ANALYSIS OF THE IMPACT OF VALUE ADDED TAX ON TOTAL FEDERALLY
COLLECTED REVENUE IN NIGERIA (1994 – 2012)


1 NWAWURU CLIFFORD EBERE
2 NMESIRIONYE JOSEPHINE ADANMA (Ph.D.)
3 IRONKWE, UGOCHUKWU ISIKAKU
1,2 Department of Accounting
3 Bursary Department
1,2 College of Management Sciences Michael Okpara University of Agriculture, Umudike.
1 e-mail: nwawuruc@yahoo.com
2 e-mail adandynmes@yahoo.co.uk
3 e-mail : ugoluck@yahoo.com

ABSTRACT
This research work examined the impact of value added tax on total federally collected revenue in
Nigeria. Time series data on value added tax and total federally collected revenue from 1994 to 2012
were collected from the Central Bank of Nigeria Statistical Bulletin. The Augmented Dickey Fuller
unit root test was used to confirm the stationarity of the variables and the ordinary least square of
simple regression was used in analyzing and estimating the log-linearized model while the Engle
Granger General Regression approach was employed in testing the long run and short run
equilibrium conditions. Result indicates that VAT contributes a minimum of 3% to total federally
collected revenue in years 2000 and 2005, and a maximum of 10% in 2009 while the overall mean
contribution was 5.47%. Result from the graph plotted shows that though VAT is contributing to
TFCR, the trend is not stable which may be as a result of other variables inherent. The result of
hypothesis tested equally shows that value added tax has significant effect on total federally collected
revenue which is about 34.5% of the total variation in the dependent variables. Also, significant long
run equilibrium relationships were shown to exist between the totally federally collected revenue and
value added tax. The study therefore concludes that value added tax has the strength to contribute
significantly to revenue generation and economic growth in Nigeria and recommends that tax
authorities and staff of the agencies should be motivated to avoid leakages in value added tax
revenue. Government should intensify efforts to boost the generation of value added tax revenue on
a year to year basis. Tax administrators should be adequately motivated to ensure higher levels of
efficiency and effectiveness in their performance.
KEYWORDS: Value Added Tax, Total Federally Collected Revenue, Percentage Contribution,
Unstable Trend, and Overall Mean Contribution.

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