The Impact of Value Added Tax on Economic Growth in Nigeria (1994 - 2012)

Abstract

This study is aimed at empirically analyzing the impact of Value Added Tax (VAT) on economic growth (GDP) in Nigeria from 1994 – 2012. Relevant data were collected from Central Bank of Nigeria (CBN) statistical bulletin and Federal Inland Revenue Service (FIRS) reports. The Ordinary Least Square techniques were used to estimate three models in line with the formulated hypotheses. The results from the models revealed a strong positive significant impact of VAT on economic growth as proxy by GDP in Nigeria. It also revealed that there is positive relationship or impact of VAT on total tax revenue over the period studied. Consequently, it was recommended among other things that government should put in place measures to effectively utilize generated VAT revenue for infrastructural and economic development. It also recommends the review of tax incentives to attract both local and foreign investors in order to boost economic growth in Nigeria.

Keywords: Value Added Tax (VAT), Economic Growth (GDP), Total Revenue