Effect Of Capital Gains Tax On Economic Growth Of Nigeria (1999- 2018)

ABSTRACT

Capital gain tax (CGT) is a form of tax chargeable on capital gains arising from the disposal of chargeable assets. This implies that anybody that generates income from the disposal of chargeable assets pays taxes known as capital gains tax. In Nigeria capital gains tax administration aims and tries to tax each company in the state more effectively in order to generate revenue. The study analysed the effect of capital gains tax on the economic growth of Nigeria (1999 – 2018). In Nigeria, to tackle the problem of high incidence of tax evasion and avoidance by tax payers by examining the extent to which capital gains tax affect gross domestic product and gross national product. Secondary data was used and it was sourced from CBN statistical Bulletin. The data covered from 1999 – 2018. The economic tool used was simple regression analysis. From the results, it was found that capital gain tax has significant effect on gross domestic product of Nigeria and capital gain tax has  significant effect on gross national product of Nigeria. Based on the findings, it was recommended that  there is need to capture more taxable items into the data base of the nation so as to enable the government have an effect and efficient data base that will enhance more capital gain taxes to further improve economic growth in Nigeria. Also government should enact policies (such as the maximum time for collection of all taxes) so to ensure adequate collections of taxation and government should embarked on massive awareness and sensitization on the importance of taxation to the populace.

TABLE OF CONTENTS

Title page                                                                                                                                i

Declaration                                                                                                                              ii

Certification                                                                                                                            iii

Dedication                                                                                                                              iv

Acknowledgements                                                                                                                v

Table of contents                                                                                                                    vi

List of Table                                                                                                                            ix        

Abstract                                                                                                                                  x        

CHAPTER ONE: INTRODUCTION

1.1             Background to the study                                                                                         1

1.2.      Statement of the Problem                                                                                        3

1.3.      Research Objectives                                                                                                          5

1.4.      Research Questions                                                                                                            5

1.5.      Research Hypotheses                                                                                             5

1.6.      Significance of the Study                                                                                        5

1.8.      Scope of the study                                                                                                   6

1.9.      Operational Definition of Terms                                                                           7

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1       Conceptual Framework                                                                                           8

2.1.1   Concept of Taxation                                                                                                8

2.1.2   Tax Structures in Nigeria                                                                                        11

2.1.3.   Nature of Capital Gain Tax in Nigeria                                                                 13

2.1.4   Chargeable Gains                                                                                                     18

2.1.5   Assessment of Capital Gains Tax                                                                          19

2.1.6   Rate and Computation of Capital Gains Tax                                                       20

2.1.7.   Exempted Bodies under Capital Gain Tax Act                                                   22

2.1.8    Problems of Capital Gains Tax Act, 2004                                                           23

2.1.9.   Assets Exempted From Capital Gains Tax                                                          25

2.10.    Concept of Economic Growth                                                                               26

2.2.      Theoretical Framework                                                                                           29

2.2.1.   Benefit Theory                                                                                                         29

2.2.2   The Cost of Service Theory                                                                                    29

2.2.3   Ability to Pay Theory                                                                                              30

2.2.4   The Financial Theory                                                                                              31

2.3.    Empirical Review                                                                                                      32

2.4.   Gap in Literature                                                                                                        42

CHAPTER THREE: METHODOLOGY

3.1       Research Design                                                                                                       43

3.2       Area of the Study                                                                                                     43

3.3     Sources of Data Collection                                                                                      43

3.4.    Validity and Reliability of Instrument                                                                   44

3.5.      Data Analysis Technique                                                                                        44

3.5.1   t-statistic                                                                                                                    44

3.5.2    F-statistic                                                                                                                  45

3.5.3   R-squared                                                                                                                  45

3.5.4   Durbin-Watson statistic                                                                                          45

3.6.      Model Specification                                                                                                45

3.7.     Description of Variables                                                                                         46

3.7.1   Dependent variable                                                                                                  46

3.7.2.   Independent Variable                                                                                             47

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1     Data Presentation                                                                                        48

4.2     Data Analysis                                                                                   48

4.2.1 Data Validity Test                                                                                      48

4.2.2 Descriptive Statistics                                                                        49

4.2.3 Regression of the Estimated Model Summary                                  50

4.2.4 Regression Results                                                                                     52

4.2.5 Test of Research Hypotheses                                                            53

4.3     Discussion of findings                                                                       54

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.1     Summary of Findings                                                                       56

5.2     Conclusions                                                                                                56

5.3     Recommendations                                                                                       57

5.4     Limitations of the Study                                                                             57

5.5     Suggestions for Further Research                                                     58

REFERENCES

APPENDIX I

APPENDIX II