A Parametric Debate of Value Added Tax, Economic Growth and Poverty Reduction in Nigeria

Abstract

Nigerian tax authorities have continued to collect huge sums of funds in form of revenue from Value Added Tax (VAT) and plans have been concluded to extend this source of revenue to financial services sector.

Meanwhile, empirical study that investigates the relationship that exists among VAT, Economic Growth and  Poverty is rather scarce. This paper examines whether VAT revenue could be used to maintain social cohesion  needed for sustainable long- run growth in Nigeria.  Two Ordinary Least Squares OLS) regressions, are conducted using time series data from 1994-2012.

The study however found that VAT revenue has positive and significant ( p<0.05) impact on economic growth and  that economic growth has negative but insignificant (P < 0.05) impact on poverty reduction.

Keywords: Value Added Tax, Economic Growth, Poverty, Government Revenue