A Tado-Yamamoto Granger-Non Causality Approach to the Impact of Taxation on Infrastructural Development in Nigeria

This study assessed the impact of taxation on infrastructural development in Nigeria using the Tado-Yamamoto Granger-Non causality approach. Time series data on the trends of Capital Gain Tax (CGT), Withholding Tax (WHT), Stamp Duty (SDY), and Infrastructural Development (IND) spanning 2000 to 2024 was elicited from the data banks of Federal Inland Revenue Service, the Central Bank of Nigeria, and National Bureau of Statistics. The Augmented Dickey-Fuller test was used to establish stationarity at first and second difference, making the series suitable for the Tado-Yamamoto model after the serial LM test showed no evidence of autocorrelation in the model. The result aligns with the a priori expectation as CGT, WHT, and SDY exerted a positive but statistically insignificant impact on infrastructural development in Nigeria. In furtherance, the result of impulse response showed a minimal long-run reaction of IND to the predictors as IND is strongly endogenous both in the short and long run, as determined by the variance decomposition. Similarly, the result of the inverse roots showed stability in the model. In line with the findings, the study recommended the need for a paradigm towards effective tax policy incorporating CGT, WHT, and SDY by the Federal Inland Revenue Service rather than the prevailing undue emphasis on tax yield from the oil sector, personal income tax, and company income tax. The Nigerian government can optimize tax yield and infrastructural development by revamping the postal service to incorporate the vast benefits of the growing e-delivery market in Nigeria.