Review of Value Added Tax (VAT) on economic growth in Nigeria

Abstract

VAT yield in Nigeria is poised to providing an irrepressible revenue base resulting in more proceeds than other consumption tax, to enable the government provide its obligations of security, social and economic improvements for her citizens, but these has not been felt in spite of its increase in tax revenue. This obliged the research to appraise value added tax influence on economic growth from 1995 to 2021 in Nigeria. Value added tax (VAT), inflation (INF) and government expenditure (GOV) were the independent variables while gross domestic product (GDP) was the contingent variable. The Vector Error Correction Mechanism (VECM) was employed on time series data, resulting in a long run relationship among the variables. The conclusion derived from the results is a positive interconnection between VAT and economic progression in Nigeria; with same direction for GOV but negative for INF. The Nigerian government is hereby recommended to use its policy framework to enlarge the scope of VAT coverage and ensure effective utilization of VAT proceeds for a progressive economy.