Value Added Tax And Revenue Generation In Nigeria: An Empirical Analysis

This study is a discourse on the contributions of Value-added tax to total revenue. The study adopts an ex-post research design with extensive use of secondary data to show the contributions of VAT to total revenue in Nigeria between the period, 1994-2017. Descriptive statistics using charts was used for the analysis. The study shows that the contributions of VAT for the period under review has been quite unimpressive. The study found that VAT is generally not characterized with threatening oscillations year-on-year over the period. This is a good sign for policy makers as it implies that over the business cycle, VAT revenue will still maintain some considerable stability and hence it can be dependent upon in the forecasting, budget planning and fiscal coordination. The study concludes that the low performance of VAT in Nigeria is rather unfortunate as most developed and emerging markets have long begun re-directing tax policy towards more consumption-based model rather than income-based model and at best having an efficient combination of both models. The reason is not far-fetched as consumption taxes have been credited with having less distortionary effects on investment and less volatile because consumption expenditure appears more stable. The tax is also quite equitable as the burden is the same irrespective of income. The tax collection is highly cost effective as it is charged at point of consumption and importantly, the loop-holes for evasion or avoidance is less when compared to direct taxes. The study recommends that the government and tax authorities look critically at the VAT- consumption based model in ensuring revenue stability.