Impact Of Value Added Tax (Vat) On The Nigeria Economy

ABSTRACT

The study examined the impact of value added tax on the Nigerian economy. The data used was secondary data, sourced from Federal Inland Revenue Service (FIRS) and Central Bank of Nigeria statistical bulletin. Multiple regression of ordinary least square (OLS) method of analysis was used. The result from the study revealed the following: that value-added tax had positive and significant impact on gross domestic product in Nigeria, while petroleum profit tax had negative and insignificant impact on gross domestic product in Nigeria.  The study therefore concludes that value added tax had positive and significant impact on the Nigerian economy which is in line with Ibu Khaldun’s theory of taxation which recognizes the positive impact of value-added tax on the economy, hence the study recommends the following: that government should sustain value added tax and administrative loopholes should be covered for VAT revenue to continue to contribute more positively and significantly on the Nigerian economy. This implies that government should ensure the accountability and transparency in the management of VAT revenue, and that as a matter of urgency government should arrest the insecurity situation in the Niger Delta areas and the country at large to avoid pipe line vandalization and illegal refineries and government should create an enabling environment for the relocated oil companies to come back to Nigeria in order to boost oil production in the country and the increase on revenue that will accrue from petroleum profit tax.

TABLE OF CONTENTS

Title ﾿ i

Declaration ﾿ ii

Certification ﾿ iii

Dedication ﾿ iv

Acknowledgments ﾿ v

Table of contents ﾿ vi

List of tables ﾿ viii

Abstract ﾿ ix

CHAPTER ONE: INTRODUCTION ﾿ 1

1.1 ﾿ Background to the Study ﾿ 1

1.2 ﾿ Statement of the Problem ﾿ 3

1.3 ﾿ Objectives of the Study ﾿ 4

1.4 ﾿ Research Questions ﾿ 4

1.5 ﾿ Research Hypotheses ﾿ 5

1.6 ﾿ Scope of the Study ﾿ 5

1.7 ﾿ Significance of the Study ﾿ 5

CHAPTER TWO: REVIEW OF RELATED LITERATURE ﾿ 7

2.1 ﾿ Conceptual Framework ﾿ 7

2.1.1 ﾿ Concept of Tax ﾿ 7

2.1.2 ﾿ Forms of Taxes ﾿ 8

2.1.3 ﾿ Definition and Concepts of Value Added Tax (VAT) ﾿ 9

2.1.4 ﾿ Aims of VAT in Nigeria ﾿ 10

2.1.5 ﾿ Different types of valued added tax (VAT) ﾿ 11

2.1.6 ﾿ Value Added Tax in Nigeria ﾿ 12

2.1.7 ﾿ Administration of VAT in Nigeria ﾿ 14

2.1.8 ﾿ Value Added Tax in Nigeria ﾿ 15

2.1.9 ﾿ Value Added Tax and its Challenges ﾿ 16

2.1.10 ﾿ The Impact of value added tax on Nigerian economy ﾿ 17

2.2 ﾿ Theoretical Framework ﾿ 19

2.3 ﾿ Empirical Review ﾿ 24

CHAPTER THREE: RESEARCH METHODOLOGY ﾿ 30

3.1 ﾿ Research Design ﾿ 30

3.2 ﾿ Nature and Source of Data ﾿ 30

3.3 ﾿ Model Specification ﾿ 30

3.4 ﾿ Techniques of Analysis ﾿ 31

3.5 ﾿ Decision Rule ﾿ 31

3.6 ﾿ Description of Variables ﾿ 31

3.6.1 ﾿ Dependent Variable: ﾿ 31

3.6.2 ﾿ Independent Variable: ﾿ 32

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS ﾿ 33

4.1 ﾿ Data presentation ﾿ 33

4.2 ﾿ Regression Analysis and interpretation of Result ﾿ 34

4.3 ﾿ Test of Hypotheses ﾿ 34

4.4 ﾿ Discussion of findings ﾿ 36

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS ﾿ 38

5.1 ﾿ Summary of Findings ﾿ 38

5.2 ﾿ Conclusion ﾿ 38

5.3 ﾿ Recommendations ﾿ 38

REFERENCES ﾿ 40