ANALYSIS OF THE IMPACT OF VALUE ADDED TAX ON THE ECONOMIC GROWTH OF NIGERIA

This study examined the impact of Value Added Tax (VAT) on the economic growth of Nigeria. Value Added Tax has become one of the major sources of government revenue in Nigeria, contributing significantly to public finance and national development. The study was motivated by the need to assess whether revenue generated from VAT has translated into meaningful economic growth in the country. Specifically, the study investigated the relationship between VAT revenue and economic growth, using Gross Domestic Product (GDP) as a proxy for economic growth. The study adopted an ex-post facto research design and relied on secondary data obtained from the Central Bank of Nigeria (CBN), Federal Inland Revenue Service (FIRS), and National Bureau of Statistics (NBS). Data covering a selected period were analyzed using descriptive statistics, correlation analysis, and regression techniques to determine the nature and extent of the relationship between VAT and economic growth in Nigeria. The findings revealed that VAT has a positive and significant impact on Nigeria’s economic growth, indicating that increases in VAT revenue contribute to improvements in GDP. The study also found that VAT serves as a stable and reliable source of revenue for government, which can be used to finance infrastructural development, public services, and other growth-enhancing projects. However, the study noted that the effectiveness of VAT in promoting economic growth depends largely on efficient tax administration, proper utilization of tax proceeds, and the level of compliance among taxpayers. Challenges such as tax evasion, weak administrative structures, corruption, and low public trust in government were identified as factors limiting the full potential of VAT in stimulating economic growth. Based on the findings, the study concluded that VAT plays an important role in enhancing economic growth in Nigeria when properly administered and effectively managed. The study therefore recommended improved tax administration, greater transparency and accountability in the use of VAT proceeds, and intensified public enlightenment to encourage compliance and maximize the contribution of VAT to Nigeria’s economic development.