TAX POLICY AND THE GROWTH OF NIGERIA'S DIGITAL ECONOMY: A PANEL DATA ANALYSIS OF ICT AND REVENUE LINKAGES

Abstract

Tax revenue in Nigeria reflects the growing digital economy and the impact of recent ICT-focused tax reforms amid persistent administrative and legal challenges. This study examines the influence of Information and Communication Technology (ICT) indicators and recent digital tax reforms on tax revenue mobilization in Nigeria from 2010 to 2023. Using panel data from four purposively selected states, the analysis employs fixed-effects regression models to account for within-state variations and unobserved heterogeneity, with robust standard errors clustered at the state level. Results indicate that mobile subscriptions positively and significantly affect tax revenue, while internet penetration shows a small negative effect and broadband usage is not statistically significant. The interaction of ICT indicators with digital tax reforms, including digital service taxation and Significant Economic Presence (SEP) rules, reveals that internet and broadband usage enhance revenue, whereas mobile subscriptions show a negative effect. Joint significance tests confirm that both ICT indicators and reform interactions collectively influence tax revenue. The findings highlight the need for integrated ICT and digital taxation strategies to optimize revenue mobilization in Nigeria. The study concludes that integrating ICT development with digital tax reforms is key to enhancing tax revenue in Nigeria. It was recommended that the government combine ICT development with digital tax reforms to boost revenue from Nigeria’s digital economy.