The Effects of Value Added Tax (V.A.T) on the Economic Growth of Nigeria.

Abstract

The study sets out to investigate the effects of Value Added Tax (VAT) on economic growth (GDP) and total tax revenue in Nigeria. VAT was introduced in the country in 1994 and one wants to estimate its contributions to GDP and total Revenue. In pursuit of this, two hypotheses were proposed namely First: H₀ that VAT does not have significant effect on GDP. Secondly we have H₀ VAT does not have significant effect on Total Tax Revenue. Simple Linear Regression method was used to analyze time series data relating to VAT, GDP and Total Revenue for period 1994 – 2010 and computation done with the assistance of SPSS. The results of regression analysis show that VAT has significant effect on GDP and also on Total Tax Revenue. That means that both Null Hypotheses (H_o) are accepted. The government is encouraged to sensitize the people to enable it increase the tax rate so as to enlarge its annual revenue for economic development.

Keywords: Value Added Tax, Gross Domestic Product, Total Revenue, Maxims of Taxation, Developing and Transitional Economies, Cascading treatment