Value Added Tax and Nigerian Economy: A Pre & Post Reform Analysis

Abstract

The study was designed to evaluate the impact of value added tax reforms on economic development of Nigeria (1994-2014). The research design adopted in this study was the ex-post facto research design. To achieve the objectives of this study, two specific objectives and two research questions were raised while one research hypotheses were formulated. The independent variable was measured by Value added tax (VAT), while economic development was proxy by gross domestic product (GDP). The study made use of secondary data which were collected from the Central Bank of Nigeria (CBN) and Federal Inland Revenue Service (FIRS). Data obtained were analyzed using Chow test statistical tool with the aid of Eview version 7.0. Findings showed that value added tax reforms actually impacted positively on the economic development. Based on the findings, the study recommended that Government should encourage production and service sectors of the economy since it is established by the study that tax reforms have
positively impacted on the economy in both the pre-reform and post re-reform periods especially in the area of gross domestic product. Value added tax rate should be increased from five percent (5%) to fifteen percent (15%) since the study has established that there was a significant relationship between the joint contribution of the pre and post-reform periods of Value added tax reform and gross domestic product.