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This project is titled the effect of taxation on Nigerian Economy. The objective of the study is to determine and assess the effect of taxes towards the growth and development of the Nigerian economy. The survey research design was adopted, data were obtained from secondary sources and the use of simple linear regression as a statistical tool for data analysis. The major findings from the analysis of data and the testing of the hypothesis showed there exist a positive relationship between taxation and the growth and development of the Nigerian economy. The conclusion draw from this study revealed the following; (i).Total tax revenue to Gross Domestic product tend to grow as the nation develops. (ii). Increase in total tax rate will reduce profit of a company and rate of returns an investment (FDI). (iii). Inflations rate will affect the tax reform and policies, that affect the economy of Nigeria. The recommendations from this study include; the autonomy of the Nigerian tax system, efficient and effective tax administration and public enlightenment for compliance with tax policies.

1.1     OVERVIEW
One of the major functions of any government especially developing countries such as Nigeria is the provision of infrastructural services and social amenities such as hospitals, schools, good roads, electricity, pipe borne water, security of life and properties and to also ensure a rise in the per capital income, the Gross Domestic Product (GDP) and poverty alleviation to mention a few as stated by Soyode and Kajola (2006).
For these services to be adequately provided, the government should have enough revenue to finance the provision of these necessities in the economy. The task of financing these enormous responsibilities is one of the major problem or challenges facing the government of Nigeria. Based on the limited resources of government, there is the need to involve the citizens of the nation in this development through the imposition of tax on all taxable individuals and companies to boost and increase government financial position.
To this end, the government has always enacted various tax legislations or tax law and reformed existing ones to stand and meet the test of time.
They include; Companies Income Tax Act (CITA 1979) as stated by Ariwodola (2007), Income Tax Management Act (ITM), Joint Tax Board (JTB), Personal Income Tax Act (PITA1993) as posited by Ariwodola (2008).
All there are aimed at ensuring adherence to tax payment and discouraging tax evasion and avoidance, for the purpose of this study, the researcher would be concerned with the effects of taxation on the Nigerian economy.

It is important to state that no tax system succeeds without the tax payer’s co-operation. Ezeali and Nwoba, (2012) stated that the primary objectives of taxation are not related to instability of income and employment. Instead, such a country faces a number of problems corrected with economic growth on one hand and removal of poverty and inequality on the other. In Nigeria, we have additional problems of chronic unemployment and regional disparity. Oriakhi (2002) stated the Nigerian economy is face with the vicious circle of poverty, non compliance with tax policies and the government has an active role in this task and the public through taxation.

          Here, we can ask some thought provoking questions such as what makes taxation such a complex and difficult issue? Why do people feel cheated when it comes to tax? What are the effects of taxation on corporate bodies and individuals? The effect of taxation on economic development of the nation? In view of the several questions and problems above, this study is carried out to offer solution to them.
We shall also look at the following issues and offer recommendation;

  • Process of the administration in Nigeria
  • Problem affecting the successful operation of tax system in Nigeria.
  • Effects of taxation in Nigeria.

The overall objective of the study is to determine and assess the effects of taxes towards the growth and development of the Nigeria economy.
This is assessing the various effects of taxation and the various tax policies to determine if they have resulted into positive or negative growth and development of the Nigerian economy over time.
However, the specific objective of this study includes;

  • To examine the relevance of taxation in Nigeria.
  • To determine the effects of taxation on production or national output.
  • To know the effect of taxation on inflation rates in the Nigeria economy.
  • To determine the effect of taxation on consumption patterns of the populace.
  • To know the general desirability of firms to invest as a result of tax incentives measures.
  • To assess the effect of taxation on savings, and investment in the Nigerian economy.
  • To determine the effects of taxation on employment and salaries of working in Nigeria.

Generally, the work is done to determine and know if taxation forms a large part of government revenue and how the utilization of this revenue effectively to promote economic gainful activities, developments and to erase the erroneous belief that it is a means of exploitation by the government for their selfish interest.

The significant issues that must be considered to determine and understand the diverse effects of taxation in the goal and objective of achieving a diversified economic growth and development with stability in all sectors of the economy of Nigeria includes;

  • Does the revenue generated from tax meet up with the commitment of the Nigerian Government?
  • Does taxation ensures and encourages investments and savings?
  • Do individuals and companies respond positively or negatively towards the payment of tax?
  • Does taxation affect employment and production level in the economy?
  • Does tax regulations and policies ensures efficiency of the tax system?