VALUE ADDED TAX AND GOVERNMENT BORROWING: NIGERIAN EXPERIENCE

Abstract

The study investigated the effect of value added tax on government borrowing in Nigeria for the period 2011 to 2020. Quarterly time series data sourced from the Federal Inland Revenue Service (FIRS) and Debt Management office (DMO) were utilized for the work. The study found that Value Added Tax (VAT) has a positive and insignificant effect on government borrowing in Nigeria over the period of the study. The study concludes that value added tax does not have a significant effect in reducing the level of government borrowing in Nigeria. The study recommended that the fight against corruptions in the parastatals and agencies of government saddled with the responsibility of collecting and remitting indirect taxes to the treasury single account should be holistic instead of being selective. This would deter public office holders in these institutions from diverting these funds for personal use and would eventually translate to increase in government revenue and further reduce the level of borrowing by the government in Nigeria.