Value Added Tax, Tax Revenue and Economic Growth in Nigeria
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Date
2022-12
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Lead City University
Abstract
Every government has the responsibility to provide infrastructure for an enabling environment for its citizens. However there are needs for funds, these funds are mostly derivable from tax of which in the Nigeria context VAT has a potential to increase tax which can lead to economic growth. Therefore this study seeks to examine the contributory effect of value added tax to the level of tax revenue in Nigeria; to investigate the effect of value added tax on economic growth in Nigeria; to determine the extent to which tax revenue affect economic growth in Nigeria; to ascertain the threshold of value added tax as a proportion of tax revenue that can spur economic growth in Nigeria; and to establish the causal link among value added tax, tax revenue and economic growth in Nigeria. This is in a bid to investigate the investigate the relationship among value added tax, tax revenue and economic growth in Nigeria between 2010 and 2021 using quarterly data sourced from CBN statistical bulletin and WDI. The techniques that were employed to achieve the objective of this study were ARDL model and Granger Causality through the VECM approach. The result of the study indicates a negative contributory effect of VAT on tax revenue, a positive and significant effect of tax revenue on economic growth, a negative and insignificant effect of VAT on economic growth, and a causal link among VAT, tax revenue and economic growth. It can therefore be concluded that there is a significant relationship between VAT, tax revenue and economic growth in Nigeria. Hence it is recommended that government should work at increasing the level of VAT in the country to produce positive overall tax revenue as well as the economy; government should also employ means by which tax revenue is increased for economic growth.
Keywords: VAT, Tax Revenue, Economic Growth, ARDL and Granger Causality
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Kate Turabian