TAX REFORMS, DIGITALISATION AND GOVERNMENT REVENUE IN NIGERIA
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Date
2022
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Abstract
Mobilisation of tax revenue has become a critical policy objective for the public sector in Nigeria.
The influence of tax reforms and digitalisation on government revenue in Nigeria was investigated
in this study. This research focused on evaluating the distributional outcomes of tax revenue and
digitalisation on the revenues of both Federal and State government. The study used a time seriesbased research approach with both descriptive and inferential analysis of the hypothesised
relationships. The Autoregressive Distributed Lag (ARDL) technique was used to create a dynamic
framework for analysing the linkages in the study. Disaggregated data on government revenues
was employed in the empirical analysis due to differentials in revenue stream. The long and short
run impacts of tax reforms (for Company Income Tax – CIT and Value added tax – VAT) and
digitalisation on government revenues were calculated using the analytical framework. The study's
findings suggest that both CIT and VAT amendments increased revenue of the federal government
in the short and long run. The reforms, on the other hand, hampered state government earnings in
Nigeria, particularly in the long run. Furthermore, there is evidence that, in the short and long run,
digitalisation has a considerable beneficial influence on Federal-based revenue but a negative
impact on State-based revenue. In the long run, digitalisation improved the impact of tax reforms
on federal government revenues, however, the impact on state government revenues was not
obvious in the study. The results imply that the current VAT reforms in Nigeria seem to undermine
the state government's fiscal system and focus more on federal revenue activities, although the CIT
reforms appear to be more widespread in terms of their effect on short-term revenue inflows. In
the same vein, there are implications that tax reforms that are more streamlined with the
transformation of the economy (in terms of digitalisation) will yield better revenue outcomes in
Nigeria. It is therefore recommended that the conduct of fiscal reforms in Nigeria should evolve
to become more of a bottom-top approach where all tiers of government are carried along at all
times. Moreover, state governments need to improve their capacity to obtain better revenue input
from the digital economy in Nigeria by playing more active roles in provision and monitoring of
the digital economy.