Tax is one of the ways successive governments have used in raising funds for government expenses especially in executing projects and programs that are beneficial to the citizens. Value Added Tax (VAT) is among the numerous forms of taxes collected by the government. VAT became a prominent and topical issue among scholars, experts and practitioners following the suit instituted against the Federal Inland Revenue Service (FIRS) by River State Government. The issue has further divided the country along ethnic, primordial, religious and party lines either speaking for or against VAT collection by the Federal Government or State Government. It is against this background that this study seeks to examine the rationale behind the power to raise taxes. The study reveals that there is a constitutional flaw about tax rising, there is also a faceoff between the Federal Government and State Government with regards to who collects Value Added Tax (VAT) in the state. The study further reveals that VAT has made some states to be lazy in terms of exploring other sources of revenue other than waiting for the share from the federal purse. Lastly, if states are allowed to collect VAT and remit the same to the federal government, it will promote true federalism and enthrone financial autonomy to states. The study recommended that the constitutional provision for rising tax should be made clear, the federal mighty should be curtailed by adequate constitutional provisions, the state should be granted financial autonomy especially in the area of raising the taxes. This is to bring about true federalism and to promote good governance among states.
Citation: Asomba, Ifeyinwa and Etalong, Thomas Alama (2021) Federalism and Tax Raising Power in Nigeria: The Issue of Value Added Tax (VAT), Global Journal of Political Science and Administration, Vol.9, No.3, pp.70-80
This study aims at investigating the relevance of tax revenue in driving economic growth in emerging market economy context. . Using data extracted from central bank of Nigeria statistical bulletin for various years and auto-regression estimation model, our study documents the existence of significant and positive relationship between petroleum profit taxes (PPT), Company Income Tax (CIT) on economic growth in Nigeria. Our findings further reveal that Value Added Tax (VAT) and Custom –excise duty (CED) exert negative influence on economic growth. However, the study provide evidence that VAT and CED are insignificant in determining the economic growth in emerging market economy context with special interest in Nigeria This study provide further evidence that the higher the amount of tax revenue generated, the higher the level of economic growth in the economy. There is a recommendation therefore that strong institutional reforms are panacea to prevent leakages of revenue from VAT and CED.
Effects of Value Added Tax and Custom Duties on Revenue Generation in Nigeria (2000-2016) (Published)
The study examined value added tax and customs duties on revenue generation in Nigeria. Secondary data was sourced from Federal Inland Revenue Service (FIRS) ranging from 2000 to 2016. Autoregressive Distributed Lag (ARDL) and Granger causality tests were used as the estimation techniques. The findings of the study revealed that the F-statistics value was 2.883868 which is lesser than both the lower bound and the upper bound values of 3.79 and 4.85 respectively at the 5percent level of significance which implies that there is no long-run relationship among value-added tax, customs duties and revenue generation. It was equally revealed that there is no causality among value-added tax, customs duties, and revenue generation. The study concluded that value-added tax and customs duties no significant effect on revenue generation and there is no long-run relationship among value-added tax, customs duties and revenue generation in Nigeria during the study period. Thus, it is recommended that the fiscal policy should discourage tax avoidance by emulating measures for compliance of value added tax and customs duties
An Assessment of the Casual Relationship between Economic Growth and Indirect Taxes in Nigeria (Published)
The study examines the causal relationship between economic growth and indirect taxes in Nigeria. Ex-post facto research design was employed and time series data were sourced from Central Bank Nigeria (CBN) statistical bulletin of various years 1994-2014. Multiple regression inferential statistics was used for data analysis. The result reveals that VAT has a positive significance effect on GDP. This is because the computed t-statistic of 3.142 is greater than the critical value table value of 2.120. The result of the second hypothesis also showed that the computed t- statistic of 4.557 is greater than the critical table value of 2.120 thus, proving that CED actually has a positive significance effect on GDP. The study conclude and that VAT and CED as indirect taxes contributes to economic growth in Nigeria, hence government should intensify effort to ensure immediate response of payment by the general public as flow of fund will encourage faster economic growth.
The Impact of Company Income Tax and Value-Added Tax on Economic Growth: Evidence from Nigeria (Published)
This study examined the impact of companies’ income tax, value-added tax on economic growth (proxy by gross domestic product) in Nigeria. Secondary time series panel data was collected for the period 2005 to 2014 from the Statistical Bulletin of the Central Bank of Nigeria (CBN). The study employed Ordinary Least Squares (OLS) technique based on the computer software Windows SPSS 20 version for the analysis of data, where gross Domestic product (GDP), the dependent variable and proxy for economic growth, was regressed as a function of company income tax (CIT) and value-added tax (VAT), the independent variables. The results of the analysis showed that both company income tax and value-added tax have significantly positive impact on economic growth. Based on the findings, the study recommended that government should strengthen the tax administration system to broaden the tax income, and embark on tax education to ensure voluntary tax compliance. The study also recommended that the tax authorities should employ qualified tax professionals who should be regularly trained and be retained in the tax administration system for efficient tax administration and collection.
The study examined the possibility of “Re-engineering VAT Administration in Nigeria for Economic Development (1994-2014)”. The study used across sectional survey design involving the survey of existing data (secondary sources). The research instruments used in collection of data for this study were mainly secondary data from the FIRS Website, CBN & NBS Annual Statistical Bulletins. This study used the econometric technique of Ordinary Least Square (OLS) in form of Multiple Linear Regressions. The regression model was estimated through the use of Statistical Package for Social Sciences (SPSS). The study found that VAT is of immense benefit to government. Through taxation, government ensures that resources are channeled towards important projects in the society. However, VAT is being mismanaged in Nigeria as the study has conclusively revealed that: There is no significant relationship between value added tax and revenue growth in Nigeria, there is significant relationship between value added tax and the consumption pattern in Nigeria and there is no significant relationship between value –added tax and the economic development in Nigeria from 1994-2014. Therefore, the study recommends that: Efforts should be made by the government to fight corruption and if possible, introduce capital punishment depending on the degree of mismanagement of public funds or embezzlement of public funds to deter those who steal VAT funds. Also value added tax (VAT) Act should be amended further to impose VAT based on destination principle. This will enable VAT to be imposed on imported services rendered by a non-resident company outside Nigeria.
This paper attempts to examine the relationship between Value added tax and Economic development: in Nigeria. It is expected that this study will be of immense use to both the Government and general public. The study covered 18years period between 1994 and 2012. Multiple regression was used to analyse the data gotten from Central Bank of Nigeria (CBN) Statistical Bulletin of various years. The result of the multiple regression showed a negative significant relationship between value added tax revenue and Gross domestic product. Also, the result showed a positive significant relationship between Gross domestic product and Total consolidated revenue. We recommend that federal government should educate the general public more on the essential of VAT payments and also that machineries should be put in place to ensure that VAT revenue does reduce as this will help foster economic development. Also, VAT rate should be increased as it will account for more revenue to the government.
Most industrialized countries over the years have passed through the agrarian era. In fact, the industrial sector takes its roots from the agricultural sector. In a developing nation, government fiscal responsibility is very central to all facets of development including agriculture. The study thus seeks to examine the impact of fiscal policy on the growth of agricultural sector in Nigeria between 1981 and 2013 using Error Correction Model (ECM). Unit root tests were conducted on each of the variables to avoid spurious regression results. Stationary variables were subsequently used for the analysis. The co-integration results showed that long run equilibrium relationship exists among the variables. The findings from the study revealed that custom and excise duties (CED) though statistically significant, relates negatively with volume of agricultural outputs (VAO). It shows that the amount of tax imposed on agricultural exports has not improved its productions and thus has a dampening multiplier effects on its growth. Value added tax (VAT) was however found to have influenced the growth of VAO positively and significantly. It shows that the amount of VAT imposed on agricultural outputs has improved the growth of the agricultural produce. The total government expenditures on agricultural sector were found to have negatively influenced agricultural growth in Nigeria. It showed that the amount of government expenditures towards the growth of the sector has not been favorable. Government capital allocation and expenditure to agriculture is relatively low and the actual expenditure falls short of budgeting expenditure. The rate of under spending was found to have been higher for agriculture than for any other economic sectors as large proportion of the funds allocated to agriculture has not gone directly to farmers. Suggestive from the analysis therefore is that Government should increase her budgetary allocation to this sector in a consistent manner because of its importance to the national economy, hoping that with proper monitoring of fund, it would contribute more significantly to the economy of the country. Customs and excise duties on agricultural exports should be stream-lined and more incentives should be given to rural farmers since they covered the larger population in agricultural sector.