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A Cointegration of Value Added Tax and Economic Growth in Nigeria: 1994-2012

Author(s)

Chigbu, E.E. (Phd) ,

Download Full PDF Pages: 95-103 | Views: 400 | Downloads: 117 | DOI: 10.5281/zenodo.3455944

Volume 3 - February 2014 (02)

Abstract

This paper examines the impact of value added tax on the economic growth of Nigeria. To achieve the objective of this paper, relevant secondary data were collected from the Central Bank of Nigeria (CBN) and the Federal Inland Revenue Service (FIRS) for the period 1994-2012. The secondary data collected from the relevant government agencies in Nigeria were analysed with relevant econometric tests of Breusch-Godfrey Serial Correlation LM, White Heteroskedasticity, Ramsey RESET, Jarque Bera, Johansen Co-integration, and Granger Causality. The results show that there exists a long run equilibrium relationship between economic growth and VAT. It was also found that VAT does granger cause gross domestic product of Nigeria. On the basis of the empirical analysis, the paper concludes that VAT is one of the most important components indirect taxes in Nigeria that affects the economic growth of the country and therefore should be properly managed to reduce the level of evasion by the input and output relationship in Nigeria. The paper recommends among others that vatable persons should be properly supervised by the relevant tax authority (FIRS) to reduce the level of tax evasion; government should show more accountability in the management of tax revenue and finally, the level of corruption in Nigeria and that of government officials should be drastically reduced to win the confidence of tax payers for voluntary tax compliance. 

Keywords

Tax, VAT, economic growth, co-integration, Nigeria

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