Original Research Article | OPEN ACCESS

Value Added Tax, Revenue Generation and Economic Growth in Nigeria

For correspondence:-    

Received: January 15, 2022        Accepted: March 3, 2022        Published: March 31, 2022

Citation: Value Added Tax, Revenue Generation and Economic Growth in Nigeria. Account Tax Rev 2007; 6(1):10-29 doi:

© 2007 The authors.
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Abstract

This study investigated the effect of Value-added Tax (VAT) on revenue generation and economic growth in Nigeria. It specifically examined the effect of VAT on Gross Domestic Product (GDP) and the total revenue generated in Nigeria for the period (1994-2018) as well as the trend of VAT in the period under review. Time-series data were employed in the study to run the regression for VAT on total tax revenue and GDP. The vector error correction and autoregression models were used in the regression. VAT, total tax revenue and GDP were included in the data at the end of each year for the period (1994-2018). In other to accommodate the long-run properties of the variables, tests for stationarity and co-integration were carried out. The study finds that VAT has a significant effect on total tax revenue with a two-year lag and it increasingly explains changes in total tax revenue with time. The study also shows that VAT has a significant and negative effect on GDP with a one-year lag. The trend in VAT has a positive coefficient, indicating that VAT increases with time. In view of the findings, the study, therefore,recommends that government should critically evaluate the process of VAT collection, eliminate bureaucratic procedures and improve transparency so that economic units can synchronise their efforts with those of tax authorities.

Keywords: Economic growth, GDP, Nigeria, Revenue generation, VAT