Value Added Tax, Governance and Economic Growth in a Democratic Era A Study of Nigeria

Main Article Content

Chinweoke Nwaeze (PhD)
Kalu Maurice Chukwu
Ufomadu Ogechukwu Abel

Abstract

Economic growth can be seen as an effect of both taxation and different strategies of governance applied to enhance the national macroeconomic environment. Taxes and governance are determining factors in the evolution of socio-economic life, influencing also economic growth. This paper aimed to identify the relationship between value-added tax, governance and economic growth of Nigeria using the Autoregressive Distributed Lag (ARDL). Based on the annual data from Nigeria, the Granger causality test was applied to identify the cause-and-effect mechanism of the variables. The results revealed that value-added tax enhances economic growth but this could be hampered by bad governance. In terms of the Granger causality test, VAT and governance indices collectively influenced real gross domestic product (measure of economic growth) and the combination of real gross domestic product and governance indices influenced value-added tax. Recommendations were made that the government should make sure that money raised through VAT is properly utilized for infrastructure improvements that are obvious for taxpayers to see and appreciate, including strengthening the collection apparatus, closing loopholes, and making room for a more efficient VAT system.

Keywords: Governance, Economic Growth, Revenue Mobilization, Taxes, Value Added Tax

Article Details

Value Added Tax, Governance and Economic Growth in a Democratic Era: A Study of Nigeria. (2024). African Journal of Management and Business Research, 15(1), 285-308. https://doi.org/10.62154/5d864s59
Articles

Copyright (c) 2024 Chinweoke Nwaeze (PhD), Kalu Maurice Chukwu, Ufomadu Ogechukwu Abel (Author)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Chinweoke Nwaeze (PhD), Abia State Polytechnic, Aba.

Department of Banking and Finance,

Abia State Polytechnic, Aba.

Kalu Maurice Chukwu, Abia State Polytechnic, Aba.

Department of Business Administration and Management,

Abia State Polytechnic, Aba.

Ufomadu Ogechukwu Abel, Abia State Polytechnic, Aba.

Department of Accountancy,

Abia State Polytechnic, Aba.

Adefolake, A. O., & Omodero, C. O. (2022) Tax revenue and economic growth in Nigeria. Cogent Business & Management, 9(1), 2115282, DOI: 10.1080/23311975.2022.2115282

https://doi.org/10.1080/23311975.2022.2115282

Adegbie, F. F., Jayeoba, O., & Kwabai, J. D. (2016). Assessment of value added tax on the growth and development of Nigeria economy: Imperative for reform. Accounting and Finance Research, 5(4), 163 - 178. https://doi.org/10.5430/afr.v5n4p163

https://doi.org/10.5430/afr.v5n4p163

Adereti, S. A., Sanni M. R. & Adesina J. A. (2011). Value added tax and economic growth of Nigeria. European Journal of Humanities and Social Science. 10(1), 456-471.

Afolayan, S. M., Okonkwo, I. V., & Okaro, C. S. (2021). Value added tax rate change: effects on inflation rate and government borrowing in Nigeria. Journal of Contemporary Issues in Accounting, 2(1), 157-176.

Afuberoh, D., & Okoye, E. (2014). The impact of taxation on revenue generation in Nigeria: A study of Federal Capital Territory and selected states. International Journal of Public Administration and Management Research (IJPAMR), 2(2), 22-47.

Alabede, J. O., & Affrin, Z. Z. (2011). Public governance quality and tax compliance behavior in Nigeria: The moderating role of financial condition and risk preference. Issues in Social and Environmental Accounting (ISEA), 5(1/2), 3-24.

https://doi.org/10.22164/isea.v5i1.54

Anichebe, A. S. (2015). Implication of tax policy on inflation in Nigeria (1981-2012). Journal of Developing Country Studies, 5(2),103-113.

Ayoub, Z., & Mukherjee, S. (2019). Value added tax and economic growth: An empirical study of China perspective. Signifikan: Jurnal IlmuEkonomi, 8(2), 235 - 242.

https://doi.org/10.15408/sjie.v8i2.10155

Central Bank of Nigeria. (2021). CBN annual statistical bulletin, 32. Abuja, Nigeria.

Chigbu, E. E., & Ali, P. I. (2014). Econometric analysis of the impact of value added tax on economic growth in Nigeria. European Journal of Business and Management, 6(18), 31-36.

Cole, A. A., Aroyewun, B. O., Soetan, A., & Akintola, A. F. (2021). Value added tax and economic growth in Nigeria, 2004-2018. American Journal of Multidisciplinary Research & Development, 3(12), 09-13.

Etim, R. S., Jeremaiah, O. O., & Udonsek, A. (2020). The implementation of value added tax on e-transactions in Nigeria: Issues and implications. American International Journal of Business Management, 3(4), 01-09.

Everest-Phillip, M., & Sandall, R., (2009). Linking business tax reform with governance: How to measure success. Working paper, Investment Climate Department, World Bank Group.

Gujarati, D. N., & Porter, D.C. (2009). Basic econometrics. 5th Edition, McGraw Hill Inc., New York.

Ibrohimjonova, P. H. (2019). Impact of value added tax on GDP growth: the case for Uzbekistan. International Journal of Economics, Commerce and Management, 7(12), 926 - 937.

Jafrul, J. S. (2022). Impact of value-added tax on gross domestic product of Bangladesh. Indian Journal of Finance and Banking, 10(1), 41-44.

https://doi.org/10.46281/ijfb.v10i1.1753

Johnson, P. N. & Omodero, C.O. (2021). Governance quality and tax revenue mobilization in Nigeria. Journal of Legal Studies, 28(42), 1-41. DOI: 10.2478/jles-2021-0009

https://doi.org/10.2478/jles-2021-0009

Kareem, R. A., Arije, R. O., & Avovome, Y. H. (2020). Value-added tax and economic growth in Nigeria (1994 - 2017). Izvestiya Journal of Varna University of Economics, 64(2), 137 - 152.

Ngenuka, N. (2021). 'Nigeria loses over N100b yearly to tax related corruption'. https://guardian.ng/news/nigeria-loses-over-n100b-yearly-to-tax-related-corruption/

Obaretin, O., & Uwaifo, F. N. (2020). Value added tax and economic development inNigeria. Accounting and Taxation Review, 4(1), 148-157.

Odu, V. C. (2022). Value-added tax, revenue generation and economic growth in Nigeria. Accounting and Taxation Review, 6(1), 10-28.

Olarotimi, Y. L., & Alor, U.S. (2021). Dynamic impact of value added tax on economic growth in Nigeria. Journal of Research in Humanities and Social Science, 9(5), 24-28.

Onakoya, A., & Afintinni, O. I. (2016). Taxation and economic growth in Nigeria. Asian Journal of Economic Modelling, 4(4), 199-210.

https://doi.org/10.18488/journal.8/2016.4.4/8.4.199.210

Onwuchekwa, J. C., & Suleman, A.S.A. (2014). Value added tax and economic growth in Nigeria. European Journal of Accounting Auditing and Finance Research, 2(8), 62-69.

Orisadare, M. A., & Fasoye, K. (2022). The effect of value-added tax on economic growth of Nigeria. African Journal of Economic Review, 10(1), 158 - 169.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289 - 326.

https://doi.org/10.1002/jae.616

Regoniel, P. A., (2015). Conceptual framework: A step-by-step guide on how to make one. Simply Educate. Me.

Sandmo, A. (2004). The theory of tax evasion: A retrospective view. Norwegian School of Economics and Business Administration, Discussion Paper 31/04. https://core.ac.uk/download/pdf/30834949.pdf

Sebele-Mpofu, F. Y. (2020). Governance quality and tax morale and noncompliance in Zimbabwe's informal sector. Cogent Business & Management, 7(1), Article ID 1794662

https://doi.org/10.1080/23311975.2020.1794662

Soro, S. S. (2020). Institutional quality and tax revenue in Côte d'Ivoire: Evidence from ARDL approach. International Journal of Economics and Financial Issues,10(6), 40-49.

https://doi.org/10.32479/ijefi.10363

Torgler, B. (2005). Tax morale and direct democracy. European Journal of Political economy, 21(2), 525-531.

https://doi.org/10.1016/j.ejpoleco.2004.08.002

Uche, E. P. & Ugonabo, C. U. (2021). The effect of value added tax on economic development in Nigeria (1994-2018). IOSR Journal of Humanities and Social Science, 26(5), 21-30.

Vlachos, V., & Bitzenis, A. (2018). Corruption and tax compliance of Greek SMEs. In Economy, finance and business in Southeastern and Central Europe, Springer, Cham, 413-418.

https://doi.org/10.1007/978-3-319-70377-0_28

World Bank, (2022). Global tax program.https://www.worldbank.org/en/programs/the-global-tax-program