Effect of Value-Added Tax on Economic Development (The Nigerian Perspective)

Abstract

Synopsis of tax administration system in Nigeria fascinates divergent views, especially in relation to value-added tax (VAT) effectiveness in enhancing economic development. There are concerns in some quarters that VAT administration in Nigeria is plagued by structural defects on multiple fronts. This paper, therefore, investigated the effectiveness of VAT system in Nigeria to evaluate its influence on economic development. Meta-analytic results from the research on VAT administration in Nigeria assert the importance of effective tax administration system to assist Nigerian government diversify its revenue stream. Finding the nexus between effective VAT administration and economic development is the crux of this paper which adopted two constructs to investigate the subject matter (FCR and GDP). The justification stems from seemingly dearth of nexus in research on the influence of VAT on development and how this tax tool can help government actualize its departure from single revenue stream (crude oil). Simple linear regression was employed to analyze data which shows a positive relationship between VAT, FCR and GDP.