VALUE ADDED TAX REVENUE AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study examines the impact Value Added Tax (VAT) revenue and economic growth in Nigeria using time series data from year 1994-2020. The result of the estimated OLS model shows that there is a positive and significant relationship between VAT revenue and economic growth in Nigeria which was proxied by the real GDP at 5% level of significance.  Personal Income Tax was found to positively affect economic growth and was significant at 5% level and lastly, the analysis revealed that a positive relationship exists between VAT revenue and total household consumption expenditure and the relationship was found to have being statistically significant at 5% level. The study recommended that government should consider the implications when making decisions about VAT rates and structure and that a potential solution is to mitigate the negative effects of VAT on lower-income households by implementing a progressive tax system where lower rates are applied to basic necessities and higher rates to luxury goods and services. The study further recommended that in order to enhance economic growth of Nigeria through VAT revenue, the enlightenment of the public on how VAT works, how it is calculated and how it affects them can increase understanding and acceptance of the tax.