Tax and Economic Growth Nexus: Evaluating the Intervening Role of Social Performance (A Multi-Economy Assessment)
DOI:
https://doi.org/10.59573/emsj.8(6).2024.23Keywords:
GDP per capita, growth rate, inflation, social progress index, social performance, taxAbstract
This study investigates the relationship between tax revenue, inflation, social performance, and economic growth in Nigeria. It compares it to other selected developing countries in West Africa, North Africa, South Africa and a developed economy like the UK. Despite persistent calls for improved government performance and social welfare, Nigeria faces challenges in achieving sustainable economic development. Using panel data spanning 2013-2022, we analyse the impact of tax revenue and inflation on GDP per capita, considering the intervening role of social performance. Employing econometric techniques, including the Augmented Dickey-Fuller test, Fully Modified Ordinary Least Squares (FMOLS), and panel data estimation methods (POLS, FEM, REM), the findings reveal a significant negative impact of tax revenue on GDP per capita in Nigeria. Inflation also shows a negative but insignificant impact on GDP per capita. However, a crucial insight emerges: social performance acts as a significant moderating variable in Nigeria, significantly mitigating the negative effect of tax revenue on economic growth, mirroring similar findings in Ghana, Togo, South Africa and the UK. This suggests that prioritizing social performance is essential for improving Nigeria's economic outlook and enhancing the well-being of its citizens. The study underscores the importance of a balanced approach to fiscal policy, where tax revenue generation is coupled with effective social programs that promote inclusive growth and development.
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