This research work was undertaken to examine the tax and economic performance in Nigeria. The study is aimed at putting together those factors that constitute those variables which the government uses to manipulate the economy. The result of the research shows that in this country, a great proportion of government revenue, which should have been generated from taxation, are lost through an ineffective system of tax administration. Hence, making it difficult for taxation to be used as a tool of fiscal policies, effective tax administration should be put in place to ensure that everybody is brought to the tax net. They should be transparency in the part of the government in providing the social amenities to the populate to encourage people to pay their tax. Tax is of immense importance in the pursuance of government policies. The level of government expenditure is more or less dependent on the ability of the tax system to place the required and sufficient revenue at the reach of government. Based on the above findings and conclusion, it recommends that tax system should be restructured and taxation law in Nigeria should be constantly reviewed and updated to meet with socio-economic needs, public enlightenment campaign on tax matters should be done twice in a year at the federal level but also at the states and local levels, government should install a strong and vibrant tax administration, so that they can establish their own tax authorities in accordance with relevant tax laws.