CONSUMPTION VERSUS INCOME TAX IN NIGERIA: IMPLICATIONS FOR MONETARY POLICY

CONSUMPTION VERSUS
INCOME TAX IN NIGERIA:
IMPLICATIONS FOR MONETARY
POLICY
Akpan, D.B., Achua, J.K., Erowo, H.I.,
Yusuf, M. and Joshua, R.
ABSTRACT
The results of structural vector
autoregressive (SVAR) model indicate that
consumption and income tax varieties
have no significant shocks on monetary
policy rate. This is largely explained by the
policy impotence due to trilemma effect
and low tax efficiency ratios (6.5 and 1.8
per cent for consumption and income tax,
respectively) as well as the counteracting
trajectory between the tax types.
However, while income tax shocks exert
significant pressure on interest rate,
consumption tax pulses significantly taper
inflation
contemporaneously.
These
results suggest indirect influences of both
tax types on monetary policy through itsBook of Abstract
transmission channels, albeit, differently.
The findings fill an important literature
gap and elicit the need for proactive policy
actions.

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