ABSTRACT

The study investigatedeffect ofvalue added tax on the economy ofNigeria. It utilized secondary data from 1994-2018 extractedfrom CBN statistical bulletin, National Bureau ofStatistic and various reports ofthe Federal Inland Revenue Service. The study was prompted by the need to examine whether value added tax has made an effect from its inception. It extracted real gross domestic product and total tax revenue as proxies for economy while value added tax revenue was used as the independent variable. It adopted expostfacto research design because the data are in existence. It used the augmentedDickey—Fuller unitroot test to ascertain whether the variables are stationary andfound a combination of 1(1) and 1(0). The ARDL Bounds test regression technique was engaged to determine the relationship ofthe variables. There is long run equilibrium relationship between value added tax and economic growth in Nigeria. There is positive significant short run effect ofvalue added tax on economic growth in Nigeria but not significant in the long run. There is significant effect of value added tax on percent change in real gross domestic product in Nigeria. It was established that value added tax has positive significant relationship with total tax revenue both atshortrun and long run equilibrium levels. Value added tax has significant effect on total tax revenue in Nigeria. It concluded that value added tax has significant effect on economic growth ofNigeria and recommends that government should intensify efforts to enhance the generation of value added tax based on percentage increases on yearly basis to influence economic growth. The Nigeria tax system should be computerized and have a comprehensive data basefor all vatable businessesso as to increase revenue on VAT and total tax revenue.