Value added tax and economic growth: evidence from Nigeria

Olaniyi, T.A ; Jonathan, H. ; Afolabi, S.A ; Oke, A.A (2013)

Article

The replacement of sales tax with Value Added Tax (VAT) in Nigeria was premised on the need to engender more transparency, ease of collection and widen tax base of the Nigerian tax system. This is with a view to increase the revenue base of the government and brings forth more development programmes and economic growth. This study evaluates the impact of VAT after the introduction of Standard Integrated Government Tax Administration System (SIGITAS) on the country’s economic growth using quarterly time series data generated from Office of the Accountant General of the Federation and Central Bank of Nigeria for forty-right quarters (Quarter 1 2001 – Quarter 4 2012); the data was analyzed using Ordinary Least Square (OLS) statistical tool after testing for normalcy using Phillips-Perron’s Unit Root test. The study reveals that VAT has negative relationship with GDP while Company Income Tax (CIT) and Total Federally Collected Revenue (TFR) have no positive relationships with GDP. It is therefore recommended amongst others that the automation of the administration and collection procedure for VAT is germane to eliminate the loopholes therein in order to raise government revenue from VAT and promote economic growth in Nigeria.

Collections: