ABSTRACT

The study investigated effect of value added tax on the economy of Nigeria. It

utilized secondary data from 1999-2016 extracted from CI3N statistical bulletin,

National Bureau of Statistic and various reports of the Federal Inland Revenue

Service. The study was prompted by the need to examine whether value added tax

has made an effect during the democratic dispensation. 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 ex posifticto research

design because the data are in existence. The ordinary least squares method of simple

regression technique was engaged to determine the relationship of the variables. Ii.

used the augmented I)ickey —Fuller unit root test to ascertain whether the variables

are stationary. 'I'he regression result established that there is negative significant

relationship between value added tax and economic growth of Nigeria. It was found

that there is positive significant relationship between value added tax and total tax

revenue of Nigeria. The study found that value added tax revenue has significant

effect on both economic growth and total tax revenue of Nigeria and concludes that

value added tax has significant effect on the economy ofNigeria. 1'he study therefore

recommends amongst others that government should intensify efforts to enhance the

generation of value added tax based on percentage increases on yearly basis, the tax

authorities and staff of the Federal Inland Revenue Service should be motivated to

ensure that leakages in the revenue will be avoided, government should strengthen

the fiscal responsibility system to enhance effective use of the revenue and

government should, provide social goods and enhance tax awareness campaign

among potential tax payers.