For correspondence:-
Received: 7 November, 2018 Accepted: 30 December, 2018 Published: 31 December, 2018
Citation: Value-Added Tax and Economic Growth: New Evidence from Nigeria. Account Tax Rev 2003; 2(4):99-112 doi:
© 2003 The authors.
This is an Open Access article that uses a funding model which does not charge readers or their institutions for access and distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0) and the Budapest Open Access Initiative (http://www.budapestopenaccessinitiative.org/read), which permit unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited..
Abstract
The study investigates the nexus between value-added tax and economic growth against the backdrop of the active presence of informal sector activities in the economy of African countries with particular reference to Nigeria. The study is anchored on the deductive research approach and driven by the positivist philosophy. Archival data were sourced from the Central Bank of Nigeria statistical bulletin (growth rate in gross domestic product, investment to GDP ratio, labour force participation, and openness), Nigeria Population Commission (population growth rate), and Federal Inland Revenue Service (value-added tax). The data were tested for stationarity using the Augmented Dickey-Fuller approach, subjected to diagnosis tests, and analysed using the Ordinary Least Square regression technique. The result of the analysis shows that value-added tax is negatively related to economic growth. To test the robustness of the result, we substituted the dependent variable with total tax revenue and total federally collected revenue. Both results were negative and statistically significant. The negative relationship shows that there are leakages arising from the poor administration of value-added tax in Nigeria. To overcome the leakages it is recommended that the FIRS should embark on sensitization, human resource development to meet the growing challenges of effective tax administration in Nigeria.
Fulltext in PDF