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This study examines the impact of tax on manufacturing sector performance in Nigeria. For this study, ex post facto research design is adopted. The time series properties of data series employed in the estimation equation is tested for stationarity using Augmented-Dick-Fuller (ADF) unit root test. The study covers the impact of taxation as it relates to manufacturing sector in Nigeria for a period of 35 years (1981 to 2015). The findings of the study therefore revealed that tax rate has significant impact on manufacturing sector performance in Nigeria during the chosen period of observation and company income tax has significant impact on manufacturing sector performance in Nigeria. In addition, the R2 stood at 96 percent total variation on manufacturing sector performance in Nigeria affected by the influence of the increase in Capital Customs and Excise Duties charged, Company Income Tax and Petroleum Profit Tax. The study therefore recommends that the federal board of Inland Revenue should try to device a formula to ensure smooth payment of these taxes, they should make payment as cheap as possible so that tax payers will not see payment as a burden and therefore should pay tax voluntarily without any grant of dissatisfaction. In addition, for the PPT policy to have a more significant impact on the revenue and economic development of Nigeria, Government should minimize or find ways of eliminating totally the widespread corruption and leakages in the petroleum profit tax administration. Conclusively, it is suggested that government should pay attention to the factors that influence the willingness of citizens to pay tax and improve on them, thereby improving peoples‟ willingness to pay tax, government revenue and economic growth and development of the nation generally, lending credence to the Lindahl and Bowen models showing relationship between tax revenue and economic growth and development.




1.1       Background to the Study

Nigeria is Africa‘s most populous country and Africa’s largest economy ahead of South Africa. By virtue of its size, improved economic management and strong economic growth in Nigeria would generate substantial prospects for growth and spillovers for the whole West African region (Pitigala and Hoppe, 2011). But the challenges facing the country has hindered it from harnessing its vast potentials, formidable among this challenges is an efficient tax system and tax behavior in Nigeria.

As described by Dike (2014) tax is a monetary charge imposed by the Government on persons, entities, transactions and properties to yield revenue and also It can be used to steer private sector activity in the directions desired by governments(Avi-Yonah, 2006). Tax is one of the major instruments of fiscal policy for regulating the economy of any nation, Nigerian inclusive. At various times, successive governments in Nigeria have employed the instrument of tax policy to encourage industrial and corporate growth in the private sector (Nwaobia, 2014).The objective of tax policy in Nigeria are to address the myriad of problems bedeviling the Nigerian tax system. It is aimed at creating a tax system that will contribute to the well-being of all Nigerians and taxes which are collected by Government, should directly Impact on the lives of the citizens (Dike, 2014) by way of promoting economic growth and development, ensure fiscal discipline and accountability, address the issue of inequality and correcting market failures.

Over the years, it has been observed that the Nigerian tax system has inherent problems in its structure in this regardOdusola (2006) opined that the Nigerian tax system is concentrated on Petroleum Profit Tax (PPT) and Company Income Tax (CIT) while broad-based indirect taxes like the Value-Added Tax (VAT) and Custom and Excise Duty (CEXD) are neglected. Thus, the tax system lacks the potential of diversifying the revenue portfolio for the country to safeguard against the volatility of crude oil prices and to promote fiscal sustainability and economic viability at lower tiers of government (Azaiki and Shagari, 2007).

In recent times, some manufacturing industries in Nigeria have been characterized by declining productivity rate, by extension employment generation, which is caused largely by inadequate electricity supply, smuggling of foreign products into the country, trade liberalization, globalization, high exchange rate, and low government expenditure. Therefore, the slow performance of manufacturing sector in Nigeria is mainly due to massive importation of finished goods, inadequate financial support and other exogenous variables which has resulted in the reduction in capacity utilization and output of the manufacturing sector of the economy (Tomola, Adebisi and Olawale, 2012). The contribution of manufacturing to GDP has been declining instead of increasing. The share of manufacturing subsector output in GDP which was 76.6% in 1975 reduced to 38.3 % in 1985 and 32.4% in 1998 and by 2010 this figure had dropped to 22.03%, in 2013 20.58% and this declined continued up to 2015 with industrial contribution to economic growth dropping to 19.30% and 17.82% in 2016 (CBN, 2016). Also at the same period, the overall manufacturing capacity utilization grew from 40.3% in 1990 to 58.92% in 2010 36% in 2014 (CBN, 2016)

1.2       Statement of the Problem

Being a major instruments of fiscal policy for regulating the economy of any nation, Nigeria inclusive, successive governments in Nigeria have employed the instrument of tax policy to encourage industrial and corporate growth in the private sector (Nwaobia, 2014). On the opposing side, taxation and tax policies in Nigeria do equally act as disincentive to manufacturing firms to create value for stakeholders and enhance the value of the firmsNwaobia, Kwarbai and Ogundajo (2016). This implies that tax’s policy helps in regulating business activities and economic growth of an economy.

Evidently has noted by Gatsi, Gadzo and Kportorgbi (2013) taxation, can be used to protect infant industries, encourage investment and particularly company income tax observably, plays a role in the misfortunes of the manufacturing sector because tax policies, apart from generating revenue for the state, serve several other purposes.

As added by Ihendinihu (2009) noted that unfriendly tax policies is one of the many reasons for the growth of the underground economy, where law-abiding individuals and corporate citizens seek refuge from wrongs inflicted on them by government. The major challenge of corporate entities, and in particular manufacturing firms, come in a midst of high corporate tax rates and multiples of other taxes that lead to high effective tax rates far above the statutory company income tax rate (Omesi, Teerah and Nzor, 2014). With the introduction of the Information Technology tax, there are about forty different taxes levied on companies and individuals (Bammeke, 2012).

Many of these taxes from the different levels of government overlap and are forcefully extracted from corporate organizations. The effect of these exactions of course is high cost structure for firms (Nwaobia, 2014). One will not fail to agree with Nnadi and Akpomi (2008) that a tax policy defines the cost structure of firms as it is factored into pricing. In addition, tax costs and eventual payout deplete the disposable income of individuals as well as the distributable profits of corporate organizations. These taxes in fact, do translate to a substantial cost to organizations and if not properly planned and managed can have adverse impact on the bottom line, cash flow and capacity to investNwaobiaet al (2016).

As such it becomes necessary to investigate the impact of tax on manufacturing sector in Nigeria, so as to provide the manufacturing sector with tools for effective tax plans in order to remain competitive.

1.3       Research Questions

From the above problem statement, the following research questions are raised;

  1. What is the impact of tax on manufacturing sector performance in Nigeria?
  2. What is the impact of company income tax on manufacturing sector performance in Nigeria?
  3. What is impact of value added tax on manufacturing sector performance in Nigeria?

1.4       Objectives of the Study

The broad objective of this study is to examine the impact of tax on manufacturing sector performance in Nigeria, specifically the study will aim at;

  1. Investigating the impact of company income tax on manufacturing sector performance in Nigeria
  2. Determine the impact of value added tax on economic growth in Nigeria.

1.5       Hypothesis of theStudy

The hypothesis will guides this study includes;

  1. H0: Tax rate has no significant impact on manufacturing sector performance in Nigeria

H1: Tax rate has a significant impact on manufacturing sector performance in Nigeria

  1. H0: Company income tax has no significant impact on manufacturing sector performance in Nigeria.

H1: Company income tax has a significant impact on manufacturing sector performance in Nigeria

  • Significance of the Study

This study will be of significance to the governmentpolicy makers and tax institutions as a tool to evaluate the impact of their tax policy over the years and provide them with tool for decision making. Also the companies which comprises the Nigerian manufacturing sector will benefit from this study as it will provide them with tools for planning and decision making and further expansion.

Furthermore, it will be of significance to students and researchers as a point of reference and an addition to already existing study. It will further serve as a bedrock for further study.

1.7       Scope and Limitation of the Study

The study covers the impact of taxation as it relates to manufacturing sector in Nigeria for a period of 35 years (1981 to 2015). The generalization from this study is limited to the manufacturing sector and companies which comprises and classified as manufacturing companies in Nigeria.








2.1       Conceptual Framework

2.1.1    Concept of Taxation

According to Anyanwu (1997), a tax is a compulsory levy imposed by the government on individuals, companies, goods and services to raise revenue for its operations and to promote social equity through the redistribution of income effect of taxation. In line with this frame of thought, taxation is a source of government revenue by which individuals and corporate bodies are mandatorily required to pay certain proportion of their earnings to the government for the course of development. In addition, Bhatia (2003) defined tax as a compulsory levy payable by an economic unit to the government without any corresponding entitlement to receive a definite and direct benefit from the government. Note, the word direct here does not mean a price paid by the tax payer for any definite service rendered or a commodity supplied by the government. Rather it means that the benefits received by tax payers from the government are not related to or based upon the tax paid by the tax payers. This in effect implies that tax is a generalized exaction, which may be levied on one or more criteria upon individuals, groups, or the legal entities.

Taxation in Nigeria following the extant laws is enforced by the 3 tiers of government, that is, federal, state, and local governments with each having its sphere clearly spelt out in the Taxes and Levies (approved list for collection) Decree, 1998. However, Nigeria runs a largely centralized revenue collection system, with the federal government collecting the major revenue (petroleum revenue – profit taxes, royalties, crude oil sales; company income tax, value added tax, customs and excise duties) on behalf of the constituent governments (Emmanuel, 2010).

2.1.2    Taxation System and Administrationin Nigeria

According to Bariyiman and Gladson (2009), tax administration in Nigeria is carried out by the various tax authorities as established under the relevant tax laws. “Tax authority” as defined in section 100 of the Personal Income Tax Decree, 1993 and amended by Decree No 18-finance Miscellaneous Taxation Provisions) Decree 1998, means “the Federal Board of Inland Revenue, the State Board of Internal Revenue or the Local Government Revenue Committee”. Also the tax organ in Nigeria is constituted by; the Joint Tax Board; the Joint State Revenue Committee; andthe Body of Appeal commissioners.

  1. The Federal Board of Inland Revenue

Oluba (2008), the Federal Board of Inland Revenue through its operational arm, the Federal Inland Revenue Service, deals with corporate bodies as well as Personal Income Tax for certain categories of individuals Viz: members of the Armed forces, the Nigeria Police, residents of the federal capital Territory Abuja, External Affairs officials and non-resident individuals. This is the body established by the federal government and it is vested with the power to administer the act and to carry out all acts which may be deemed necessary and expedient of the assessment and collection of tax and shall account for all amount so collected in a manner to be prescribed by the Federal Ministry of Finance. The Board as certain reserved to powers which it shall not delegate to other person to perform e.g. power to acquire , hold and dispose of property of any company in satisfaction of tax or any judgment debt, power to satisfy forms of return , claims and notice.All taxes collected by the Federal Inland Revenue Service go to the federal government.



  1. The State Board of Internal Revenue

Oluba (2008) posited that the State Board of InternalRevenue through its operational arm, the State Internal Revenue Service collects taxes from individuals and partnerships resident in the states. Taxes collected go to the state government. The Local Government Revenue Committee collects specified rates, levies and fees from individual and businesses located in the local government area.

  • The Joint Tax Board

Since each state has its Internal Revenue Board to oversee Personal tax administration and collection, a central body is desirable to resolve conflicts which may arise between states as to residence of individuals and therefore income tax claims. This responsibility is on a body called The Joint Tax Board (JTB). This is the body created under the section 27(1) Income Tax Management Act 1961 as amended. Its primary function under Personal Income Tax Decree PITD (1993) is to coordinate and promote unity in the application of tax laws at the federal andstate level. The Joint Tax Board (JTB) is headed by the executive chairman of Federal Board of Inland Revenue who also act as the chairman of the board. All the state of federation must nominate a member via the commissioner responsible for income tax of the state. Usually, the chairmen of the State Inland Board of Revenue represent their respective states. The secretary to the board who should not be a member to the board is to be nominated by the Federal Public Service Commission. He must be an experienced senior officer in income tax matters. Another member who should always be in attendance in JTB meeting is the adviser for the board. However, the JTB is, thus the apex unifying body for all tax authority in Nigeria. Specifically, the problems common to and disputes arising among tax authorities are dealt with by this board which has been established, among other things, to act as the adjudicating body.

2.1.3    Tax in Nigeria

Different types, forms and classes of taxes exist (Anyaduba, 2004) but the commonest classification in Nigeria is that according to the tax payer categorised as direct or indirect. The direct tax is a levy on personal, corporate income or property. Examples are Personal income tax, company income tax, petroleum profit tax, and capital gains tax. When the imposition is on the price of goods and services, then it is called an indirect tax. Indirect tax is payable on the consumption of products and services associated with import duties/tariffs, export duties, value added tax and excise duties. In Nigeria, the government can emphasize on any one of the tax forms depending on the objective it wants to pursue. In Nigeria, different legislations that allow the government tax its citizens and to increase the tax revenue of the country exist. These legislations are the Personal Income Tax Amendment Act 2011, Companies Income Tax Amendment Act 2007, and the Petroleum Profit Tax Amendment Act 2004. Others are the Capital Gains Tax Amendment Act 2004, the Value Added Tax Amendment Act 2007 and the Education Tax Amendment Act 2004. The agency of the federal government in charge of the administration and collection of these taxes, (except customs/excise duties) up to April 2007 was the Federal Board of Inland Revenue (FBIR). In 2007, the board was scrapped and replaced by the Federal Inland Revenue Services (FIRS).

2.1.4    Multiple Taxation in Nigeria

A major problem facing the country is the multiplicity of taxes. Individuals and corporate bodies complain about the ripple effects associated with the duplication of tax (Odusola, 2008). We are aware of the challenge of inadequate funding which has continued to confront both federal and state governments with greater intensity and has limited infrastructural development in the country. Our leaders should know that multiple- taxation has not only become a cancerous leach in the body of corporate entities in the economy but also constituted a major source of revenue leakages as illegal agents have exploited the lapses within the tax system to pursue their selfish interests. Hence, this problem should be addressed holistically.

Multiple taxation is the levying of tax by two or more jurisdictions on the sense declared income (in the case of income taxes), asset (in the case of capital gains taxes), or financial transaction (in the case of sales taxes). Multiple taxation is a situation in which the same earnings are taxed more than once. For example, it may occur when a publicly traded company pays corporate tax on its earnings and passes some of those earnings to shareholders (the owners) as dividends on which they must pay a capital gains tax at the federal level and then at the state level (Adam 1989) defines multiple taxation as “the taxing of a person by two or more government authorities demanding the same kind of tax”. Commenting on the menace of multiplicity of taxes, Dangote (2001) in Bassey, (2013) noted that “the manufacturing industries are confronted with multiple statutory levies and taxes which are clearly duplicate of what other tiers of government charge.

Apart from the additional cost to the industries, the time spent discussing such levies constitutes a distraction to the operators of manufacturing industries in Nigeria. According to him, it also makes planning difficult since one is not sure of how many levies and taxes will be paid”. The tax administration system in Nigeria over the years has been burdened by challenges ranging from non-identification, registration, poor documentation, multiple taxation and non-compliance of taxpayers (Anaesoronye, 2013). A tax reform strategy was designed to address these issues, replace the older error prone manual registration process, enhance voluntary compliance by taxpayers and provide a basis for better planning and developmental budgeting purposes. It was in recognition of these issues that the Joint Tax Board (JTB) was mandated to provide efficient, effective and innovative solutions to proper tax administration practices, while maintain a tax friendly environment through effective and efficient flow of information in order to discourage multiple taxation and manual tax administration related problems (Anaesoronye, 2013).

In addition, the National Economic Council (NEC) in what appears to be a proactive step to finding a workable solution to the problem of multiplicity of taxes, constituted a committee to appraise the problem with a view to identifying how best to address it for the purpose of minimizing the burden of taxpayers, ensure tax justice and by extension, improve tax compliance rate as encapsulated in the National tax policy. The hospitality, for example, sub-sector is currently faced with an avalanche of taxes; registration of hospitality premises, Stamp Duty, Nigerian social insurance Trust Fund (NSIT), Industrial training fund (ITF), National pension commission, Nigerian Tourism development corporation, Value added tax (VAT), Pay As You Earn (PAYE), Company income tax, Withholding tax, Liqourlicence, Food handlers and health certificate. Others are visual advert, Waste disposal, Bill board, Sign post, Operation permit, Vehicle emission fee, Contravention charges, Business premises, Administrative charges for environment, Audit, Copyright society of Nigeria, Water supply, Electricity supply, Copious levies by the Local Government Councils as well as other fees charged by regulatory agencies across the sectors at the state and federal levels has pushed the sector to the brink. According to him, the reality is that the current burden of taxes and levies is heavy, especially when situated within the context of the high operating cost for business. The sector wants to be very clear and certain of tax obligations, the number of taxes, the rates, period of payment, and mode of payment and so on.

2.1.5    Manufacturing Sector in Nigeria

Empirical evidences seem to indicate that the growth performance of the industrial sector together with its capacity utilization level has not been encouraging. Though, the share of manufacturing which is a sub-sector of the industrial sector, in GDP rose from about 4% in 1977 (at 1984 constant prizes) to a peak of 13% in 1982, but it has since fallen to less than 10 percent today. A number of factors account for this, chief among which is the inadequate access to raw materials and spare parts because of chronic foreign exchange shortages (Obadan, 2006). The lack of vital industrial inputs negatively affects industrial capacity utilization, which fell from 70 percent in 1981 to about 25 percent in the period 1982 – 1986 and 36% in 2014.

The industrial pattern of Nigeria at political independence in 1960 was that of providing agricultural raw materials needs of the advanced economies, particularly of Britain. The bulk of national income was from exports of primary agricultural products. Available data shows that the share of agriculture in Gross Domestic Product (GDP) was about 63% and about 80% of export earnings of the country came from agriculture. The level of industrial activities in the country was very low and, mostly commercial activities owned and run by foreign companies like the United Africa Company (UAC) Ltd., John Holt, Peterson Zonhonis (PZ), CompagnieFrancaise de I’AfriqueOccidentale (CFAO), Societe’ Commerciale de I’QuestAfricain (SCOA), and the Union Trading Company (U.T.C). These companies engaged in trade and commerce especially in the importation and distribution of (foreign) manufactured goods. Laying a solid foundation for the development of an industrial economy for Nigeria was not part of the colonial economic policy rather making the colonies perpetual producers of primary raw materials for foreign industries and importers of manufactured goods (Egwaikhideet al, 2001 and Banjokoet al, 2012). Hence, being a major primary products producer and heavy consumer goods importer which underlined the country’s external dependence on the uncertain World markets coupled with Western experience to the effect that industrialisation promotes economic growth and development faster than agriculture, industrialization was made the highest priority area for the Nigeria state shortly after political independence (Roberts and Azubuike, 2005).

In attempt to facilitate industrialization in the country, over the years, different industrial policies/industrialization strategies like import substitution approach, export promotion strategy and foreign private investment led industrialization as well as policy reform measures like indigenization policy, structural adjustment programme, etc. have been formulated and implemented. There had been huge public investment in the industrial sector. Government embarked on the establishment of industrial core projects (ICPS) like iron and steel plant at Ajaokuta, steel rolling mills at Warri, Kaduna and Oshogbo, aluminiumsmeltter plant at IkotAbasi, crude oil refineries at Port Harcourt and Kaduna, petrochemical and fertilizer factories at Port Harcourt, paper industry at Oku Iboku, cement industries at Calabar and Nkalagu, machine tools company, sugar plants and marble industries. These targeted areas of public sector industrial projects, the so-called industrial core projects (ICPS), were meant to provide the necessary foundation for growth of the industrial sector of the country by providing the basic engineering infrastructure for the production of raw materials, spare parts, equipment components and machinery needed in the various industrial establishments in Nigeria. Furthermore, supporting institutions such as research institutes like Federal Institute for Industrial Research (FIIR) at Oshodi, Project Development Agency (PRODA) at Enugu, and Raw Materials Research Development Centre (RMRDC) with offices in almost all the states of the Federation have been established by the government (Adaowo, 2002). To train and produce the needed manpower for the industrial sector, Polytechnics, Conventional universities and universities of technology have been established by the government.

Despite all the efforts of the government, at least in principle, to kick-start and sustain rapid industrialization in Nigeria, attainment of required level of industrialization that can produce the much needed dynamic change in the economic structure of Nigeria with attendant substantial benefits trickling down to the people has remained an up-hill-task. For over three decades now, economic indicators of level of industrialization in Nigeria are unimpressive. Nigeria’s industrial sector has been characterised by high import content of industrial inputs, dwindling capacity utilization, high cost of production, low value added, declining output growth, low employment generation and inadequate linkages with other sectors of the economy (Obioma and Ozughalu, 2005). The annual growth rate of industrial sector as a percentage of GDP is marginal compared to what is obtained in many countries, even countries like Singapore, Malaysia, Indonesia and South Korea which were at the same level of development with Nigeria in the 1960s and the early 1970s (Ekpo, 2005). The contribution of manufacturing to GDP has been declining instead of increasing. The share of manufacturing subsector output in GDP which was 76.6% in 1975 reduced to 38.3 % in 1985 and 32.4% in 1998 and by 2010 this figure had dropped to 22.03%, in 2013 20.58% and this declined continued up to 2015 with industrial contribution to economic growth dropping to 19.30% and 17.82% in 2016 (CBN, 2016), which by implication portrays Nigeria’s industrialization as still at rudimentary level.

2.2       Theoretical Review

Various theories have been propounded by scholars in a attempt to explain the subject matter of tax revenue and economic growth. This study review three theories of taxation: the cost of service theory, the benefit theory and the sociopolitical theories of taxation.

2.2.1    Cost of Service Theory

According to the cost of service theory, the cost incurred by government in providing certain services to the people must collectively be met by the people who are the ultimate receivers of the service (Jhingan, 2004). This theory believes that tax is similar to price. So if a person does not utilize the service of a state, he should not be charged any tax. Some criticisms have been leveled against this theory. According to Jhingan (2004), the cost of service theory imposes some restrictions on government services. The objective of government is to provide welfare to the poor. If the theory is applied, the state will not undertake welfare activities like medical care, education, social amenities, etc. furthermore, it will be very difficult to compute the cost per head of the various services provided by the state, again, the theory has violated the correct definition and tenets of tax, finally the basis of taxation as propounded by the theory is misleading.

2.2.2    Benefit Theory

The limitations inherent in the cost of service theory led to the modernization of the theory. This modification gave birth to the benefit received theory of taxation. According to this theory, citizens should be asked to pay taxes in proportion to the benefits they receive from the services rendered by the government. The theory assumes that there is exchange relationship or quid pro quo between tax payers and government. The government confers some benefits on tax payers by providing social goods which the tax payers pay a consideration in the form of taxes for using such goods in proportion to the benefits received (Bhartia, 2009).The inability to measure the benefits received by an individual from the services rendered by the government has rendered this theory inapplicable (Ahuja, 2012).Anyanfo (1996) argues that taxes should be allocated on the basis of benefits received from government expenditure.

2.2.3    Socio – Political Theory

The socio-political theory of taxation states that social and political objectives should be the major factors in selecting taxes. The theory advocated that a tax system should not be designed to serve individuals, but should be used to cure the ills of society as a whole (Bhartia, 2009). This theory of taxation states that social and political objectives should be the major factors in selecting taxes.

2.3       Empirical Review

Ofoegbu, Akwu and Oliver (2016)examined the effect of tax revenue on the economic development of Nigerian, and to ascertain whether there is any difference in using HDI and GDP in establishing the relationship. The approach adopted in this study was that of using annual time series data for the period 2005 to 2014 to estimate a linear model of tax revenue and human development index using ordinary least square (OLS) regression technique. Findings showed a positive and significant relationship between tax revenue and economic development. The result also revealed that measuring the effect of tax revenue on economic development using HDI gives lower relationship than measuring the relationship with GDP. The researchers concluded that tax revenue can be an instrument of economic development in Nigeria.

Worlu and Emeka (2012) examined the impact of Tax Revenue on the economic growth of Nigeria between 1980 and 2007 using its effect on infrastructural development. They reported that tax revenue has direct and indirect relationships with the infrastructural development and the gross domestic product respectively (GDP). The authors argue that the channels through which tax revenue affects economic growth in Nigeria are infrastructural development, foreign direct investment, and GDP. They stressed that availability of infrastructure stirs up an investment that in turn brings about economic growth.

Bukie and Adejumo (2013) examined the effect of tax revenue on economic growth of Nigeria for the period 1970 to 2011, regressing indicators of economic growth (domestic investment, labourforce and foreign direct investment) on tax revenue. The result shows that the indicators all have a positive and significant relationship with economic growth in Nigeria.

Owolabi and Okwu (2011) examined the contribution of only Value Added Tax (VAT) to Development of Lagos State Economy from 2001 to 2005. The study regressed each development indicator (infrastructural, environmental management, education sector, youth and social welfare, agricultural, healthcare, and transportation) on VAT revenue proceeds generated by Lagos State during the study period. Their finding was that revenue generated from VAT positively contributed to the development of the respective sectors of Lagos State economy during the period studied.

Aderetiet al. (2011) extended the study by examining the impact of VAT revenue on economic growth of Nigeria during the period 1994 to 2008 using time series data on the GDP, VAT Revenue, Total Tax Revenue and the total revenue of the federal government. The result of the study was in line with that of Owolabi and Okwu (2011) showing an existence of a positive and significant correlation between VAT Revenue and Gross Domestic Product of Nigeria.

Success et al. (2012) investigated the impact of Petroleum Profit Tax on the economic development of Nigeria between the period 2000 to 2010. Their findings reveal that petroleum profit tax positively impacts on gross domestic product (GDP) of Nigeria, and the impact is statistically significant. They failed to report on the economic development that was the topic of consideration. However, the authors were worried that the enormous amount of money generated from Petroleum Profit Tax, and Oil Revenue do not translate into the economic development of Nigeria. They argue that the increase in the economic growth rate does not reflect in Nigeria’s general economic development.

Okafor (2012) examined the relationship between federally generated revenue and economic development in Nigeria using Gross Domestic Product (GDP) for the period 1981 to 2007. The result of the study showed a positive and significant relationship between Income Tax Revenue and Economic Development of Nigeria.

Adegbie and Fakile (2011) concentrated on the relationship between Company Income Tax alone and Nigeria Economic Development. Their conclusion based on finding was that there is a significant association between company income tax and economic development of Nigeria. The latest period examined by these authors was 2011.

We believe that availability of timely information for government policy decisions is necessary. Also, most authors examined the effect of tax revenue on Gross Domestic Product (GDP) this study intends to use manufacturing sector output examine the relationship between tax rate and manufacturing sector performance in Nigeria. Our study extended the period of study to 2015 and use a wider scope to obtain a robust estimates.


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