The Effect of Personal and Company Income Taxes on Total Government Expenditure in Nigeria

Abstract

The study investigated the effect of personal and company income taxes on total government expenditure. The study covered time period spanning from 1997 to 2016. Data for the study were sourced from Central Bank of Nigeria Statistical Bulletin, as well as the data base of National Bureau of Statistics. The study employed multivariate time series estimation techniques such as the co-integration regression and error correction model (ECM) estimation following pretest such as unit root test and co-integration test. Result revealed that on the short run, personal income tax exert inconsequential positive influence on total government expenditure 0.075747 (p = 0.7140 > 0.05), but on the long run the impact of personal income tax on total government expenditure become negative though no significant, -0.035629 (p = 0.9162 > 0.05); while company income tax exert unimportant positive effect on total government expenditure both on the short run 5.096910 (p = 0.3082 > 0.05) and long run 6.034018 (p = 0.0613 > 0.05). The study concluded that revenue generation from non-oil taxes in Nigeria do not contribute substantially to maintaining and sustaining full budget implementation in terms of government expenditure.