Research Hypotheses
relationship between tax revenue and economic The following null research hypotheses are posed to be
development, such as Nweze Ogbodo, and Ezejiofor (2021) tested for the study as follows;
from 2000 to 2019, found that tax revenue has a significant
positive effect on per capita income of Nigeria. Joseph and  H02: Value-added tax has no significant effects on the
Omodero (2020) showed that federally received revenue and real gross domestic product of Nigeria and South Africa
Value Added Tax (VAT) have a moderate positive  H03: Custom and excise duties tax has no significant
relationship with the economic growth.Alexander, Keyi and effects on the real gross domestic product of Nigeria and
Alfa, 2019; Olaoye, Ogundipe and Oluwadare, 2019; Ideh South Africa
(2019); Yahaya and Bakare (2018); Arowoshegbe  H04: Capital gain tax does not significantly effects the
Uniamikogbo and Aigienohuwa (2017) up to 2017, 2018, real gross domestic product of Nigeria and South Africa
revealed that in Nigeria, the various categories of taxation
such as Petroleum Profit Tax, Personal Income Tax and  Significance of the Study
Value Added Tax selected for their study have significant The study will be of theoretical benefit and as well as
effects on economic growth process practical benefit to policy makers, fellow researcher/
academia’s
The issues on the effectiveness of taxes as a tool for
promoting growth and development remains inconclusive, Theoretically, the study will help policymakers; fellow
as several studies have indicated mixed reaction on researcher/academia’s to see that the tax system has several
contributions of tax, thereby creating a gap in knowledge, potential benefits for an economy. It will expose them to the
This could be as a result of variation in geographical fact that tax system can help to raise revenue for the
location, variables, methodology, scope and statistical tools. government, which can be use to finance public goods and
services, such as education and infrastructure. The tax
Secondly, none of the empirical literature has vividly system can also help to redistribute income and wealth,
looked at the various tax system variables across African which can reduce inequality in society. Additionally, the tax
and how this affect country’s economic growth as these system can create incentives for individuals and businesses
laws, rules, regulation and competitive climate may affect to engage in certain economic activities, such as saving and
the economy within a particular country, investment.

Finally, there is a periodic gap as prior studies ended Finally, the study will help users to see that a tax
in 2020, to bridge the gap, this study will be conducted up system of a country can help to stabilize the economy by
to 2021. This loophole in knowledge create a setback and providing monetary relief during times of economic
this gap in knowledge is what this study intends to cover. recession.
This study is therefore set to determine the effect of tax
system on economic growth in Nigeria and South Africa. However, in practical terms, the study will be of
benefit to tax policymakers, fellow researchers/academia.
 Objective of the Study
The major objective of the study is to ascertain how Tax policymakers will benefit from the study as the
tax system affects the economic growth of Nigeria economy study helps them see practical ways that will make it easier
and South Africa. The specific objectives of the study is to; to collect taxes from people and businesses to fund the
government. It will also helps them see the need to make
 Determine the extent value-added tax affects the real adequate policies that will make it easy for taxpayers to pay
gross domestic product of Nigeria and South Africa. their taxes and as well helps them equalize the distribution
 Asses how custom and excise duties tax affects the real of wealth by taxing people who have more money at a
gross domestic product of Nigeria and South Africa. higher rate than those who have less. Additionally, the study
 Evaluate how capital gain tax affects the real gross will helps tax policymakers see how the tax system can help
domestic product of Nigeria and South Africa. to incentivize certain behaviors, such as saving money or
investing in the economy.
 Research Questions
In other to give direction and guide the conduct of the For fellow researchers/ academia’s, the study will
study, the following research questions are raised; serves as a source of material and reference for related
studies.
 To what extent does value-added tax affect the real gross
domestic product of Nigeria and South Africa? II. REVIEW OF RELATED LITERATURE
 To what extent does custom and excise duties tax affect
the real gross domestic product of Nigeria and South  Conceptual Framework
Africa? In essence, a concept is a vague idea that serves as a
 How does capital gain tax affect the real gross domestic starting point for learning or discussion. It plays a role in
product of Nigeria and South Africa? research by examining thoughts related to a particular topic.
A conceptual framework, on the other hand, is a useful tool
that comes in different forms and situations. It's handy when

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ISSN No:-2456-2165
you need to see the bigger picture. It helps to sort out and a conceptual framework as a basic structure made up of
organize ideas. In research papers, a conceptual framework different parts that represent the observational,
is used to explain the important concepts, variables, and how experimental, and analytical sides of a process or system. It
they're connected for study. Think of it as a researcher's way includes both dependent and independent variables. The
of arranging and explaining things for readers. independent variables are various tax systems like value-
added tax, company income tax, withholding tax, capital
Think of the conceptual framework as a structure. gain tax, and customs and excise duty tax. The dependent
Researchers use this structure to describe how something variable is economic growth – showing how these tax
develops over time. Boujelbene and Affes (2013) described systems affect the overall economy.

Fig 1 Proposed Conceptual Framework

 Economic Growth government to help with things like roads and schools
Economic growth means making more stuff and (Dandago and Alabede, 2001).
services over time. People look at it using numbers, like Taxes are super important for a country that's
real money or the regular kind, and it helps to know how growing. Right now, Nigeria really needs a good system to
the economy is doing. They usually use big numbers like collect taxes and make money. This money can help the
gross national product or real gross domestic product. Some country grow and do better economically (Oji, 2000). But
folks also use other numbers, but those two are common sometimes, taxes can seem scary because they take away
(Potters, 2021). some money that you could use. Even though it might not
be great for individuals or businesses, it's really important
Talking about economic stuff, there are some ideas for the government and the things it needs to do. Taxes help
that help explain how things grow and get better. One of move money around and make it work for the country.In a
these ideas is called the Harrod-Domar model. A while ago, big picture, taxes help make sure money is shared fairly,
in 1939 and 1946, Sir Roy Harrod and Evsey Domar came and that's a good thing (Olusanya et al., 2012).
up with this idea. It helps to show how fast an economy can
grow. And if we look way back, the start of thinking about Economic growth means the economy makes more
growth and development came from Adam Smith's "Wealth valuable stuff and services over time. Experts who count
of Nations." He said that a country's money comes from things often use a percentage number to show how much the
how well people work together. But later on, others like economy has grown. This number is usually about the gross
Ricardo, Malthus, and Mill thought more and made Adam domestic product (GDP), which is like the total value of
Smith's idea better. They talked about how work can everything the country makes.When we talk about the speed
change and make more wealth. of economic growth, we're looking at how the GDP grows
from one year to another. It's like checking how much
Now, let's talk about taxes. People see taxes in bigger the economy gets each year. This growth number
different ways, but they all point in one direction. Some shows the general direction the GDP is moving in, and it
experts, like Wambai and Hanga (2013), say taxes are like doesn't worry about the ups and downs along the way (IMF,
the government's way of taking money from people or 2012).Economists wield a distinct vernacular when delving
businesses. It's like a rule that they have to follow. People into discussions about growth. They posit that growth
and businesses have to give a part of their money to the unfolds along two primary pathways. The first is intensive
growth, an evolution where the economy refines its

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adeptness in utilizing resources such as labor, machinery,  Tax System
energy, and materials. This translates to an astute modus It's a well-known fact that governments, no matter the
operandi aimed at heightening production without level, need money to help their country grow. And one of
magnifying the resource input. In essence, it's akin to an the ways governments get money is by using taxes. The
artful orchestration of processes to yield greater output word 'tax' has different meanings based on who you ask.
while economizing on input (Gordon, 2017). Like Kagan (2019) said, taxes are payments that people or
businesses have to give to the government. It doesn't matter
On the converse trajectory resides extensive growth. if the government is local, regional, or national.
This manifestation transpires when the economy
experiences an influx of fresh resources, akin to the infusion Taxation is when the government makes its citizens
of a greater workforce or uncharted territories. This pay money as a requirement. This money helps the
metamorphosis echoes the augmentation of ingredients, government run things smoothly (Anyanwu, 1997). Tax, in
amplifying the capacity to manufacture more commodities simple terms, means giving money to the government
(Gordon, 2017). because the law says so. You don't get something directly in
return, like a service or value, whether it's called a tax or not
Turning the gaze to the realm of real gross domestic (National tax policy, 2012). Tax is like a must-pay fee set by
product (GDP), a distinct panorama emerges. This metric, the government. Everyone, both regular people and
while swathed in the mantle of inflation-adjustment, companies, have to pay it, no matter if they get something
emerges as a yardstick quantifying the summation of all back from the government or not. As Appah (2014) and
goods and services crafted within a nation's confines during Oyandonghan (2011) explain, tax is money that you have to
a designated interval. This measure, underscored by prices give to the government, and the government uses it to keep
from a selected base year, often resonates under the epithets people safe, provide social benefits, and help the economy.
of constant-price GDP or inflation-corrected GDP. The
potency of real GDP is unleashed in its capacity to infuse You can also think of tax as a way to control things. It
significance into year-to-year and cross-temporal can help manage the making of certain goods and services,
comparisons. It unfurls a canvas that not only embraces the help new businesses, control companies, and manage how
qualitative and quantitative dimension of goods and services prices go up (Anyanwu, 1997).
but also navigates the delicate interplay of their value
(Gordon, 2017).Real GDP as a tool is calculated by dividing According to Kiabel (2017), tax is a kind of payment
nominal GDP by a GDP deflator. that the government makes people or businesses give. This
money comes from their income, profit, or wealth. And
Real GDP as a macroeconomic statistic tool measures guess what? It doesn't come with a guaranteed benefit in
the value of the goods and services produced by a given return. The government decides on rules to decide who or
economy in a specific period, adjusted for inflation. what should pay taxes. When you think about it, taxes help
Governments use both nominal and real GDP as metrics for the country get money for running things smoothly. The
analyzing economic growth and purchasing power over cool thing is that not everyone who pays tax gets something
time. This is done using the GDP price deflator (also called back immediately or in a way that matches what they paid.
the implicit price deflator), which measures the changes in It's like a benefit that all citizens enjoy, but not in a direct
prices for all of the goods and services produced in "you paid this much tax, so you get this much stuff" way. A
an economy. person who gives tax money is called a taxpayer. But here's
the thing, a taxpayer can't sue the government for not
Real GDP takes into consideration adjustments for spending money in line with how much tax they paid. Taxes
changes in inflation. This means that if inflation is positive, and penalties/fines are quite different. They might both
real GDP will be lower than nominal, and vice versa. bring money to the government, but they're not the same.
Without a real GDP adjustment, positive inflation greatly
inflates GDP in nominal terms. The Nigerian government has different ways to get
money, as mentioned in the 1999 constitution. Every
Calculating real GDP is a complex process typically government's job is to keep people and their things safe and
best provided by the BEA. In general, calculating real GDP give them basic things they need. Despite these many ways
is done by dividing nominal GDP by the GDP deflator (R). of making money in Nigeria, the country still heavily relies
on oil sales, which give them a big chunk of their money
R= N every year. This has made Nigeria's economy pretty focused
D on oil. In fact, more than 80% of their money comes from
oil (Khadijat and Kabi, 2019).
Where
Talking about taxes, it's important to remember that tax
R = real GDP isn't the same as other things you're made to give. Akanbi
(2015) says that we shouldn't mix up tax with other
N = nominal GDP payments that might seem similar. And ICAN (2009) tells
us that taxation is like a kind of fee that everyone who lives
D = GDP deflator or does business in a place has to give. It's a way to help the

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government get money to provide things that help society, and spare parts and services rendered by community and
like schools and roads. Paying taxes is something citizens peoples banks, were free from vat. Revenue generated was
should do because it helps the country become better. But shared 20:80 between the federal and state government, but
there's a difference between taxes and paying for a specific currently, it is shared between 15:50:35 among federal, state
service, like when you use a bridge and pay a toll. and local government. To ensure that vat is affected, certain
amendments were made.
Tax revenues finance government activities, including
public works and services such as roads and schools, or  Reduction of the personal income tax burden through
programs such as Social Security and Medicare. Okpe increased tax allowances.
(2008) documented that tax is the transfer of resources and  Tax rate reduction.
income from the private sector to the public sector to  Monetization and taxation of fringe benefits.
achieve some of the nation’s economic and social goals.  Deduction of R&D expenditure from gross earnings of
These economic goals maybe in the form of provision of companies.
additional government basic services in education, public  Extension of tax-free status to companies in rural areas
health, transportation, capital formation and in the provision and granting of incentives based on the infrastructure
of facilities. Okwo (2011) stated that tax is a compulsory available in the areas.
payment made by individuals and corporate bodies to the  Reduction of company tax rate from 40% to 35%, and
government towards financing of government expenditure subsequently to 30%,
aimed at improving the taxpayer’s welfare and in which
 And payment of petroleum profit tax in dollars.
both the taxpayer and the public at large benefit.
Furthermore, according to Odiambo and Olushola
In the insights of Taiwo, Illori, and Emenike (2019),
(2018), the realm of Value Added Tax (VAT) operates
the fundamental tenets of taxation encompass several pivotal
under the purview of the Value Added Tax Act Cap V1,
facets. Firstly, there's the compulsion factor enshrined in
LFN 2004, with subsequent amendments. This tax comes
Section 24 of Nigeria's 1999 constitution. This mandates into play when goods are bought or services are provided.
every Nigerian citizen to honestly declare their income to It's a kind of consumption tax that's ultimately carried by the
lawful entities and dutifully settle their taxes. Taxes, in their
end consumer. Almost everything - goods and services
essence, are levied on individuals, their incomes, properties,
produced domestically or imported - falls under its taxable
and transactions. These components serve as the bedrock
umbrella, except for those items specifically exempted by
upon which taxation is built.
the VAT Act. The levy stands at a rate of 7.5%.
Interestingly, certain items like non-oil exports are tagged
Moreover, the imposition of taxes is contingent upon
with a zero rate, meaning they're still subject to VAT, but at
the robust foundation of legal enactments, including a nil value.
constitutional provisions, state laws, and other legislative
instruments governing taxation and rates. A core principle of When it comes to keeping things in order, all those
taxation demands equitable and just treatment for all who come under the VAT umbrella need to submit monthly
taxpayers. It translates into a system where higher earnings returns no later than the 21st day after the month of the
translate to higher tax payments, and the inverse holds true.
transaction (Edewusi & Ajayi, 2019). Now, in the world of
Nigerian VAT, three different groups of folks have the task
Simplicity stands as a vital criterion in tax design,
of deducting VAT at the source and passing it directly to the
rendering it user-friendly and straightforward for taxpayers.
tax authority. These groups are: Nigerian companies that are
Payment convenience and efficiency factor in as well,
involved in transactions subject to VAT with non-resident
alongside the mandate for cost-effectiveness. In essence, the companies within the country, government ministries,
administrative expenses incurred shouldn't overshadow the statutory bodies, and other government agencies, and
revenue garnered – a balance of economic viability. companies that do business in the oil and gas sector (Joseph
& Omodero 2020; Odiambo & Olushola, 2018).
A pivotal aspect remains the certainty attached to
taxation. Taxpayers should be able to determine their tax A value-added tax (VAT) is a consumption tax placed
liabilities, and a sense of neutrality should underscore the
on a product whenever value is added at each stage of the
tax charged. The essence is to create a framework that is
supply chain, from production to the point of sale. The
clear, fair, and financially palatable for all involved parties. amount of VAT that the user pays is on the cost of the
product, less any of the costs of materials used in the
 Value Added Tax and Economic Growth
product that have already been taxed. VAT is essentially a
Value added tax (VAT) was adopted in January regressive tax that places an increased economic strain on
through the vat act no. 102 of1993 but it began
lower-income taxpayers, and also adds bureaucratic burdens
implementation in January 1994. And since its introduction, for businesses. Value-added taxation is based on a
15 of its sections out of 42 have undergone amendment. taxpayer's consumption rather than their income. In contrast
Replacing sales tax, vat was originally imposed on 17 to a progressive income tax, which levies greater taxes on
categories of goods and 24 service categories. Items as basic
higher-level earners, VAT applies equally to every purchase
foods, medical and pharmaceutical products, books, (Kagan, 2019). A value-added tax (VAT) is a consumption
newspapers and magazines, house rent, commercial vehicles tax levied on products at every point of sale where value has

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been added, starting from raw materials and going all the can be seen as the total income a state rakes in from
way to final retail purchase. Ultimately, the consumer pays different avenues during a specific timeframe. State
the VAT; buyers at earlier stages of production receive governments, like the other levels of government, have
reimbursements for the previous VAT they've paid. Value distinct sources and uses for their revenue. Osisami (1994)
Added Tax (VAT) in Nigeria is a consumption tax that was identifies two main categories of revenue for state
instated by the Value Added Tax Act of 1993. It is a Federal governments: internally generated revenue and revenue
Tax which is managed by the Federal Inland Revenue allocated from the Federation Account. The former includes
Service (FIRS). VAT is charged on most goods and services income garnered within the state, like taxes (such as pay as
provides in Nigeria and also on goods imported into Nigeria. you earn, direct assessment, and capital gain taxes) and
Businesses add VAT to the sales price of the goods or motor vehicle licenses, whereas the latter involves the
services they offer in Nigeria. They also pay VAT, just like Federation Account share and Value Added Tax.
consumers, on goods and services that they consume. Some
VAT paid by businesses can be used to offset VAT In the scenario of the Federation Account share, states'
collected before remittance to the FIRS (Deloitte, 2019). portion constituted 57.97% in 2002 and surged to 65.82% in
Examples of VATable goods include jewelries, shoes, bags, 2006, whereas internally generated revenue dwindled from
television etc. VATable Services are all services rendered by 13.38% in 2002 to 8.11% in 2006 (CBN, 2006). For most
any person in Nigeria except those specifically exempted non-oil producing states, the average percentages of
under the law. Examples of VATable services are, services internally generated revenue in relation to federal allocation
rendered by Lawyers, Engineers, Accountants, Contractors ranged from 5% to 9% in recent times. Kano, with vigorous
and Consultants etc (Asquith, 2019). revenue generation strategies, slightly exceeded 10% in
2004 and continues to do so, with Lagos state standing as
 Highlight of Value Added Tax Act of 2007 the unique outlier.
The aim begins with having a burning desire to build a
viable Country at the national and sub-national levels. This With the lingering economic struggles, there have been
aims must be supported with plans which are cost-oriented renewed calls for the Nigerian government to diversify the
to ensure that the expenditure to support the plan is well economy away from the oil and gas sector. Unfortunately,
articulated and to avoid wrong strategies at implementation. Nigeria’s dependence on the oil sector is too critical and the
These are monies collected by a government through effect of Nigeria’s dwindling oil revenue is damaging with
imposition of levies and taxes on facilities, incomes, sale of reverberations beyond the Federal Government. State
goods and services, transfers of properties, and other Governments who depend primarily on statutory allocations
domestic transactions, as opposed to monies collected from from the federation account have found their ability to
duties imposed on imports and other international deliver the most basic public services (education, health, and
transactions. Also known as Inland Revenue Internally others)
generated revenues (IGR) are revenues generated by States
within the Nigerian federation, independent of their share of  Custom and Excise Duty Tax and Economic Growth
revenue from the federation account. Customs duties in Nigeria are imposed solely on
imports. Rates fluctuate for various items, generally ranging
Various authors have tackled the concept of revenue in from 5% to 35%, and are determined using the prevailing
different ways. According to Adam (2006), revenue Harmonized Commodity and Coding System (HS code).
signifies the funds needed by the government to support its
operations. These funds come from diverse channels like Nigerian-registered airlines engaged in commercial air
taxes, loans, fines, fees, and such. Another view, shared by transport enjoy the privilege of duty-free importation for
Hamid (2008), defines revenue as the complete amount of their aircraft, engines, spare parts, and components, whether
money an organization, be it public or private, collects bought or leased.Regarding excise duty, it applies to beer,
within a specific time frame. It's worth noting that state stout, wines, spirits, cigarettes, and homogenized tobacco
revenue comprises income from taxation, as well as non-tax produced within Nigeria or imported, pegged at 20%.
sources such as the proceeds from selling government assets
or other interests, plus earnings from investments and loans. Effective from 1st June 2022, there have been hikes in
Bhatia (2001) further breaks down revenue receipts into excise duties for tobacco and alcoholic beverages, while
"routine" and "earned" income, encompassing tax receipts, new excise duties have been introduced for non-alcoholic
donations, grants, fees, fines, and more, but excluding beverages and telecommunication services. This new
borrowings and loan recoveries from other parties. structure exclusively concerns tobacco and its derivatives
(such as cigarettes), alcoholic drinks (including beers and
Pearce (1986) adds that government revenue stouts, spirits, and wines), non-alcoholic beverages, and
encompasses all monetary inflows apart from issuing debt or telecommunication services, as detailed below:
cashing in investments. This includes tax collections,
charges, miscellaneous revenues, utility and insurance trust Excise duty stands as a tax imposed during the
revenue, covering all funds and agencies of a government. manufacturing process, targeting certain goods. It also
Public revenue, as described by Stephen and Osagie (1985), serves as an indirect tax on the sale or use of specific goods,
delves into the ways through which a government products, services, or activities like tobacco, alcohol,
accumulates funds. Summing up these definitions, revenue narcotics, gambling, primarily aimed at discouraging their

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consumption. Excise duty has been lifted for many infrastructure and equipment, along with service quality and
manufactured items, except for those that carry harmful affordability for subscribers, is quite direct.
effects, like bleaching creams, alcohol, tobacco, cigarettes,
etc. Since its inception in 1962, there have been numerous Currently, telecommunications service providers face
adjustments to the administration, rates, and the roster of various levies and taxes such as Right of Way Charges,
goods subject to excise duties.In historical context, excise National Information Technology Development Fund Levy,
duty has earned the moniker of a "sin tax" due to its National Cybersecurity Fund, and Annual Operating Levy,
application to certain categories of goods. Initially, it wasn't in addition to established statutory taxes including
a primary revenue driver for the government. However, Companies Income Tax, Tertiary Education Tax, and Value
given the recent drop in crude oil prices, the government has Added Tax. The inclusion of excise duty will only add to the
increasingly turned its attention towards non-oil revenue existing issue of multiple taxes experienced in the industry.
streams to bolster the budget and foster economic growth Ideally, one would expect the government to streamline
and progress. these taxes and levies, aligning with their ease-of-doing-
business initiatives.
 Highlights of Amendments to the Customs and Excise
Tariff, Etc. (Consolidation) Act Nigeria boasts one of Africa's largest
Before the amendments brought about by the Finance telecommunications markets, thus the introduction of excise
Act of 2019, Section 21 of the Customs and Excise Tariff, duty on these services could naturally boost government
Etc. (Consolidation) Act (CETA) outlined the imposition of revenue. However, it's equally crucial to evaluate the
excise duty only on specific goods manufactured within potential adverse impacts on subscribers and the economy.
Nigeria. The particular locally produced goods subject to This could mean that subscribers would likely have to pay
excise duty were specified in the Fifth schedule of CETA. more for these services, as these costs will be passed down
To establish fairness between locally produced and imported to them. Consequently, reduced usage may occur, leading to
goods, the CETA underwent changes through the Finance lower earnings for the operators and, in turn, affecting
Act of 2019 to extend the scope of excise duties to imported productivity and the overall economic output of the public.
goods mentioned in the Fifth schedule of CETA. However,
an inclusion was introduced as part of these changes, Currently, only a handful of countries such as the
suggesting that goods not produced within Nigeria and raw United States of America, Tanzania, Zanzibar, Uganda, and
materials not locally available would be excise duty exempt. Malawi impose excise duty on telecommunications services.
This inclusion, unfortunately, contradicted the intended Typically, excise duty is levied on goods to deter their
purpose of applying excise duty to imported goods. demand and consumption. One might question the
government's motive in light of the telecommunications
Hence, the necessity for the most recent amendment in industry's contribution to Nigeria's gross domestic product.
the Finance Act of 2020. This contentious inclusion has now While the government rightly seeks alternative non-oil
been removed. Consequently, all imported goods listed in revenue sources to fund the national budget, it's essential to
the Fifth schedule of CETA will now incur excise duty. exercise caution, considering the potential negative impact
Moreover, the adjustments made in the Finance Act of 2020 of additional taxes or levies on both businesses and
also encompass telecommunication services as services individuals.
liable to excise duty.
 Capital Gains Tax and Economic Growth
It's crucial to understand that prior to the Finance Act Capital Gains Tax Is A Levy Imposed On The Profit
of 2019, the government had previously issued a Circular Realized From An Investment When It's Sold (Investopedia,
with reference number 17642/II/172, dated 6 March 2018. 2022). When Investment Assets Like Stock Shares Are
This circular announced an increase in excise duty rates for Sold, The Profits Earned Are Considered Realized Capital
tobacco and alcoholic beverages, effective from 4 June Gains. This Tax Doesn't Apply To Investments That Haven't
2018. The latest alteration to the excise duty framework is Been Sold Or To Unrealized Gains. Stocks, For Instance,
the introduction of excise duty on telecommunication Only Become Subject To Taxes When They're Sold,
services rendered within Nigeria. This move has sparked Regardless Of How Long They've Been Held Or Their
considerable criticism from pertinent stakeholders within the Increased Value.
telecommunications sector, as it imposes an additional tax
burden on telecommunication service providers. The Concept Of Capital Gains Tax Started In The
USA, Where Individuals And Corporations Pay U.S.
 Likely Impact of Imposition of Excise Duty on Federal Income Tax On Their Net Capital Gains, Much Like
Telecommunication Services Other Forms Of Income (Wikipedia, 2014). However, Long-
The telecommunications services sector stands as a Term Capital Gains Usually Enjoy A More Favorable Tax
significant contributor to government tax revenue. Yet, the Rate Compared To Regular Income. The Taxation Rate An
taxes and charges imposed on these companies have a Investor Faces Depends On Their Tax Bracket And The
profound impact on their service provision, influencing Duration The Investment Was Held Before Being Sold.
aspects like adoption, pricing, investment choices, service Short-Term Capital Gains, Defined As Assets Sold Within
quality, and affordability. The connection between high A Year Or Less, Are Taxed At The Investor's Regular
taxes and investments by operators or investors in Income Tax Rate.

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The Administration Of The Capital Gains Tax Falls Faced Adverse Financial Consequences Due To Income Tax
Under The Capital Gains Tax (CGT) Act, Cap C1 LFN 2004 Gains. Citing Evidence From Five Companies, They
(As Amended). According To Karumba (2016), The Tax Is Suggest That These Companies Suffered Financially For
Set At A Fixed Rate Of 10% Of Chargeable Gains. This Almost A Year, With Outcomes Such As An Average Loss
Implies That All Chargeable Assets Are Subject To The Tax Of Up To Five Employees Due To Unaffordable Wages,
When They're Sold At A Gain, Except For Those Increased Expenses Related To Financial Management
Specifically Exempted By The Act. This Encompasses All Structures, Diminished Capital Bases, Reduced Borrowing
Forms Of Property, Regardless Of Their Location. The Capacities, Heightened Speculation, And Incurred Losses.
Deadline For Filing Returns And Paying The Tax Mirrors
That Of Companies Income Tax (Edewusi & Ajayi, 2019). A Study Conducted By The GOK (2013), Titled
"Economic Management For Renewed Growth," Focused
Lyndon And Paymaster (2016) Outlined That On Capital Gains Tax For Companies Listed On The
Allowable Expenditure For CGT Includes Fees Paid For Nairobi Stock Exchange And Its Potential Future
Professional Services, Commissions, And The Cost Of Implications On Business. This Study Highlighted That
Transfers. Exemptions From CGT Include Gains From The Companies Would Be Required To Pay Capital Gains Tax
Sale Of Awards For Bravery, Life Insurance Policies, On Profits Gained From Transferring Property Located
Nigerian Government Securities, Stocks, And Shares, Within Kenya. The Definition Of Property Encompasses
Among Others. Certain Organizations Are Exempt From Assets Acquired Or Held For Investment Purposes,
CGT On Gains, As Long As Those Gains Don't Arise From Excluding Road Vehicles, As Derived From The
The Disposal Of Assets Linked To Their Trade Activities. Interpretation And General Provisions Act. This
This Includes Entities Like Ecclesiastical, Charitable, Or Comprehensive Definition Brings Numerous Investments
Educational Institutions Of Public Character, Registered Held By Companies Under The Scope Of Capital Gains
Friendly Societies, And Trade Unions (Akhor & Ekundayo, Tax.
2016).
However, Companies Faced Challenges After
In Africa, Capital Gains Tax Has Not Been The Only Realizing Gains From Transferring Assets That Had
Major Source Of Income For The Government In African Qualified For Wear & Tear Deductions, Or From
Counties Like South Africa, Nigeria And Ghana But Has Exchanging Property As Part Of A Business Restructuring
Been A Source Of Motivation For A Number Of Or Reorganization. Once Taxed, Some Companies
Companies To Invest Higher And Smartly For Improved Experienced Financial Setbacks, And Others Were
Profits (OECD, 2013). Ghana & Gatsi (2013) Writes That, Compelled To Lower Employee Wages To Accommodate
The Flat Corporate Tax Rate Does Not Favour Small The Tax Burden (GOK, 2013). The Phenomenon Of
Companies Listed In The Stock Market Today. In Reduced Financial Realization Is Further Elucidated By
Buttressing This Argument, The Manufacturing Companies KIPPRA (2015). In A Study Involving Five Real Estate
For Example Compare The Flat Corporate Tax Rate With Companies Listed On The NSE, It Was Discovered That
The Progressive Personal Income Tax Rates. The Companies Could Potentially Pay Up To Ksh. 30 Million
Companies Listed In The Corporate Stock Market In Ghana Annually As Capital Gains Tax. The Cumulative Impact Of
For Example Are Taxed Up To 25% Of Their Gains Just Such Payments On A Company's Overall Performance
Like It Is In The Case In SA And Probably Nigeria That Includes A Reduction In Its Financial Foundation,
Deviate To 45% And 23% Respectively. Decreased Availability Of Funds For Wages And Ongoing
Expenses, Decreased Motivation For Future Investment,
As Noted By Okoth (2015), The Bill Was Mainly Associations Of Future Losses With Decisions Like
Centered On The Taxation Of Petroleum Operations, Except Withholding Property Due To Speculation, Destabilized
For A Significant Alteration In The Tax Regulations Leverage, And Even The Closure Of Young Companies
Regarding Capital Gains. This Change Pertained To The With Unstable Liquidity Ratios.
Taxation Of Capital Gains Gained By Individuals Through
The Sale Of Shares In A Private Limited Liability Similar To Other Countries, KIPPRA (2014) Contends
Company. Okoth Further Contends That The Most Prevalent That The Introduction Of Such A Tax Is Advantageous To
Form Of Capital Gains Realized By Individuals In Uganda The Government But Places A Substantial Burden On The
Arises From The Sale Of Shares, Bonds, And Property Like Financial Foundation Of Companies Subject To It. Various
Land And Buildings. Under Uganda's Income Tax Law, If Studies Conducted In South Africa And Ghana By Kovanen
An Individual Sells Shares They Hold In A Private Limited (2011) And Gatsi (2013) Respectively Have Demonstrated
Liability Company, The Profit Obtained From This Sale Is That, During The Initial Years Of Taxation, Companies
Usually Not Subject To Taxation, Unless The Individual Is Encountered Financial Downturns. Some Faced Challenges
Actively Engaged In The Business Of Buying And Selling In Managing Their Financial Structures, Insuring Against
Shares. Associated Risks, Meeting Expected Targets Due To Poor
Speculation, And More. This Pattern Can Be Observed In
Nevertheless, Klemm & Van Parys (2012), In Their The Kenyan Context As Well, Given The Historical Issues
Study On The Effects Of Tax Incentives In Uganda, Ghana, Companies Faced With Taxation And Financial
Ethiopia, And South Africa, Argue That Smaller Companies Performance Before The Abolishment Of Capital Gains Tax
Without Substantial Political Influence In Uganda Have (Global Tax Alert, 2015).

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Hungerford's Research In 2010 On The Economic Sophisticated Methods To Exploit Tax Code Loopholes,
Effects Of Capital Gains Taxation In The USA Revealed Minimizing Their Tax Responsibilities. In Certain Places
Tangible Impacts Such As Financial Restructuring, Declines Like Mexico, Their Interests Are So Well Safeguarded By
In Financial Stability, Reductions In Wages, And Financial Lobbying Groups And Political Factions That Tax Codes
Struggles Faced By Small Companies. Mark Larochelle's Are Written In Ways That Facilitate Such Loopholes. This
Study In 2012 Titled "Raising The Capital Gains Tax Will Situation Leaves Smaller, Less Influential Companies
Not Lead To Fairness, But Only Slam U.S. Job Creation" Bearing A Heavier Tax Burden, Ultimately Leading To
Further Supports These Observations. Insufficient And Uneven Compensation For Their
Workforce In Relation To Their Profits. Okoth (2015) Posits
According To Investopedia (2015), Profits Constitute That Heightened Capital Gains Tax Has Significant
The Difference Between Revenues And Costs. In A Trade Ramifications For Both Small And Large Companies In The
Transaction, Profit Is The Contrast Between The Selling East African Region. He Outlines Three Primary Effects
Price Of A Good And Its Buying Price. For Businesses, Net Observed Across These Countries. Firstly, The Increased
Profit Represents What Remains From Turnover After Taxation On Companies Listed In Stock Markets Results In
Settling Obligations To Suppliers, Workers, Financing A Reduction Of Their Profit Margins, Subsequently Leading
Entities, And The Government. The Objective Of All Firms To Diminished Available Wages For Their Employees And
Is Believed To Be Profit Maximization. Yet, It's Not Always Closely Associated Individuals. Secondly, Companies
Straightforward For Management To Ascertain The Aiming To Remain Competitive In The Market Are
Decisions That Would Genuinely Optimize Profits. For Compelled To Allocate More Resources Towards Wages.
Instance, Short-Term Profits Can Be Superficially Boosted This Often Prompts Them To Seek Out Strategic Employees
By Cutting Back On Maintenance, Discretionary Costs, And Who Can Enhance Revenue Through Customer-Oriented
Necessary Investments That Contribute To Ongoing Tactics. Lastly, The Imposition Of Higher Capital Gains
Competitiveness. This Challenge Of Making Decisions That Tax Can Trigger Wage System Failures, Potentially Leading
Align With Long-Term Financial Success Can Be Explored To Strikes And Unrest In Cases Where Companies Struggle
Through The Lens Of A Business Simulation. To Balance Their Income, Expenses, And Government
Deductions. This Is Particularly True For Companies That
Furthermore, What Maximizes Overall Profits May Have Either Evaded Tax Obligations In The Past Or Failed
Not Necessarily Align With Achieving The Utmost Level To Establish Financial Equilibrium.
Of Profitability, Which Pertains To The Proportion Of
Profits Relative To Turnover. This Concept Becomes The Governance Of Capital Gains Tax Falls Under The
Clearer When Considering A Monopoly Model And Purview Of The Capital Gains Tax (CGT) Act, Cap C1 LFN
Contrasting Two Strategies: (I) Adopting Exceedingly High 2004 (As Amended). As Highlighted By Karumba (2016),
Prices (Resulting In High Profitability) And (Ii) Setting A The Capital Gains Tax Is Levied At A Fixed Rate Of 10%
Price Derived From A 15% Mark-Up On Costs. In Practice, On Chargeable Gains. Accordingly, All Assets Subject To
Companies Do Establish Profit Targets, At Times Even Capital Gains Are Liable To The Tax When They Are Sold
Incentivizing Managers To Achieve Them. However, It's At A Profit, Except Those Specifically Exempted By The
Essential To Recognize That A Firm's Objectives Act. Notably, Chargeable Assets Encompass All Forms Of
Encompass More Than Mere Profits (Marthin, 2015). Property, Irrespective Of Their Location Within Nigeria.
The Deadline For Filing Returns And Making Tax Payments
According To Burman, Leonard & William (2013), As Aligns With That Of The Companies Income Tax (Edewusi
Proposals For Increased Capital Gains Tax Are Raised In & Ajayi, 2019).
The UK As A Short-Term Revenue Generation Measure,
Policymakers Need A Comprehensive Grasp Of The Lyndon And Paymaster (2016) Outline Various
Potential Repercussions. This Includes Understanding The Expenses Allowable For The Purpose Of CGT. These
Probable Impacts On Government Revenues, Companies Include Fees, Commissions, Or Remunerations Paid For
Listed In The Stock Market, And The Earnings Of Professional Services And The Costs Associated With
Individuals Employed By Companies Subject To The Transfers. Certain Gains Are Exempted From CGT,
Capital Gains Tax. For Instance, In 2007, Over 28% Of Encompassing Disposals Of Decorations Awarded For Acts
Employees Working In Small Firms Listed On The SE Of Valor And Gallant Conduct, Life Insurance Policies,
Market Experienced Potential Reductions In Salary, Nigerian Government Securities, Stocks, And Shares,
Delayed Payments, Loss Of Medical Coverage, And Other Among Others. Gains Are Not Subject To Charge If They
Benefits Like Family Assistance. Accrue To Certain Organizations, Provided That The Gain
Does Not Stem From The Disposal Of An Asset Acquired
Greeley (2012) Highlighted That Heightened Taxation In Connection With A Trade Conducted By The
On Profits And Capital Gains Is A Strategy Adopted Across Organization. Such Entities Include Ecclesiastical,
Both Developed And Developing Nations To Bolster Charitable, Or Educational Institutions Of A Public Nature,
Government Funds And Achieve Budget Equilibrium. Registered Friendly Societies, Cooperative Societies
However, This Approach Can Be Dual-Edged. He Goes On Governed By The Cooperative Societies Law Of Any State,
To Point Out That Affluent Individuals And Corporations, And Trade Unions Registered Under The Trade Unions Act
Particularly In Regions Like India, South Africa, Latin (Akhor & Ekundayo, 2016).
America, And Impoverished African Countries, Utilize

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III. RESEARCH DESIGN IV. METHOD OF DATA ANALYSIS

In other to guide the conduct of the study and give A cross-sectional multi-liner regression (A cross-
direction to it, so that a concise and reliable result can be sectional, multi-liner regression is a regression analysis that
achieved, Ex-Post Facto research design and Time series takes into account the relationships between multiple
data were used. An Ex-post facto design is a quasi- predictor variables and a single outcome variable. This type
experimental study examining how an independent variable, of regression is used to identify potential predictors of a
present in the study affects the dependent variable and in particular outcome and to quantify the strength of the
such a situation, all data will not be randomly assigned but relationship between each predictor and the outcome)will be
was given equal chance. According to Mary (2009), to used in the study to compare and contrast the effect of tax
understand the relationship between a variable and another system on economic growth across the Africa countries
with the primary goal to investigate casual (cause/effect) used.
relationships is what ex-post facto research design called for
and this will help the researcher to fully understand the Unit trust test was employed to determine if the
relationship and effect of one or more variables on other trending data should be first differenced or regressed on
variables. This will be the reason for the adoption and use of deterministic functions of time to render the data stationary
the design in this study. and co-integration test to establish if there is a correlation
between several time series in the long term.
 Area of the Study
The area of the study covered two African countries  Model Specification
namely, Nigeria and South Africa. These two countries were In this study, the dependent variable is economic
selected based on the availability of data. growth while tax system in Africa (TAS) independent
variable. The dependent variable which is economic growth
 Nature and Source of Data will be proxied with Real Gross Domestic Product (RGDP),
Data is the backbone of any research, especially when while the independent variable was proxied with VAT
it comes to scientific research. It is the most important thing (Value added tax), capital gain tax(CGT) and customs &
for any researcher to have a good understanding of data and its excise duties tax(CED).
role in the research process. As a result of this, this study
used already existing (published) available data on taxation This study will modify the functional relationship
within the two selected African countries (Nigeria and South between tax revenue and the economic growth of Nigeria
Africa) model by Ojong, Ogar and Arikpo (2016). The model is
expressed thus:
Secondary research data were sourced from the
financial statistical bulletin, CBN statistical bulletin as well RGDP= β0+ β1VAT it + β3CED it + β4CGT itt - -
as the Federal Inland Revenue (FIRS) for Nigeria and South -
African Revenue Services (SARS) for South African
statistical bulletin &World Bank Data (various issues) from RGDP =Real Gross domestic product
2001 to 2021 using time series data based on the availability
of data among the two countries. The researcher codified VAT = Value added tax
the data into the following categories namely; economic
growth (EG), Real gross domestic product(RGDP), CED = Customs and Excise duties tax
withholding tax (WHT), Value added tax (VAT), Corporate
income tax (CIT), capital gain tax(CGT) and custom and CGT = Capital gain tax
excise duties tax (CED).
β0 = constant
 Population and sample size
The Population is made up of 54 African countries but  Data Presentation
our sample size is purposive sampling techniques that
selected two among them which includes Nigeria and South  Data Analysis
Africa. this is because of some similarities and equal
availability of data in the two countries tax systems and
economic growth

Table 1 Regression analysis between VAT, CED, CGT and GDP for Nigeria and South Africa
Nigeria South Africa
Variables Coefficient t-Statistic Prob. Variables Coefficient t-Statistic Prob.
C 269770.5 2.959493 0.0103 C 258422.9 5.126241 0.0001
VAT 0.083203 0.455395 0.6558 VAT 0.984587 2.332622 0.0340
CED 1.378786 0.526888 0.6065 SED 0.038628 0.026780 0.9790
CGT -1.454733 -1.768773 0.0987 CGT 0.384615 1.044731 0.3127
R2 0.8350 R2 0.6869

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AR2 0.7760 AR2 0.5826
F-stat(p-val) 0.0000 F-s(p-val) 0.0020
DW 0.9995 DW 0.7701
Source: Author’s Computation, (2023)

The explanation of the regression model start with the The coefficient values of stamp and excise duties as an
Durbin-Watson (DW), which checks for the appropriateness independent variable of tax system in both NG and SA have
of the model, applied for our analysis. From the models, positive values: 1.378786, 0.038628 and their respective
these show to have the value of 0.9995, 0.7701 for both probability values are 0.6065, 0.9790. We apply the decision
Nigeria and South Africa respectively, and this seems to be rule based on 5% and 105% significant level, and thus
less than two, as an indication that it has non auto- reject the alternative hypothesis and accept the stated null
correlation and thus it is appropriate but the model hypothesis that in both countries, stamp and excise duties
probability F-statistics has the value as 0.0000, 0.0020 for are positive and non statistically significant on their real
both Nigeria and South Africa respectively ,and they seems GDP.
to be less than the normal decision value of 5% and 10%
levels of significance decision of this study. Since their  H03: Capital gain tax CGT does not significantly affect
value is less that the significance value, we accept that the the real GDP of both Nigeria and South Africa.
effect of tax system on economic growth of Nigeria and
South Africa is generally significant on their GDP. We find from the two abridged models that the values
of CGT are -1.454733, 0.384615, respectively for Nigeria
The valve of R-squared coefficient of determination and SA; while their respective probabilities are: 0.0987 and
stood at 0.8350, 0.6869 for both Nigeria and South Africa 0.3127. Thus basing the decision on the stated values of 5%
respectively which implies that 84%,69% respectively of and 10% level of significance, we state that in Nigeria CGT
the systematic variations in the dependent variables GDP is negative and statistically significant on GDP; while in SA,
were able to be predicted by the individual variables power it is positive and non-significant on GDP.
of the independent variables of both countries; while about
16%, 31% respectively were unexplained, and possibly  Findings of the Study
these were captured by the stochastic error term. On the The findings are related to each of the variables
other hand, the adjusted R-squared are 0.7760(78%), findings. They are as follows:
0.5836(58%) for both countries respectively, these also
show that all the independent variables jointly have the VAT is positive and non-statistically significant in
power to explain about 78%, 58% of the systematic Nigeria real GDP; while it is positive and statistically
variation in the change of GDP of Nigeria and South Africa significant in South Africa real GDP.
economy for the period covered, while th balance of 22%,
42% of both countries respectively aare the stpchastic In both Nigeria and South Africa, custom and excise
elements that represent all other endogenous and exogenous duties are positive and non- statistically significant on real
variables affecting Nigeria and South Africa GDP within tax GDP.
system which were not captured in the study models of both
countries. In Nigeria, CGT is negative and statistically significant
on real GDP; while in SA, it is positive and non-statistically
 Hypotheses Testing significant on GDP.

 H01:Value-added tax VAT has no significant effect on V. DISCUSSIONS OF MAJOR FINDINGS

real gross domestic products in both Nigeria (NG) and
South Africa (SA) The study discussions of the findings are based on the
related empirical literatures applied throughout this study as
From the abridged model values of both countries, it relates to each of the variables findings.
there are positive coefficient values of VAT given as:
0.083203, 0.984587; and their probability values are as well: CIT is positive and non-statistically significant in
0.6558, 0.0340 for both countries respectively. Applying the Nigeria; while it is negative and non-statistically significant
study decision point of 5% and 10% significance level, we in SA. This finding that CIT is significant in Nigeria agrees
reject the alternate hypothesis for NG and accept the null with the prior researches of: (Labatu, 2014; kaka, 2014;
hypothesis that VAT is positive and non-statistically Chibu & Njoku, 2015; Ejiofor, et al., 2021; Onoja &
significant in Nigeria GDP; while the alternate hypothesis Ibrahim, 2020; Alexander, et al., 2019; Okoye, et, al., 2019;
was accepted showing that it is positive and significant in Ideh, 2019) ; while it did not agree with these authors who
South Africa GDP. found negative: ( Okasha & Iqbal, 2012; Nweze et al.,
2021;)
 H02: custom and excise duties has no significant effect
on real gross domestic products in both Nigeria (NG) In both Nigeria and South Africa, custom and excise
and South Africa (SA) duties are positive and non-statistically significant on real
GDP. These authors found positive in agreement with our

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study: (Oladipupo & Ibadin, 2015; Chibu & Njoku, 2015; Based on the above findings, it could be summarized
Dritsaki & Katerina, 2015;); while the following researchers that within the context of this study, company income tax,
found negative; (Dejong & Ripoll, 2003;) value added tax, custom and excise duties, and capital gains
tax were all statistically insignificant with gross domestic
VAT is positive and non-statistically significant in product in Nigeria. However, withholding tax and value
Nigeria GDP; while it is positive and statistically significant added tax were significant, while company income tax,
in South Africa GDP. Vat being positive in both countries custom and excise duties and capital gain tax were
GDP agrees with the findings of the following prior insignificant in South Africa. Company income tax, and
literatures: (Madugba & Azubike, 2016; Apere & Durojaiye, withholding tax characterized with negative effect on gross
2016; Egolum & Celestine, 2021); while it did not agree domestic product across in South Africa, while capital gain
with these authors who found negative: (Salti & Chabaan, tax and withholding tax were negatively affect gross
2010; Ugochukwu & Azubike, 2016; Madugba & Azubike, domestic product in Nigeria. Meanwhile the outcome from
2016; Njoku, 2015; Oraka, et al., 2017;) the study can be due to different in tax rates and
administration; as well as tax avoidance and aggressiveness
Capital gains tax is negative and non-statistically can also be a contributing factor to it. Nigerian government
significant in Nigeria and South Africa real GDP which to generate adequate revenue from tax has become a matter
agrees with the findings of; ( Ngu, 2020; Obaje,et el 2012; of urgency in a bid to sustain economic growth. The results
Osho et el 2019; Kabir, 2016; El-Maude et el, 2018 ) while obtained from this study are a departure from mainstream
it did not agree with the finding of; (Offor, 2019) traditional economic theory, which disseminate the theory of
high-income tax rate as necessary conditions for sustained
In both Nigeria and South Africa, custom and excise economic growth. This study portrays the view that lower
duties are positive and non- statistically significant on real taxes (w.r.t. to excise duty tax, value added tax, capital gain
GDP and this agrees with the finging of ((Ideh, 2019: tax and company income tax) can influence economic
Oladipupo & Ibadin, 2015: Dejong & Ripoll, 2005) while growth that is consistent with endogenous growth models.
(Dritsaki and Katerina, 2005) found it negative.
Conclusively, the outcome of the analysis indicates
VI. SUMMARY OF FINDINGS that while the increase in value added tax and withholding
tax leads to increase in the economic growth, other tax
The following were the major findings of the study: systems (company income tax, custom and excise duties and
capital gain tax) were in opposite direction. In the sense that
 There was a statistically significant effect between value economic growth decreases as a result of increase in the
added tax and gross domestic product in South Africa, amount of tax paid. As Nigerian tax variables revealed
while Nigerian value added tax shows no significant, insignificant, this however, create income effects that reduce
and their effects were; positively and positively the need to engage in productive economic activity in
respectively. Nigeria, and they may subsidize old capital, which provides
 There was no statistically significant effect between windfall gains to asset holders that undermine incentives for
custom and excise duties tax and gross domestic product new activity.
in the two countries (Nigerian and South Africa), and
their effects were positively and positively respectively. RECOMMENDATIONS
 There was no statistically significant effect between
capital gain tax and gross domestic product in the two The following recommendations were proffered based
countries (Nigeria and South Africa), and their effects on the findings of the study:
were negatively and positively respectively.
 In order to reverse the insignificant effect of VAT,
VII. CONCLUSION Nigerian government should see that the application of
VAT ensures that international trade takes place on a
In a bid to contribute to the existing literature, the transparent basis and avoids distortions like tax
study embarked on a cross-country comparative analysis of cascading associated with alternative commodity taxes.
the effect of tax systems on the real gross domestic product  Since CED has insignificant effect on the productivity of
in Nigeria and South Africa. The study specifically Nigeria, Government should devise means of curbing
examined how company income tax, value added tax, corruption and leakages in the CED administration and
custom and excise duties, capital gain tax and withholding continue in investing in infrastructure and public goods
taxrelated with economic growth of Nigeria and South and services.
Africa.The study employed the real gross domestic product  The study recommends that the government should
(RGDP) as a measure of economic growth which was used provide the necessary enabling environment that are
in related studies in this context. The time series was needed to support both domestic and foreign investment
adopted in selecting the twenty one (21) years in Nigeria so they can attract more capital gain that will boost
and South African due to equal availability data for these taxable income thereby improve in the economic growth
periods covered. of these countries.

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Volume 8, Issue 8, August – 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
 There is need should be continuous review and reforms [14]. Appah, E. (2011). “corporate tax incentives: A Tool
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