Impact of Value Added Tax on consumer spending behaviour in Edo State, Nigeria

Abstract

This study investigates the influence of Value Added Tax (VAT) implementation on consumers spending behaviour in Edo State, Nigeria. Specifically, the work examined the effect of public perceptions of VAT, perceives inequalities of VAT, price sensitivity of VAT-able goods on changes in consumers spending pattern as a result of VAT. The research design employed in this study was a cross-sectional survey research design. The sample size of 368 respondents were selected from the population of 390 consumers of goods and services in Edo state using purposive sampling and stratified random sampling. The descriptive analysis was carried out to summarize, organize, and present data clearly, identifying patterns, trends, and data characteristics while multiple linear regression was conducted to test the study’s hypotheses. Findings revealed a statistically significant, though negative effect of public perception of VAT on consumers spending behaviour. It also indicates a statistically significant influence of perceived inequalities of VAT on consumers spending behaviour while the variable of price sensitivity of VAT-able goods demonstrates significant negative effect on consumers spending behaviour. It is recommended that policy makers should explore the possibility of implementing VAT rate adjustments to balance tax revenue needs with the potential to maintain consumer spending while also targeting VAT rebates for low-income households to ensure that the tax burden is equitably distributed and does not disproportionately affect the economically vulnerable.