TAX REFORM AND SUSTAINABLE DEVELOPMENT IN NIGERIA

Despite numerous tax reform initiatives aimed at enhancing revenue generation and fiscal sustainability, Nigeria continues to face challenges such as a low tax-to-GDP ratio, high tax evasion, and over-reliance on oil revenues, which hinder sustainable development outcomes. The study uses an ex-post facto research design from reputable sources like the Central Bank of Nigeria (CBN), Federal Inland Revenue Service (FIRS), Federal Ministry of Finance and National Bureau of Statistics (NBS). The study used secondary source of data which consists of annual time series data spanning a period of 20 years from 2004 to 2024. The study employs the Vector Autoregression (VAR) model, preceded by Augmented Dickey-Fuller unit root and Johansen cointegration tests, to analyze the relationships among the variables. The findings reveal that company income tax significantly contributes to sustainable economic development in Nigeria, showing that revenues generated from corporate taxation play a vital role in financing investment in physical and productive capital. Conversely, petroleum profit tax is found to exert a negative but insignificant effect, indicating that despite being a major revenue source, petroleum taxation has not effectively translated into sustainable capital formation. Furthermore, value added tax is shown to have a positive but statistically insignificant effect, reflecting its limited role in enhancing sustainable development within the study period. A major takeaway from this study is that while taxation remains a crucial tool for financing sustainable development, the effectiveness of different tax instruments varies considerably. Company income tax appears to be the most reliable driver of sustainable capital formation, while petroleum profit tax and value added tax remain weak links due to structural, administrative, and compliance challenges. In conclusion, the findings highlight the need for a diversified tax base, strengthened compliance mechanisms, and more efficient utilization of tax revenues to foster long-term economic sustainability in Nigeria.