The study was aimed at examining the impact of taxation as a tool for economic development of Nigeria, with a reference to Federal Inland Revenue Service. Attempt is also made in the study (through the means of secondary data) at highlighting the concept of taxation, theoretical framework, empirical studies, principles of taxation, characteristics in Nigerian tax system, taxation as a tool for economic development and employment, classification of taxes, Nigeria’s major taxes and other issues that relate to taxation. In achieving the objective of the study, the researcher adopted also primary sources of data to present and analyze the information for the study. The testing of the hypotheses of the study was done using Simple percentages and Chi-Square statistical tool. The research discovered among others that, taxation as a tool aid economic development of Nigeria and taxation plays a significant role in economic growth and development in Nigeria. The research concluded with some recommendations that State and Local Governments with the aim of identifying all possible sources of income of tax payers for tax purpose; the tax collection processes must be free from corruption. In addition, the Federal Government, States and Local Governments should urgently fully modernize and automate all its tax system, improve tax payers’ convenience in the assessment and payment process whilst at the same time entrenching effective and modern human resources management practice in the tax authorities.