taxes and infrastructural development in nigeria

Nigerian Journal of Banking, Finance and Entrepreneurship Management Volume 1, September 2015: 14 - 28 ISSN:XXXX-XXXX

TAXES AND INFRASTRUCTURAL DEVELOPMENT IN NIGERIA J. O. Anyaduba Associate Professor, Department of Accounting Faculty of Management sciences University of Benin [email protected] E. J. Aronmwan Department of Accounting Faculty of Management sciences University of Benin [email protected]

ABSTRACT

The objective of this study is geared towards investigating the impact of tax revenues collected by the government on infrastructural development in Nigeria. This study restricts itself to taxes collected by the federal government of Nigeria. The longitudinal research design was used. The choice of this design is based on the observation of variables over a period of time (1980 to 2014). The hypotheses raised were evaluated using the Error Correction Model. The findings show that CIT and TET have significant impact on the level of infrastructural development while PPT and VAT have non-significant impact. Based on these, the study recommends amidst others that the administration of taxes especially VAT should be done in a way that collection and remittance cannot be evaded so that its effect may be properly seen in the extent of infrastructural facilities and also, future researches can improve on this study by employing multi-proxy approach rather than the single proxy . Keywords: Petroleum Profit Tax, Company Income Tax, Tertiary Education Tax, Value Added Tax, Infrastructural Development JEL: H2, E62

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INTRODUCTION For the growth and development of any nation, it is expedient that infrastructural facilities are in place. By infrastructural facilities, we mean all activities that fall under the ambit of “Social Overhead Capital (SOC)”. According to World Bank (1994), SOC includes public utilities such as power, telecommunication, water supply, sanitation & sewerage as well as public works such as roads, dams, and drainage. Put differently, infrastructure may be argued to include all public services meant to serve the populace (eg provision of law and order, education, health care, transportation & telecommunication, power, drainage, etc). In Africa, evidence abounds as to the deficiency in infrastructure and this as inhibited growth and development in the continent. According to Foster and BricenoGarmendia (2010), most African countries lag behind other developed countries. In addition, the United Nations (2010) assert that 884 million people lack access to potable water and 2.6 billion people lack access to basic sanitation services. Infrastructure is very important to a country„s developmental prospect. The adequacy of infrastructure may determine a country‟s success or failure in diversifying production, coping with population growth, reducing poverty, improving welfare of citizens (Mobolaji, & Wale 2012). Thus, every country strives for infrastructural development and to achieve this, they need revenue, and thus engage in revenue mobilization which may be domestic or foreign. In recent times, revenue mobilization in developing countries has become imperative. Revenue mobilization and generation is a major requirement needed by countries for the actualization of sufficient finance. Nigeria was primarily an agrarian economy, whose revenue generation was based on agriculture. This was before the discovery of oil by the British in the Niger Delta in the late 1950‟s (Onaolapo, Fasina, & Adegbeti, 2013). Due to the instability in oil prices, globalization and forces of demand and supply of oil, the Nigerian government has been forced to seek other sources of revenue. One of these sources is taxation. Taxation has become a vital source of revenue to the government because of its consistency. In Nigeria, taxation has been in existence even before the coming of the colonial men or the British (Samuel, & Tyokoso, 2014). According to Oriakhi (2013), revenue from taxes contributes significantly to the federally collected revenue since independence. Tax is seen as a burden which every citizen must bear to maintain his or her government because the government has certain functions to carry out for the benefits of those it governs (Afuberoh & Okoye, 2014). One of such function is the provision of infrastructure. Taxes are not only imposed for revenue generation sake, but also to influence economic activities (Oriakhi, 2013). Similarly, Ola (2005) assert that taxes serve as an instrument for correcting inflation and deflation, balance of payment deficit and redistribution of income among others. Despite the amount of money generated by government through tax revenue, development in Nigeria still remains a dream as poverty, unemployment, low standard

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of living and poor infrastructural facilities still linger at a very high rate (Nwite, 2015). Alabi and Ocholi (2010) opine that the state of infrastructure in Nigeria is in shamble. Similarly, the World Bank (2002) reports that Nigeria‟s infrastructure in terms of quality and quantity is grossly substandard and incomparable to the state of infrastructure in other parts of the world. According to the survey by the World Bank, top on the list of inadequate infrastructure in Nigeria are pipe borne or portable drinking water, road network, waste management and power. Although in recent years, Nigeria has experienced increased infrastructural transformation in terms of building of more schools, road, and telecommunication facilities, it is in nowhere near what is required of it (Owolabi, 2015). Thus, the aim of this study is geared towards contributing to existing studies by investigating the impact of tax revenues collected by the federal government of Nigeria on infrastructural development. The hypotheses to be tested in this study include: Ho1: Company Income Tax (CIT) has no significant impact on infrastructural development. Ho2: Petroleum Profit Tax (PPT) has no significant impact on infrastructural development. Ho3: Value Added Tax Development. Ho4:

(VAT)

has no significant impact on infrastructural

Education Tax (ET) has no significant impact on infrastructural development.

LITERATURE REVIEW Theoretical Framework There are many theories in taxation, but for the purpose of this study, the optimal theory of taxation is adopted. There are three main advocates of this theory, and they are: Ramsey (1927) who advocates linear commodity taxation to raise revenues and redistribute; Pigou (1920) who advocates the linear commodity taxation to correct for externalities; and Mirrlees (1971) who advocates the nonlinear income taxation. The theory employs a normative approach to tax analysis that is based on the commonly used tools of welfare economics. The theory expects that a tax system should be able to raise taxes in such a way that treats the people fairly, reduces the obstruction and interference in economic decisions and does not inflict undue costs on taxpayers or tax administrators. Optimal taxation theory is all about maximizing the social welfare of the individuals in the society. Optimal taxation typically treats the social planner as a utilitarian who has a social welfare function that is based on the utilities of individuals in the society. Inferring from the theory, the government is the social planner and responsible for creating a good tax system for the purpose of revenue generation and also for welfare of the taxpayer. The basic goal is to choose a tax system that maximizes the welfare of the citizens in the society. In simple terms, the social planner

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(the government) is responsible for providing the various infrastructural facilities with the use of the revenue gotten from tax. Thus, this is the anchor for this study. Infrastructural Development in Nigeria Infrastructure is generally seen as those basic and essential services that should be in place if development must. Waziri, Ali and Nuru (2014) note that the physical structures necessary for the functioning of society can also be seen as infrastructure. Oisasoje and Ojeifo (2012) describe infrastructure as those specific elements that serve as catalyst for development, as well as improvement in welfare of citizens. Infrastructural development holistically can be seen as sustained rates of growth of income per capita. Todaro and Smith (2011) is of the view that infrastructural development can be facilitated and accelerated by the presence of physical, social and economic infrastructures. If these facilities and services are not in place, development will be a near impossibility (Migap 2014). According to Fidelis, Jude and Ighata (2014), traffic congestion, erratic power supply, inaccessible roads and networks, poor telecommunication services, poor drinking water etc are all features of the nature of the existing infrastructural in Nigeria. Alabi and Ocholi (2010) in describing Nigerian roads, observed that the roads the lowest in Africa in terms of density. They further assert that 31% of the roads are paved as compared to 50% in the middle income countries. Recently, infrastructural development has been given central attention in the current development policy vision 20: 2020 of the federal government of Nigeria (Adesoye, 2014). To achieve this, the governments will require a large influx of revenue and this can be gotten through taxation. Company Income Tax (CIT) The tax system is an opportunity for government to collect revenue needed in discharging its crucial obligations. Tax is a compulsory levy imposed on a subject or upon his property by the government to make available security, social amenities & create conditions for the economic wellbeing of the society (Appah 2004; Appah & Oyandonghan, 2011). Tax can also be inferred as a com pulsory payment made by all concerned to the government of a country from which vital services are rendered, without necessarily offering an explanation on how the money generated was spent or equating the services with the money collected (Onwuchekwa, & Aruwa, 2014). According to Dike (2014), CIT is a corporation tax. It is claimable at a rate of 30% on the profits of all registered corporate entities other than those engaged in petroleum operations. Corporate taxation is relatively straightforward in a closed economy, but it becomes more complex when companies operate in different countries (Zucman, 2014). Although, company income tax is not the largest contributor of tax revenue in Nigeria, it is one of the major taxes collected by the federal government and it help in the provision of revenue for the development of some key sectors in Nigeria. By paying their taxes, companies get to enjoy some essential services from the government like the construction of better road networks, effective and efficient telecommunication, electricity and water supply. Government also develops human

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resources by establishing universities and college of technology, which ensures the efficient and effective running of their business. And so, the amounts of the tax that these companies pay should represent a key element of the contribution that they make to the economy as they operate (Adegbite, 2015). Petroleum Profit Tax (PPT) Petroleum profit tax of 50% & 85% is imposed on the profits of all corporate entities registered in Nigeria or those that derive income from oil and gas operations in Nigeria (Dike, 2014). The Petroleum Profit Tax is regulated by the Petroleum Profit Tax Act of 2007 as amended. In 2009, petroleum profit tax attracted 85% tax rate on export and 65.75% on domestic sale of oil & gas (Ogbonna & Appah 2012). The petroleum industry is seen as the largest and main generator of GDP in Nigeria, which is the most populous in the African nations (Onaolapo, Fasina, & Adegbite, 2013). The contribution of the petroleum industry can be evaluated in terms of its share of revenue generation in the Nigerian economy. The petroleum industry has contributed tremendously in both foreign exchange reserves and government revenues (Onyemaechi 2012). It has been established that the PPT is the largest contributor to the tax revenue of Nigeria; therefore, it might be safe to conclude that it is also one of the main contributors to the development of infrastructural facilities in the country. Azaiki and Shagari (2007) observe that countries that are blessed sufficiently to have petroleum, can base their development on this resource. They also point to the prospective benefits of improved economic growth and the creation of jobs, increased government revenues to finance poverty alleviation, the transfer of technology, the development of infrastructure and the encouragement of related industries. Value Added Tax (VAT) Value added tax (VAT) is a consumption tax. It is levied at each stage of the consumption chain and borne by the final consumer of the product or service (Onwuchekwa, & Aruwa, 2014). Value Added Tax can be seen as the incremental value, which a producer, using labour, contributes to his raw materials of purchases before selling the processed goods or services (Okoli, & Afolayan, 2015). In Africa, VAT has been introduced countries such as Benin- Republic, Cote d‟Ivore, Kenya, Madagascar, Mauritius, Senegal, Togo, and Nigeria. In these countries, it is observed that VAT has become a major contributor to government revenue (Ajakaiye, 2000; Shalizi & Squire, 1988; Adereti, Sanni & Adesina, 2011). In Nigeria in particular, VAT was introduced in 1993; though implementation began in 1994 on a full scale (Onwuchekwa & Aruwa, 2014). It is claimable by the government at a rate of 5% of the value goods and services and therefore, the lowest worldwide despite the series of amendment to the Act (Abiola, 2014). Onoh (2013) asserts that Value added tax (VAT) is an ideal form of taxation and has contributed immensely to infrastructural development in Nigeria. Okoli and Afolayan (2015) in their study, revealed that VAT should be the second long term source of the total federally collected revenue in Nigeria.

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Education Tax The education tax decree No. 7 of 1993 stipulates the payment of 2% of assessable profits of companies registered in Nigeria as education tax, which is to be disbursed according to the ratio of 50:40:10 to higher, primary, and secondary education respectively. The share of higher education is further allocated to the universities, polytechnics, and colleges of education in the ratio 2:1:1 respectively (Ajayi & Alani, 1996). In 1995, the government established the education tax fund in which companies with more than 100 employees contribute 2% of their pretax earnings to the fund. Primary education receives 40% of these funds, secondary education receives 10%, and higher education receives 50% (Teboho, 2000). The assessment of education tax goes together with the company income tax. Defaulters are to pay 5% plus interest at commercial rate for non-compliance (Abiola & Asiweh, 2012). Operation of the Education Tax Fund (ETF) was amended by Act No. 40 of (22nd Dec.) 1998 because of the widely recognized decline in educational standards and the deep rot in infrastructure and other facilities at all levels of the Nigerian educational system (Ugwuanyi, 2014). The ETF ensures that funds generated from education tax are utilized to improve the quality of education in Nigeria by providing funding for educational facilities and infrastructural development, promoting creative and innovative approaches to educational learning and services, stimulating, supporting and enhancing improvement activities in educational foundation areas like teacher education, teaching practice, library development etc., and championing new literacy-enhancing areas such as scientific, information and technology literacy (Ugwuanyi, 2014). Empirical Studies on Tax Revenue and Infrastructural Development Akinwale (2010) investigated the inadequacy of infrastructure in Nigeria. He gathered data from archival source and found based on the analysis that despite the efforts aimed at improving the state of infrastructure in Nigeria, the problem of inadequacy in infrastructure still persists. He opined that the problem is not insufficient fund but that of negligence and corruption. CBC (2013) asserts that the continent of Africa is indeed faced with a huge problem of infrastructure, and this has grossly undermined its regional integration and development potentials. Without mincing words, they advocate that development and growth as well as actualization of developmental plans and visions can only be addressed if the issue of deficit infrastructure is tackled. They opine effective taxation as a means through which this can be achieved. Zhattua (2013) strongly opine that taxation has two board purpose in developing nations. The first is for concession and fiscal incentive while the second is funding of public expenditure. Zhattua further asserts that taxation is vital for necessities such as education, health care, security and other things necessary for the smooth running of a country.

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Adefila and Bulus (2014) suggest that there are spatial inequalities in infrastructural development in Plateau State, Nigeria. Methodology adopted was the survey research design, and structured questionnaire distributed to one thousand and twenty (1,020) randomly sampled Nigerian citizens. The study employed standardized score (Z-score) analytical technique. The result revealed substantial inter-local government disparities in overall levels of infrastructural development in the study area and a lopsided spatial pattern of infrastructural development. Basically, infrastructural development was not even across the state and this may be based on the managerial pattern of the local government as to usage of fund. Nwite (2015) noted that the money generated by government from tax revenue is not evident in the level of development in Nigeria as poverty, unemployment, low standard of living and poor infrastructural facilities still remain at a very high rate. He furthered noted that it is indeed worrisome that the tax reforms to ameliorate the tax/infrastructure deficit gap has not yet recorded significant improvement. Okoli and Afolayan (2015) in their study opine that Value Added Tax (VAT) contributes substantially to revenue of Nigeria. Error Correction Model (ECM) was used for the analysis of the data gathered for the period 1994 -2012. From the study, it was observed that VAT is the second long term source of the total federally collected revenue.

METHODS For the purpose of this study, longitudinal research design was used. The choice of this design is based on the observation of variables over a period of time. This study restricts itself to taxes collected by the federal government of Nigeria. Specifically, PPT, CIT, ET and VAT, are the taxes used for the period 1980 to 2014. The data were sourced from FIRS Guage, Statistical bulletin and World fact books of various years. Model Specification The model used in this study is an adaptation of the model by Ogbonna and Appah (2012), who examined the impact of tax reform on economic growth in Nigeria. The model they used is: GDP = f (PPT, CIT, VAT, ET, PIT, CED) …eq(1) Where,PPT = Petroleum Profit Tax; CIT = Companies Income Tax; VAT = Value Added Tax; ET = Education Tax; PIT = Personal Income Tax; CED = Custom and Excise Duties; GDP = gross domestic product. While the model used in this current study is given as equation 2 and is analyzed using the Ordinary Least Square regression technique and Error Correction Model: IFRAC = f (CIT, PPT, VAT, TET,) ……….eq (2)

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Where IFRAC = Infrastructural development (Captured using percentage of Electricity produced from hydroelectric source) CIT= Company income tax (Captured using total corporation tax paid by Companies in Nigeria excluding petroleum operating companies). PPT= Petroleum profit tax (Captured using total petroleum tax paid by petroleum Companies in Nigeria). VAT= value added tax (Captured using Value added Tax collected by the government) TET= Education Tax (Captured using total education tax paid by companies to the government) β0 = constant β1 – β4= PARAMETER to be estimated Ut = error term The eq (2) in ECM form is:

RESULTS AND DISCUSSIONS Table 1: Augmented Dickey Fuller Unit Root Test (a): Augmented-Dickey Fuller (ADF) Test Results at Levels Variables

ADF Test Statistics

CIT

6.684533

95% ADF Critical Value with intercept -2.963972

Order of Integration

Remarks

IFRAC PPT

-0.795078 -0.998519

-2.951125 -2.981038

I (0) I (0)

Not Stationary Not Stationary

TET

-3.426738

-2.951125

I (0)

Stationary

VAT

0.153012

-2.981038

I (0)

Not Stationary

I (0)

Stationary

Source: Authors Fieldwork (2015) (b): Augmented-Dickey Fuller (ADF) Test Results at first difference Variables CIT

ADF Test Statistics 4.775545

95% ADF Critical Value with intercept -2.981038

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Order of Integration I (1)

Remarks Stationary

Nigerian Journal of Banking, Finance and Entrepreneurship Management Volume 1, September 2015: 14 - 28 ISSN:XXXX-XXXX IFRAC

-6.836057

-2.954021

I (1)

Stationary

PPT

6.804294

-2.981038

I (1)

Stationary

TET

-7.244599

-2.954021

I (1)

Stationary

VAT

-3.114752

-2.981038

I (1)

Stationary

Source: Authors Fieldwork (2015) The unit root test for time series stationarity as presented in table 1(a) and (b) reveal that company income tax (CIT), educational tax (TET) were found to be stationary at unit while infrastructural development (IFRAC), value added tax (VAT) and petroleum profit tax (PPT) were not stationary of order zero. However, when tested at first differencing, all the variables were found to be stationary. Thus, the effects observed at this point will not be based on the effect that can be caused by time. Table 2: Estimation result: OLS Dependent Variable: IFRAC Method: Least Squares Variable

Coefficient

C PPT CIT TET VAT R-squared

36.49597 -6.66E-08 -4.21E-05 -2.36E-05 3.09E-05 0.742823

0.96883 1.44E-07 8.13E-06 1.56E-05 9.59E-06 Mean dependent var

Adjusted R-squared

0.708533

S.D. dependent var

6.79227

S.E. of regression

3.666989

Akaike info criterion

5.56818

Sum squared resid

403.4042

Schwarz criterion

5.79038

Hannan-Quinn criter.

5.64488

Log likelihood F-statistic Prob(F-statistic)

-92.44319 21.66284

Std. Error

Durbin-Watson stat

t-Statistic

Prob.

37.67005 -0.461988 -5.185682 -1.513412 3.227323

0.0001 0.6474 0.0001 0.1406 0.003 31.4684

1.0772

0.0001

Source: Authors Fieldwork (2015)

From the result above, the coefficient of determination (R2) is 0.742823 indicating that a 74.3% systematic variation in IFRAC is explained by PPT, CIT, TET and VAT while 25.7% unexplained variation is captured by the stochastic error term. This shows that the model is a good measure of fit. The Adjusted R-squared of 0.708533 shows that after adjusting for the degree of freedom, the independent variables explain 70.9% systematic variation in the dependent variable. This shows a high predictive power of the model since the value is greater than 50%. The F-value of 21.66284 and associated probability of 0.000 indicates that the overall significant of the model is met at 5% level of significance. This result tells us that there is a linear relationship between the dependent variable (IFRAC) and the independent variables (CIT, PPT, TET, and VAT) taken together. Based on the T -statistics and associated

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probabilities, it is observed that CIT and VAT are significant in explaining the nature of infrastructural development in Nigeria since they have probabilities less than 0.05 (0.000 and 0.003 respectively) while PPT and TET are not significant in explaining the nature of infrastructural development in Nigeria since they have probabilities greater than 0.05 (0.647 and 0.140 respectively). However, The DW statistics of 1.077199 shows the presence of autocorrelation and judging by the rule of thumb which state that when the DW statistics is close to 2, it shows the absence of autocorrelation in the model, we conclude that there is the presence of autocorrelation or serial correlation in the model. Thus the model is irrelevant in drawing any policy judgment. Hence, the result of ECM would be relied on. Tests for Co-integration We tested for co-integration between IFRAC and the independent variables. The Engle and Granger two stage test was used to carry out the co-integration test. The most commonly used method is to run an OLS regression at level of IFRAC and the independent variables and test its residuals for stationarity, using the ADF to test for unit roots. The result of the unit root tests on the OLS residuals is reported in the table 3: Table 3: Unit Root Test for Residual Null Hypothesis: D(ECM) has a unit root Exogenous: Constant Lag Length: 0 (Automatic - based on SIC, maxlag=4) Augmented Dickey-Fuller test statistic Test critical values:

t-Statistic

Prob.*

-5.199511

0.0006

1% level

-3.831511

5% level

-3.02997

10% level

-2.655194

Source: Authors Fieldwork (2015) From the table 3, it was observed that the residual is stationary since the absolute ADF test statistics with a value of -5.199 is greater than the absolute critical ADF value of 3.02 at 5% level of significance. This leads us to conclude that IFRAC and the independent variables are co-integrated. Table 4: Estimation result: ECM Dependent Variable: D(IFRAC) Method: Least Squares Variable

Coefficient

Std. Error

t-Statistic

Prob.

C

0.794792

0.613014

1.296531

0.2071

D(CIT)

-2.91E-05

1.07E-05

-2.72729

0.0117

D(PPT)

-4.29E-08

6.91E-08

-0.620794

0.5406

D(TET)

-1.97E-05

9.63E-06

-2.048136

0.0516

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Nigerian Journal of Banking, Finance and Entrepreneurship Management Volume 1, September 2015: 14 - 28 ISSN:XXXX-XXXX D(VAT)

-4.87E-06

1.94E-05

-0.250971

0.804

DECM

-0.554114

0.176877

-3.132756

0.0045

R-squared

0.495115

Mean dependent var

-0.23258

Adjusted R-squared

0.368894

S.D. dependent var

3.234303

2.5694

Akaike info criterion

4.920902

S.E. of regression Sum squared resid

158.4436

Schwarz criterion

5.244705

Log likelihood

-69.27398

Hannan-Quinn criter.

5.026454

F-statistic

3.922604

Durbin-Watson stat

2.053328

Prob(F-statistic)

0.00715

Source: Authors Fieldwork (2015) The result from table 4 shows a coefficient of determination (R2) of 0.495115 implying that the ECM was able to explain approximately 49.5% systematic variation in the dependent variable. The Adjusted R-squared of 0.368894 shows that after adjusting for the degree of freedom, the adjusted R2 explains approximately 36.9% systematic variation in the dependent variable. The F-ratio (3.922) and probability (0.007) shows there is significant linear relationship between the dependent and independent variables taken together. Based on the T-statistics and associated probabilities, it is observed that CIT and TET are significant in explaining the nature of infrastructural development in Nigeria since they have probabilities less than 0.05 (0.01 and 0.05 respectively) while PPT and VAT are not significant in explaining the nature of infrastructural development in Nigeria since they have probabilities greater than 0.05. The Durbin Watson test for 1st order serial correlation shows the absence of autocorrelation as we have a value of 2.053328. This was derived judging by the rule of thumb. The coefficient of the ECM is negative and significant thus it will rightly act to correct any deviations of the dependent variable from its long run equilibrium values. That is, it correct for short run dynamic value to long run equilibrium value. The coefficient of the ECM with a value of 0.55 means that the speed of adjustment is about 55% which indicates an average speed of adjustment in the long run when there is a temporary disequilibrium. With respect to the hypotheses, based on the decision rule which is to accept a null hypothesis if the probability of the T -statistics is greater than 0.05 or fail to accept a null hypothesis if the probability of the T -statistics is less than 0.05, we present a summary of the hypothesis testing in table 5 below Table 5: Summary of Hypotheses Testing Variable

T-statistic

Probability

Remark

CIT

-2.727290

0.0117

Statistically significant. Therefore, H 0 is not accepted

PPT

-0.620794

0.5406

Statistically insignificant. Therefore, H0 is accepted

TET

-2.048136

0.0516

Statistically significant. Therefore, H 0 is not accepted

VAT

-0.250971

0.8040

Statistically insignificant. Therefore, H 0 is accepted

Source: Authors Fieldwork (2015)

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It was observed from the analysis that company income tax (CIT) has a significant impact on infrastructural development. This finding aligns with the findings of Okafor (2012) who argues that infrastructural development can be sustained by the amount of revenue collected by the government if put to judicious use. When the amount of revenue gotten from tax can be used as appropriate, it is expected to translate to improved well-being of the people. The result also reveals that petroleum profit tax (PPT) has no significant impact on infrastructural development in the country. This is may be that the tax revenue gotten from petroleum profit tax has not been used for the development of the particular infrastructure used in this study. It was also observed that value added tax (VAT) has no significant impact on infrastructural development. This contradicts the finding of Okoli and Afolayan (2015), who opine that VAT is the second long term source of the total federally collected revenue. The reason for our finding may lie in the proxy used for development or maybe in the collection and subsequent remittance of VAT. While it is arguable that VAT is collected at source, if the amount so collected is not remitted or properly accounted for, then its translation into infrastructural development is minimal. Onwuchekwa and Aruwa (2014) also disagrees with our finding. According to them, value added tax is a significant determinant of the economic growth of Nigeria. The result also reveals that Education Tax has significant impact on infrastructural development. Ismaila and Imoughele (2015) agrees with this finding. According to them, fiscal policy has a long run relationship with economic growth. That is, they are important determinants of economic growth. Since infrastructural development is a step towards the growth of a nation, it might be safe to assume that they think that fiscal policy is a determinant of infrastructural development.

CONCLUSION AND RECOMMENDATIONS This study attempted to investigate the impact of tax revenue on infrastructural development in Nigeria using electricity production as a proxy for infrastructural development. Four independent variables which include company income tax, value added tax, educational tax and petroleum profit tax vis-à-vis the dependent variable were used to carry out the investigation. It covered the period of 1980-2014. The result show that company income tax and education tax have impacted on the level of infrastructure in Nigeria while petroleum profit tax and value added tax have not. Based on these, the study recommends the following: 1. The administration of taxes especially VAT should be done in a way that collection and remittance cannot be evaded so that its effect may be properly seen in the extent of infrastructural facilities. 2. The study shows that on the average, taxes have not really impacted on the level of infrastructural development as only two of the taxes investigated proved to be

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significant. Therefore, the government should do more in transforming taxes to infrastructure visible to all. 3. One of the limitations of this study is in the proxy used for infrastructural development, future researches can improve on this study by employing multi-proxy approach rather than the single proxy. References Abiola, J. & Asiweh, M. (2012). Impact of tax administration on government revenue in a developing economy- Case study of Nigeria. International Journal of Business and Social Science, 3(8), 99-113. Abiola, S., (2014). Current law and practice of value added tax in Niger ia. British Journal of Arts and Social Sciences, 5(2), 186- 201. Adefila, J. O., & Bulus, J. S., (2014). Spatial inequalities in infrastructural development in Plateau state, Nigeria. American International Journal of Contemporary Research, 4 (7), 8997. Adegbite, T.A. (2015).The analysis of the effect of corporate income tax (cit) on revenue profile in Nigeria. American Journal of Economics, Finance and Management, 1 (4), 312-319. Adereti, S.A., Sanni M.R. & Adesina J.A., (2011). Value added tax and economi c growth of Nigeria. Journal of Humanities and Social Science. 10 (1), 456-471. Adesoye, A. B. (2014). Infrastructural financing in Nigeria: Growth implications. Journal of Economics and Sustainable Development, 5 (5), 8-17. Afuberoh, D., & Okoye, E., (2014). The impact of taxation on revenue generation in Nigeria: A study of federal capital territory and selected states. International Journal of Public Administration and Management Research, 2 (2), 22-47. Ajakaiye, O.D. (2000). Macroeconomic effect of vat in Nigeria: a computable, general equilibrium analysis, Published by African Economic Research Consortium. Retrieved from unpanl.un.org. Ajayi, T & Alani, R.A. (1996). A study on cost recovery in Nigerian university education: Issues of quality, access and equity. Final Report. Accra: Association of African Universities (AAU). Akinwale, A.A. (2010). Menace of inadequate infrastructure in Nigeria. African Journal of Science, Technology, Innovation and Development, 2(3), 207-228. Alabi, M.O. & Ocholi, I. (2010). State of infrastructure and funding in Kogi state, Nigeria. Current Research Journal of Social Sciences, 2 (3), 209-213. Appah, E. & Oyandonghan, J. K. (2011). The challenges of tax mobilization and management in the Nigerian economy. Journal Business Administration Manage, 6 (2), 128-136. Appah, E., (2010). The problems of tax planning and administration in Nigeria: the federal and state governments experience. Int. J. Lab. Organ., Psychol., 4(1-2), 1-14. Azaiki, S. & Shagari, S. (2007). Oil, gas and life in Nigeria, Ibadan: y-books, a division of associated books makers of Nigeria. Commonwealth Business Council (CBC, 2013). The African investment business report 2013, London: UK. Author Fidelis, O. N., Jude, O. O. & Ighata, J. A., (2014). Infrastructural development and economic growth in Nigeria: Using simultaneous equation. Journal of Economics, 5(3), 325-332.

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