This paper examines the various tax incentives available to tax payers, the level of compliance and its effects on the economic development of Nigeria. An ex-post factor research design was adopted for the study. Data were extracted from Federal Inland Revenues Services (FIRS), Central Bank of Nigeria statistical bulletin for the period 2000 to 2014. Gross Domestic Product (GDP) was adopted as an indicator of economic development based on the tax revenue as a reflection of tax compliance. The result show a high compliance level based on the tax incentives made available to taxpayers and a regression analysis result, p-value of 0.0007 and 0.0948 of Tax Revenue (TAXREV) and Non-Tax Revenue (NTREV) respectively at 10% level of significance, reveal that TAXREV exerts a positive effect on economic development proxy GDP in Nigeria. The paper recommends that government should utilize the tax revenues very effectively, hence there is strong correlation between tax compliance, tax justice, tax revenue utilization and good corporate governance. In conclusion, this paper think that tax incentives on their own is good but instead of granting arbitrary incentives, government should focus on removing the existing disincentives especially the tax multiplicities, lack of strong data base, and difficulties in tax complying with the current tax system, this will go a long way to encourage and increase the level of tax compliance in Nigeria.