ABSTRACT
This study analyses the effect of Value Added Tax (Independent Variable) on Economic growth, proxied using Real GDP and Per Capita Income (Dependent variables). The study covered a time period of 1994 -2019. The study employed the use of secondary data from Nigeria Bureau (NBS) of Statistics, Central Bank of Nigeria (CBN), Federal Inland Revenue Service (FIRS), and World Bank Data. In order to determine the stationarity and the order of integration of the variables, a unit root test, using the Augmented Dickey-Fuller test, was conducted. The Ordinary Least Squares (OLS) was estimated, and an interpretation and a discussion of the result follow. Finally, a post-diagnostics test, such as the test for heteroskedasticity, was conducted to examine the overall fitness and validity of the model.
It could be affirmed from the correlation analysis that VAT correlates positively with RGDP, though a weak correlation, but exhibit a high correlation with Per Capita income, this could be due to the improved policy and aggressive move of the federal government on tax mobilization and collection, which has encouraged the electronic filing of tax, making it easier for a good number of individuals to be included in the tax net, with the cooperation of producers and retailers.
On this note, the following recommendation were made; Sensitization of the public on the need to be tax conscious, especially on the importance of tax in meeting the macroeconomic objectives of the economy, The monetary and fiscal authorities should ensure to formulate feasible expenditure switching policy which will make the administration of VAT friendly and conducive to the people, workable policy should be in place to ensure corruption doesn’t strive.
