Abstract

This objective ofthis study Is to examine the effect oftax revenue on the economic development of Nigerian, and to ascertain whether there is any difference in using HDI, NIEF and GDP in establishing the relationship. The approach adopted in this study was that ofusing annual time series data for the period 2005 to 2016 to estimate a model of tax revenue and human development index, gross domestic product and Nigerian index of economic freedom using ordinary least square (OLS) regression technique. Results showed that a positively and significantly relationship between tax revenue (independent variable) and two dependent variables (HDI and GDP). The third dependent variable (Nigerian index ofeconomic freedom) does not have a strong relationship with tax revenue. Result also reveals that measuring the effect oftax revenue on economic development using HDI gives a slightly higher relationship than measuring the relationship with GDP thussuggesting that using Human Development Index (HDI) gives a paintedpicture ofthe relationship between tax revenue and economic development in Nigeria. The researcher introducedNigerian index ofeconomicfreedom (NIEF) which is also an indicator and important measure of a nation's Economic Development. We, therefore, conclude that tax revenue can be an instrument of economic development in Nigeria. We also conclude that development ofany tax policy on tax revenue for economic development should better be based on' human development index (HDI), Gross Domestic Product (GDP) and Nigerian index ofEconomic Freedom. This study provides a Useful insightfor the government, stakeholders andpolicy makers into the importance oftax revenuefor economic development as a result; income derived from tax should be judiciously used so as to motivate citizens to continue to pay tax.