Research Article
Sackey, Jacob Acquah and Ejoh,
Abstract
Over the years, there have been many arguments on the impact of the government at the grass root. People generally complain about failure of government to provide necessary social amenities and infrastructures in the rural areas. There is need therefore to empirically evaluate the nature of influence tax revenue wields on the grass root economy. This, of course, would assist in establishing the type of tax, from the tax structure, that makes most contribution to the growth of the grassroots economy. This research was carried out to evaluate ‘Tax Revenue Structure and its Effect on Economic Growth’ on the third tier of government in Nigeria using Calabar Municipal Council as the case study. The study was to determine the impact of revenue structures on economic growth and the dynamics (stability) of the various tax revenue transfers (statutory allocations) to the local government council covering a period of 23 years (1980 to 2002). The main objective of the study was to ascertain the responsiveness of economic growth (GDP) in relation to the various tax revenues accruing to the local government council and how economic growth generates increase in revenue transfers to the municipal council. Secondary data were used for the study. The data collected from secondary source was analyzed using the ordinary least square method to evaluate the impact of tax revenue structures (income variables from the federal, state and local government) on economic growth (GDP). The emerging results, established that increase in revenue from the federal and state government would exert positive effect on the Gross Domestic Product (GDP), whilst increase in internally generated revenue resulted in decline in the GDP. The study ended by making some recommendations thus: Local Governments should mobilize more revenue within their domain to enhance the economic growth at the rural level. The three tiers of government should discourage any fiscal policy that could cause a decline in revenue generation and allocation. Given that tax is a two edged sword it will also help in discouraging further implementation of any tax policy that has a negative effect on the economic growth of the rural area in particular and the whole country generally.