Empirical Evaluation of Contribution of Value Added Tax (Vat) to Total Revenue Generation and Gross Domestic Product (Gdp) in Nigeria

EMPIRICAL EVALUATION OF CONTRIBUTION OF VALUE ADDED TAX (VAT) TO TOTAL REVENUE GENERATION AND GROSS DOMESTIC PRODUCT (GDP) IN NIGERIA Muhibat A. O.1 Abdul Azeez O. A.2 Tope Lawal. O.3

ABSTRACT The objective of this study is to examine the impact of Value Added Tax (VAT) on revenue generation and Gross Domestic Product (GDP) in the Nigerian Economy. Value Added Tax as a consumption tax has been embraced by many countries worldwide, and because it is a consumption tax it is relatively easy to administer and difficult to evade. This study through an empirical model formulated, tested the relationship between Value Added Tax, GDP and total revenue generated in the country since the inception of VAT. Based on the regression analysis carried out, it shows that a unit change in the Value Added Tax will lead to about 12.54 unit change in the total revenue. Results analysis shows that a unit change in the Value Added Tax for the country will lead to about 0.99 unit change in the growth of the economy (GDP). The R-squared shows about 92% the probability value (0.0000) of the F-statistics further confirms this since it is less than 0.05, the significant level. The study found that VAT significantly influenced the growth and revenue generation of Nigerian economy which led to the decline of the null hypothesis respectively and the acceptance of the positive hypothesis that confirms the study. Keywords: Value Added Tax (VAT), Total Revenue Generation, and Gross Domestic Product (GDP), Federal Inland Revenue Service (FIRS),

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INTRODUCTION

There is a growing recognition among developing countries of the crucial role of Value Added Tax revenue as an instrument of economic development. Value Added Tax (VAT) revenues are increasingly accounting for significant proportion of government revenue to finance the required level of public expenditure both at federal, state and local government levels. Value Added Tax as a consumption tax has been embraced by many countries...