DO GOVERNMENT TAXES HAVE IMPLICATIONS ON MANUFACTURING SECTOR OUTPUT? EVIDENCE FROM NIGERIA

Background: The implications of taxes on output have generated different debates and controversial issues among scholars, most especially in developing economies. Objectives: Hence, the short and long-run impact of taxes on output in the manufacturing sector is examined in Nigeria. Method: To achieve these objectives, the study investigates the effects of company income and value-added taxes on the output of the manufacturing sector in Nigeria using AutoRegressive Distributed Lags. Results: The long-run result revealed that there is a positive relationship between corporate taxes and the output of the manufacturing sector, while value-added tax reveals a negative relationship with the output. Evidence from the short-run result shows that company income tax is not statistically significant at the level of 5 per cent confirming the Ricardian Equivalence, although, the value-added tax is observed to be positively related to the output of the manufacturing sector. Conclusion: The implications of the result revealed that fiscal measures via taxation and expenditure have not enhanced the productive capacity of the manufacturing sector in Nigeria.