TAX POLICY CHANGE AND REVENUE PERFORMANCE IN NIGERIA

Abstract

The persistent underperformance of government in spite of frantic efforts in policy raises critical questions about the effectiveness of specific reform enacted to enhance revenue mobilization. This study is therefore conducted to examine the effect of tax policy change on revenue performance in Nigeria. The study adopts a quantitative research design using secondary data obtained from Central Bank of Nigeria, National Bureau of Statistics, and Federal Inland Revenue Service, covering the period of 2000-2024. The study employs unit-root tests, Johansen integration, and a Vector Error-Correction Model (long-run and short-run) statistics to test the effect of tax policy change on revenue performance in Nigeria. Findings showed that stable long-run equilibrium relationships exist among the variables. The long-run results show that tax rate has a positive and significant effect on revenue performance, while tax incentives and tax collection cost are negative and statistically insignificant. In the short run, tax rate remains significant, whereas tax incentives and tax collection cost are positive but insignificant. The study concludes that tax rate adjustments are the most effective reform instrument for revenue performance, while administrative and incentive reforms require longer gestation periods. The study therefore recommends an optimal tax rate structuring, performance-based incentive review, sustained investment in tax administration infrastructure, and integrated reform packages synchronizing statutory changes with enforcement mechanisms. These measures are expected to enhance tax performance, promote transparency and accountability and restore public confidence in government.