IMPACT OF TAX GAP ON GOVERNMENT BUDGET IMPLEMENTATION IN NIGERIA(2003-2022)

Abstract

This study investigated the impact of tax Gap on government budget implementation in Nigeria.
Specifically, the study sought to determine the impact of company income tax gap, value added tax gap, petroleum profit tax gap, capital gains tax gap and education tax gap on government budget implementation in Nigeria. The study adopted ex-post facto research design which enabled data to be collected from accounts and reports of Federal Inland Revenue Service and Statistical Bulletin of Central Bank of Nigeria for the period of 20 years, spanning from 2003 to 2022. Unit root test was the first econometric test conducted in the study on both the dependent and independent variables using the conventional Augmented Dickey-Fuller Statistics. The essence of the unit root test was to validate the data used in the study in order to avoid spurious regression results. Descriptive statistics was also carried out to determine the individual characteristics of the model variables. Additionally, the study conducted Pearson Correlation Matrix Test so as to ascertain the strength and magnitude of the impact of the explanatory variables on government budget implementation in Nigeria. Ordinary Least Square (OLS) Regression Analysis was conducted to determine the empirical relationship between components of tax gap employed in the study and the dependent variable at 0.05 level of significance. The results of the OLS regression analysis showed that company income tax gap and value added tax gap had negative and significant impact on government budget implementation in Nigeria. However, the study discovered that petroleum profit tax gap and education tax gap had positive and significant impact on government budget implementation in Nigeria; while capital gains tax evasion had positive and no significant impact on government budget implementation in Nigeria. The implication of these findings is that the variables employed in this study as proxies for tax gap are significantly relevant in estimating the amount of tax revenue needed for effective budget implementation in Nigeria. The study therefore concluded that tax gap has significantly influenced the successful implementation of budget in Nigeria. Finally, the study recommended that government should expand the revenue from taxes through the development of latent economy, and should also sealed the loopholes in the Nigerian tax system that encourage taxpayers to evade taxes.