Company Income Tax and Economic Development Nexus: ARDL Approach

This study examined the long-run relationship and dynamic interactions between company income tax and economic development in Nigeria for the period 2000-2020. Secondary data were collected from the Central Bank of Nigeria Statistical Bulletin, Federal Inland Revenue Service, and World Bank Development Indicators. Company income tax (CIT) and value-added tax (VAT) are the independent variables while Economic development (HDI) was the dependent variable. The Autoregressive Distributed Lag (ARDL) bound test as proposed by Pesaran and Pesaran (1997), and Pesaran et. al. (2001) was employed to empirically analyze the relationship between company income tax and economic development. From the results, it is evident that there is the existence of a long-run relationship between company income tax and economic development. The short-run dynamic model also uncovers that the speed of convergence to equilibrium is high suggesting that there is a shortrun relationship between company income tax and economic development. The significant negative relationship between company income tax and economic development necessitates that tax authorities should further be braced up and strengthened to implement compliance by taxpayers for income to be properly redistributed within the economy.