ABSTRACT

Based on the fact that the Nigerian government had 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, tax being the next option. The Value Added Tax (VAT) was adopted in January 1994 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 assess the contributions and challenges of VAT using the survey research design on data obtained from 165 respondents comprising of the junior and senior staff of the FIRS through questionnaires validated by experts. The Pearson's Product Moment Correlation, regression and descriptive statistics were used to analyze the data and results showed that VAT has a significant effect on and relationship with economic development. It was discovered that 94% of the change in economic development is caused by VAT revenue while other factors account for 6%. It was also discovered that VAT contributes 4.85% annually to total government revenue. The Gross Domestic Product (GDP) at factor cost and Total Federally Collected Revenue were used as proxies for economic development. It was also discovered that there are some factors militating against effective VAT administration and at the end of the research work, some strategies were formulated which could counter these factors, if adopted.