VALUE ADDED TAX AND THE NIGERIA ECONOMY

ABSTRACT

This paper examines the impact of value added tax on the economic growth of Nigeria. To achieve the objective of this paper, relevant secondary data were collected from the Central Bank of Nigeria (CBN), Federal Inland Revenue Service (FIRS), the Nigerian Bureau of Statistics (NBS) for the period 1994-2022. The secondary data collected from the relevant government agencies in Nigeria were analyzed with relevant econometric tests, Descriptive Statistics, Correlation Matrix, Variance Inflation Factors, Breusch-Godfrey Serial Correlation LM, Breusch-Pagan-Godfrey Heteroskedasticity, Ramsey RESET, and Regression Analysis.The analysis discovered no connection between Nigeria's real GDP and VAT income. VAT revenue does not fluctuate in line with changes in economic activity, indicating that factors other than Real GDP are important in generating VAT revenue. Per capita income and VAT revenue are significantly correlated. Higher VAT revenue is a direct result of rising per capita income, suggesting that consumer spending and income levels have a big impact on VAT collection. The paper recommends among others improved VAT collection mechanisms and compliance to ensure a reliable source of revenue.