Effect of Tax Incentives on Tax Revenue in Nigeria

Abstract

This study evaluates the effect of tax incentives on tax revenue in Nigeria, with a focus on assessing the effectiveness of various tax policies. Specifically, it examines the impact of capital allowances, tax reliefs for research and development and tax holidays on tax revenue. Using a survey research design with a sample size of 169 respondents, including tax auditors, tax consultants, policy analysts, and senior tax administrators, the study aims to provide empirical evidence on how these incentives influence tax revenue and corporate behavior. The findings reveal that while tax incentives such as tax incentives can stimulate investment and foster economic growth, they also lead to short-term revenue losses for the government. The effectiveness of these incentives is contingent upon strategic implementation, sectoral targeting, and robust administrative oversight. The study recommends the need for government to highlights the need for clear performance benchmarks, time-bound incentives, and enhanced regulatory frameworks to balance economic benefits with fiscal sustainability. The study contributes to the understanding of tax incentive policies in Nigeria by providing insights into their impact on tax revenue and offering recommendations for improving policy effectiveness. The results emphasize the importance of a balanced approach in designing and administering tax incentives to support economic development while maintaining adequate tax revenue levels.