ABSTRACT

Based on the fact that the Nigerian Government has depended only on oil as its major source of revenue since independence, there was the need for emphasis to be shifted to other major sources, and tax is the next option. The Value Added Tax(VAT) was started in January 1994 in Nigeria but it faced some challenges in as much as it could contribute greatly to the economy. Thus the researcher embarked on this work in order to evaluate the contributions and challenges of VAT using the survey research design on data obtained from 56 respondent comprising of senior staff of FIRS in Umuahia through questionnaires validated by experts. The Pearson's Product Moment Correlation, Anova, simple Regression and Descriptive statistics were used to analyze the data and the result showed that VAT has a significant relationship with economic development. It was discovered that 96% of the change in economic development is caused by VAT revenue while other factor account for 4%. It was also discovered that VAT contributes to 7.7% annually to the total federal revenue. The Gross Domestic Product (GDP) at factor cost and Total Federally Collected Revenue were used as proxy. It was also discovered that there are some factors that militate against effective VAT administration and at the end of the research work, some strategies were formulated which can counter these factors if adopted.