An Empirical Investigation of the Determinants of Value Added Tax (VAT) in SouthWestern Nigeria
Abstract
Despite the various tax reforms undertaken by Nigerian Government to increase tax revenue over the year, prior statistical evidence from the literature indicates that the contribution of income tax to the Government’s total revenue remained consistently low and is relatively shrinking. The study investigated the determinants of Value Added Tax (VAT) in South Western Nigeria and the influence on revenue profile of the sampled states. Panel method was adopted covering a period of ten (10) years. Random sampling incorporated with Slovin Formula was used to select three hundred and fifty six (356) respondent tax officers, vatable persons and three hundred and fifty three (353) households of VAT rated goods on whom questionnaires were administered. VAT was found positively and significantly (ðœ·= 0.7318, p = 0.05) related to revenue profile of the states. Log number of vatable industries was found to be positive (1.45334) and significant (p = 0.05), an indication that increased industrialization led to an increase in VAT. The coefficient of Log of population was negative (-0.5568789) but was significant to VAT revenue which implied that low population was associated with a decrease in VAT revenue. The study revealed that VAT has the potential of positively enhancing revenue generation of the sampled states. This could be achieved given the positive relationship with industrialization of the states and proportionality with income among the populace.
Keywords: Value Added Tax, Income VAT, South western Nigeria, Vatable persons, Revenue profile.
References
Qasi MA, Sulaiman DM (2010) Determinant of Tax Buoyancy: Empirical Evidence from Developing Countries. European Journal of Social Sciences, 13(3):408.
Omojimite BU, Iboma GE (2012) Fiscal Deficit and the Productivity of the Nigerian Tax System, 1970-2010: Journal of Sustainable Development 5(4).
Keen M, Lockwood B (2010) The value-added tax: its causes and consequences IMF Working Paper WP/07/183.
Tait A, Robert E, Tuan ML (2005) Value Added Tax, National. ‘In the encyclopedia of Taxation and Tax Policy’. The Urban Institute press Washington 461.
Jayakumar A (2010) A study on impact of value added tax (vat) implementation in India 38.
Bickley JM (2006) Value Added Tax: A new U.S. Revenue Source? CRS report for Congress, Library of congress 2.
Adejuwon JA (2009) Analysis of Taxation Principles for Nigerian Students. Not by power Nigeria Ltd. press 359-377.
Bird Richard M, Gendron PP (2007) The VAT in Developing and Transitional Countries, Cambridge and New York: Cambridge University Press.
IMF (2007) IMF working paper the value-added tax: its causes and consequences prepared by Michael Keen and Ben Lockwood fiscal affairs department.
Keen M, Lockwood B (2006) Is the VAT a money machine? National Tax Journal, 59(4):905-928.
Tanzi V, Howell HZ (2000) Tax Policy for Emerging Markets: Developing countries. National Tax Journal, 53(2):299-322.
Jonathan G (2010) Lessons Nigeria tax administrators can learn from the commonwealth: A paper presented to declare open the Commonwealth Association of Tax Administrators 31st Annual Technical Conference in Abuja. The Sunday punch, October 17, 2010 24.
Delfin SG, Marna K, Sherman R, Karen T (2005) An analysis of South Africa Value Added Tax. World Bank Policy Research Working Paper 3671.
Udeh J (2002) Petroleum Revenue Management-The Nigerian Perspective, World Bank Petroleum Revenue Mgt. Workshop.
Adesopo E, Agboola A, Akinlo AE (2004) Centralization of intergovernmental fiscal power and the lower levels of government in a federation: The Nigerian experience, Journal of Social Sciences 8(3): 179-195.
Owolabi SA, Okwu AT (2011) Empirical evaluation of contribution of value added tax to development of lagos state economy, Euro Journals Publishing, Inc Paper 97/137/139,
James OA, Zaimah BZ, Kamil MdI (2011) Determinants of tax compliance behaviour: A proposed model for Nigeria. International Journal of Finance and Economics, 78 1-130.
Osoro NE (1993) Revenue Productivity Implications of Tax Reform in Tanzania. Research Paper No. 20, Nairobi; African Economic Research Consortium.
Osoro NE (1995) Tax Reforms in Tanzania: Motivations, Directions and Implications. Research paper No. 38. Nairobi: African Economic Research Consortium.
Ariyo A (1997) Productivity of the Nigerian Tax System: 1970-1990, African Economic Research Consortium Research paper No. 67. Nairobi.
Wawire NHW (2003) Trends in Kenya’s tax ratios and tax effort indices, and their implication for future tax reforms†in Illieva E. V. (Ed.) Egerton Journal, 4:256-279.
Wawire NHW (2006) Determinants of Tax Revenues in Kenya, Unpublished Ph.D Thesis, Kenyatta University.
Muriithi MK, Moyi ED (2003) Tax Reforms and Revenue Mobilization in Kenya, AERC Research Paper 131, Nairobi: AERC
Eltony MN (2002) “Measuring Tax Effort in Arab Countriesâ€, Arab Planning Institute, 124.
Teera JM (2003) “Could Do Better: An Appraisal of Uganda’s Tax Performance Relative to Sub-Saharan Africaâ€. Department of Economics, University of Bath, BA2 7A. www.wikipedia.com.
Tanzi V, Davoodi H (1997) “Corruption, Public Investment and Growthâ€. Working.
Ariyo A (1993) An assessment of the sustainability of Nigeria’s fiscal deficit: 1970-1990. Journal of African Economie, 263-282.
Blinder AS, Solow RM (1973) Does fiscal policy matter? Journal of public Economics 90(5):319-337.
Buiter W (1983) The Theory of Optimum Deficits and Debt. NBER Working paper No 1232 Draft Document on the National Tax Policy presented by the Presidential Committee on National Tax Policy.
Zee HH (1988) The sustainability and optimality of government debt. IMF Staff Papers, 658-685.
Ariyo A, Raheem MI (1990) Deficit financing and economic development : Empirical Perspectives from Nigeria. Project report presented to the African Economic Research Consortium. Abidjan.
Alade S (2003) Fiscal adjustment in Nigeria : Issues in capital expenditure. The Bullion 8-16.
Iyoha MA (2004) Macroeconomics, theory and policy .Benin-City, Nigeria: Mindex Publishing. 36.
Ajitava RSK, Poulomi R (2007) Is the value added tax reform in india poverty improving? An analysis of data from two major states. Poverty and Economic Policy Working Paper, 18 2.
Margalioth Y, Reuven AY (2006) Taxation in developing countries: Some recent support and challenges to the conventional view. Journal of Tax and Development Review, 1-8.
John W, Li W (2007) Evaluating the impure Chinese VAT relative to a pure form in a Simple Monetary trade model with an endogenous trade surplus: National Bureau of Economic Research Working Paper 13581, 1050 Massachusetts Avenue Cambridge 3-4.
Kabatek Jan (2009) The effects of VAT harmonization on tax revenue in the European Union. An Unpublished PhD Thesis, Charles University in Prague.52.
Erbil L (2001) The Modern VAT. Washington, D.C: International Monetary Fund 192.
Keen M, Lockwood B (2007) The Value-Added Tax: Its causes and consequences. Warwick Economic Research Papers, (801).
Desai MA, Hines JR (2005) Value added taxes and international trade: The evidence. University of Michigan working papers.
Ariyo A (1997) Productivity of the Nigeria Tax System 1970-1990, African Economic Research Consortium Research Paper 67, Nairobi.
Suleiman ASA (2008) The administration and problems of value added tax in Nigeria. Finance and Accounting Research Monitor 2(2):P1.
Adekanola O (2007) Taxation as a means of economic revitalization: limitations and prospects in a developing economy. Journal of the Institute of Chartered Accountants of Nigeria, 40(4): 55-57.
Acosta J (2011) Value Added Tax Reform in a Developing Country: A CGE Model With An Informal Sector. Being a Dissertation Prospectus Presented to the Mexican Congress.1-14.
Asada D (2005) The administration of personal income tax in Nigeria: Some problem Areas. Working Paper, University of Jos, Nigeria.
Erbil L, Janet S, Reint G (1999) Revenue Implications of Trade Liberalization, Washington D.C., International Monetary Fund, occasional paper , 180.
Keen M (2006) “VAT, Tariffs, and Withholding Taxes†(Mimeo, Washington: International Monetary Fund).
Kiabel BD, Nwokah NG (2009) Curbing tax evasion and avoidance in personal Income tax administration: A study of the south-south states of Nigeria. European Journal of Economics, Finance and Administrative sciences, 15:16-61.
Narayana K (2005) “Implications of VAT and its application in India, 44(16)23.
Nzotta SM (2007) Tax evasion problems in Nigeria: A critique. The Nigerian Accountant, 12(1):40-43.
Odusola A (2006) Tax Reform in Nigeria. Research Paper, World Institute for Development Economic Research United Nation University.
Sanni A (2005) Contentious issues in tax administration and policy in Nigeria: A Governor’s perspective. First National Retreat on Taxation. Lagos: Joint tax board.
Tanzi V, Ludger S (2000) Public Spending in the 20th Century: a Global Perspective, Cambridge, Cambridge University Press.
Wawire NHW (2000) “Revenue Productivity Implications of Kenya’s Tax System†in Kwaa.
Prah K, Ahmed AGM (Ed.). Africa in Transformation. Political and Economic Issues. 1[6]. Addis Ababa: OSSREA, 99-106.
Wawire NHW (2011) Determinants of Value Added Tax Revenue in Kenya, CSAE conference paper
Zolt EM, Bird M (2005) Redistribution via Taxation: The Limited Role of the Personal Income Tax in Developing Countries,’’ UCLA Law Review, 52(1):1627-1695.
