VALUE ADDED TAX (VAT) AND ECONOMIC GROWTH IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Value added tax (VAT) is a consumption tax, levied at each stage of the consumption chain and borne by the final consumer of the product or service. The administration of VAT is relatively easy, unselective and difficult to evade. Countries all over the world, look for ways to boost their revenue, this facilitated many nations to introduce value added tax on goods and services. For instance, in Africa, VAT has been introduced in Benin Republic, Cote d’Ivore, Guinea, Kenya, Madagascar, Mauritius, Senegal, Togo, Nigeria. Evidence suggests that in these countries VAT has become an important contributor to government revenue (Ajakaiye, 2000; Shalizi and Square, 1988; Adereti, Adesina and Sanni, 2011). Nigeria introduced VAT in 1993; however, its full implementation began on 1st January, 1994. This has attracted the attention of researchers and academia on its benefit in the economic growth of Nigeria. Economic growth as measured the increase in the national income or total volume of production of goods and services of a country accompanied by improvements in the total standard of living of the people (Chinwuba and Amos, 2011 as cited in Ihendinihu and Onwuchekwa, 2012). Related works on this topic focused on the impact of VAT on economic growth, measured with GDP. Our object here is to investigate the growth pattern of VAT on GDP, the effect of the changes in VAT target and VA Tactual on the economy, and also the impact of VAT revenue on Tax revenue. Accordingly, the study is organized thus: following our introduction section two looks at the findings of related literatures while section three discusses the data, the model and the variables employed in our study, Section four provides the result of our empirical analysis and section five is on conclusion.