Value Added Tax and Macroeconomic Performance: A Dynamic Modeling of the Nigerian Experience

Abstract

This research investigates the relationship between value added tax(VAT) and macroeconomic performance in Nigeria. The main objective of the study is to empirically investigate the impact of VAT on the level of economic growth in Nigeria. The study covered the period between 1994 and 2014. The cointegration technique and Short run dynamic analysis were used for the research. The parsimonious ECM result indicates that VAT is statistically significant in explaining the level of economic growth in Nigeria. The result indicates an invalidation of the null hypothesis of no significant relationship between VAT and the level of economic growth in Nigeria. The Johansen cointegration test indicates a long run relationship among the variables. The result recommends, amongst others, an increase in VAT and efficient utilization of the proceeds from VAT.

Keywords: Value Added Tax, Petroleum Profits Tax, economic growth Company Income Tax, Cointegration