INVESTIGATING THE RELATIONSHIP BETWEEN VAT AND GDP IN NIGERIAN ECONOMY
Denis Basila
Department of Accounting
Adamawa State University, Mubi, Nigeria
ABSTRACT
This study is an empirical investigation into the relationship between Value Added Tax (VAT) and Gross Domestic Product (GDP) in Nigeria. This research is significant for planning and policy formulation as regards revenue generation. A data based on VAT revenue figure and GDP figure from 1994 to 2008 obtained from Central Bank of Nigeria’s statistical bulletin, 2008 was collected and used. GDP and VAT figures for the period of study are tested for correlation. The test revealed a strong Pearson’s Product Moment Correlation (PPMC) at about 96 per cent strength. Further, a test of significance confirmed that VAT revenue is significantly different at 99 percent confidence level in relation to GDP. This implies that VAT is not effective as revenue earner, in the sense that significant parts of GDP which represent aggregate national income as well as aggregate national expenditure are not collected as tax. Therefore, the recommendation by this study includes maintenance of the status quo as it could suggest support to the economy and convenience principles of taxation.
Key words: Investigating, VAT, GDP, Nigeria.