Effect of tax farming on tax revenue collection in Nigeria

Evidence from Federal Inland Revenue Service of Nigeria

Abstract

The study appraised the effect of tax farming on tax revenue collection in Nigeria: evidence from Federal Inland Revenue Service of Nigeria. The study used monthly data obtained from Annual Accounts/Financial Statement for sixty months (2013-2018). The variables used in this study include: tax revenue payable into Federation Account (TRFPA); Value Added Tax (VAT); National Information Technology Development Levy (NITDL) and Tax Revenue Payable into Consolidated Account (TRPCA). The study adopted time series statistical analysis by using the technique of t-test suitable for analyzing structural break in policy. The study all the series to test of stationarity using the Augumented Dickey Fuller (ADF) test statistics to ensure the reliability and validity of the result obtained. Evidence from the result indicated that the series were stationary at level and free from producing misleading result. Furthermore, the result indicated positive significant difference in tax revenue payable into Federation Account (TRFPA) since the implementation of tax farming. The result also showed positive significant difference of VAT, NITDL and TRPCA collected by FIRS in Nigeria after tax farming during the period under study. Specifically, the findings showed that FIRS revenue increased significantly after tax farming implying that the policy was worthwhile since it contributed to the rise in revenue generation of FIRS. The study recommended the strengthening of the services of tax consultants to sustain the current momentum of revenue generation.