VALUE ADDED TAX AND ECONOMIC GROWTH IN NIGERIA

Abstract

Nigeria is currently experiencing an economic downturn and revenue crisis due to declining crude oil revenue earnings, upon which the nation relies for its sustenance. The indirect taxes especially those from value added tax, which ought to contribute the higher percentage to the revenue, are not even reliable. There still persist in Nigeria the problem of underdevelopment, high mortality rate, occasioned by poor health care system, lack of critical infrastructure, insecurity and high inflation rate. To this end, the study determined the relationship between value added tax and economic growth in Nigeria form 2000-2020. The study used ex-post facto design. The study employed secondary data source from central bank of Nigeria and World Bank statistical bulletin of twenty-one (21) years financial report that covered period 2000 to 2020. The study utilized both Descriptive and Ordinary Least Square Regression method with the aid of using E-view 10 to analyze the data. The findings showed that Value Added Tax (VAT) had negative influence and statically significant with National Gross Product (NGP) and Real Gross Domestic Product (RGDP) in Nigeria. The study generally concluded that, there is a negative and significant relationship between value added tax and economic growth in Nigeria. Based on the conclusion, the study suggested that the government should put in place mechanism to close up the loopholes in the VAT collection system since its effect on gross domestic product is negative. Finally, government should put stern punitive measures in place to sanction corrupt officials as well as establishments that refuses to pay value added tax (VAT) or to remit the revenue collected.