Is Value-added Tax a Moneymaking-Machine for Developing Economies? Evidence from Ghana (original) (raw)

Tax revenue and economic growth in developing country: an autoregressive distribution lags approach

Central European Economic Journal

Tanzania, like most other developing countries, faces numerous economic challenges in striving to achieve sustainable economic growth and development through taxation. In the literature, the debate on how effective taxes are as a tool for promoting economic growth and economic development remains inconclusive, as various research have reported mixed effects of tax on economic growth. This article investigates the effect of taxation on economic growth in Tanzania using the recently developed technique of autoregressive distributed lag model (ARDL) bounds testing procedure for the period from 1996 to 2019. Various preliminary tests were conducted including stationary tests as well as the pair-wise Granger causality test. According to the results obtained, domestic goods and services (TGS) taxes are positively related to GDP growth and are statistically significant at 1% level. Income taxes, on the other hand, were found to be negatively related to GDP growth and to be statistically si...

Growth Dynamics of Value-Added Tax Revenue in Ghana

Contemporary Economics, 2019

The introduction of the value-added tax (VAT) to replace the sales tax in 1995 was one of the key policy steps undertaken by the government of Ghana (GoG) to further deepen and sustain the efficiency of Ghana’s tax system to boost tax revenue. This study uses quarterly data from 2000 to 2014 and employs dynamic ordinary least squares (DOLS) and Divisia Index approaches to examine the growth of Ghana’s VAT revenues and how this growth is affected by discretionary tax measures. On the whole, the study finds that all of the measures of VAT revenue (total VAT, domestic VAT, and import VAT) have experienced some growth. Growth in total VAT and import VAT is driven strongly by growth in the base, while that of the domestic VAT is driven by both discretionary tax measures and the tax base. Discretionary tax measures are found to have a depressive effect on both total VAT and import VAT revenue growth.

A Cointegration of Value Added Tax and Economic Growth in Nigeria: 1994-2012

This paper examines the impact of value added tax on the economic growth of Nigeria. To achieve the objective of this paper, relevant secondary data were collected from the Central Bank of Nigeria (CBN) and the Federal Inland Revenue Service (FIRS) for the period 1994-2012. The secondary data collected from the relevant government agencies in Nigeria were analysed with relevant econometric tests of Breusch-Godfrey Serial Correlation LM, White Heteroskedasticity, Ramsey RESET, Jarque Bera, Johansen Co-integration, and Granger Causality. The results show that there exists a long run equilibrium relationship between economic growth and VAT. It was also found that VAT does granger cause gross domestic product of Nigeria. On the basis of the empirical analysis, the paper concludes that VAT is one of the most important components indirect taxes in Nigeria that affects the economic growth of the country and therefore should be properly managed to reduce the level of evasion by the input and output relationship in Nigeria. The paper recommends among others that vatable persons should be properly supervised by the relevant tax authority (FIRS) to reduce the level of tax evasion; government should show more accountability in the management of tax revenue and finally, the level of corruption in Nigeria and that of government officials should be drastically reduced to win the confidence of tax payers for voluntary tax compliance.

Real Gross Domestic Product as Value Added Tax Base: Evidence from Ghana

Journal of Economics and Financial Analysis, 5(1), 43-63, 2021

Total Private Consumption is the ideal Valued Added Tax base for Valued Added Tax revenue modelling and forecasting. However, data on private consumption expenditure is not available in most developing countries. With this reason, this study aims to study the appropriateness of real Gross Domestic Product as a Valued Added Tax base by testing the correlation between Valued Added Tax Revenue and Real Gross Domestic Product. It further examines the elasticity of Valued Added Tax revenue to changes in real Gross Domestic Product of Ghana. It is realized from the study that a one percent increase in real Gross Domestic Product results in a 3.73373 percent increase in Total Valued Added Tax revenue. Also, a, high correlation of 0.9365 is realized between real Gross Domestic Product and Total Valued Added Tax revenue. Since monthly and/or quarterly data on private consumption expenditure is not available in Ghana, real Gross Domestic Product can be used as VAT base (especially in VAT revenue modelling and forecasting) because of the high correlation and elasticity between Value Added Tax revenue and real Gross Domestic Product. Sequel to these, the study recommends that the government of Ghana implements supply-side policies that will boost investment and production, reduce imports and encourage import substitution, and also demand-side policies that will increase aggregate demand. These policies will expedite rapid economic growth, and an increase in Value Added Tax revenue will be a consequent result.

Asesssing the Impact of Value Added Tax (Vat) Gaps on Vat Revenue Generation in Nigeria

2019

The study was aimed to examine the impact of Value Added Tax Revenue (VAT) Gaps on VAT Revenue Generation in Nigeria. Initially the study intended to use bottom-top approach, but the idea was later on discarded due to the problems of data availability and reliability, therefore time series data from 2010 to 2018 was used. Descriptive statistics were employed to compute VAT Policy Gap, VAT Compliance Gap and CEfficiency Ratio for all the relevant years. Auto Regressive Distributed Lag (ARDL) Model and Vector Error Correction Model (VECM) were used to examine the impact of the independent variables on VAT Revenue. The short run empirical result revealed a positive relationship between previous Value Added Tax Revenue, Aggregate Consumption and the dependent variable (Value Added Tax Revenue). Similarly VAT Policy Gap and VAT Compliance Gap have a negative relationship with the dependent variable. However Cointegration Bounds Test revealed a long run relationship among the variables, a...

Value Added Tax and Macroeconomic Performance: A Dynamic Modeling of the Nigerian Experience

European Journal of Business and Management, 2016

This research investigates the relationship between value added tax(VAT) and macroeconomic performance in Nigeria. The main objective of the study is to empirically investigate the impact of VAT on the level of economic growth in Nigeria. The study covered the period between 1994 and 2014. The cointegration technique and Short run dynamic analysis were used for the research. The parsimonious ECM result indicates that VAT is statistically significant in explaining the level of economic growth in Nigeria. The result indicates an invalidation of the null hypothesis of no significant relationship between VAT and the level of economic growth in Nigeria. The Johansen cointegration test indicates a long run relationship among the variables. The result recommends, amongst others, an increase in VAT and efficient utilization of the proceeds from VAT. Keywords: Value Added Tax, Petroleum Profits Tax, economic growth Company Income Tax, Cointegration

Value Added Tax and Economic Growth in Nigeria: A Comparative Analysis with Some Emerging Economies

This study examines the impact of Value Added Tax on the economic growth of Nigeria from 1994 to 2012 in comparison with other emerging economies. Economic growth is measured by growth in total government revenue and in GDP of the country. To achieve the objective of the study, historical secondary data relating to Value Added Tax Revenue, Gross Domestic Product and Total Government Revenue were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin, Nigerian Bureau of Statistics (NBS), journals and the Internet. Trends were established in the rate of growth of value added tax as a percentage of gross domestic product and total government revenue; Pearson Moment Correlation Coefficient as well as the student‘t’ statistic were used to analyze the data. Nigeria’s VAT/GDP rate and VAT rates were compared with those of other emerging economies of the world. Results from the tests show that value added tax has a significant positive statistical relationship with the two independent variables in Nigeria over the period under review. The results also show Nigeria has the least VAT/GDP rate and VAT rate among emerging economies. On the basis of the findings, the study concludes that Value Added Tax improves the revenue base of the government and gross domestic product of the country for economic growth and development. The paper recommends that government should review the VAT rate to between 10 and 12.5%, strengthen the collection machinery and review the VAT Act to make the system all inclusive and more effective. Keywords: Value Added Tax, Gross Domestic Product, Revenue, Economy, Economic Development, Nigeria.

Econometric Analysis of the Impact of Value Added Tax on Economic Growth in Nigeria

European Journal of Business and Management, 2014

The importance of value added tax (VAT) as a source of government revenue in both developed and developing countries has been subjected to serious examination in recent decades. The objective of this paper is to empirically analyse the relationship between VAT and economic growth in Nigeria. Using the Engle and Granger cointegration technique on annual data sample covering 1994 to 2012, this paper shows that VAT has positive effect on economic growth proxied by real GDP. The results also show absence of both long-run and short-run relationship between VAT and GDP. The government should therefore put in place measures to enhance productivity so as to increase the contribution of VAT to economic growth in Nigeria.

Analyzing the Impact of Value Added Tax (VAT) on Economic Growth in Nigeria

Mathematical Theory and Modeling, 2013

This study investigates the relative impact of value added tax on economic growth in Nigeria. We used Johansen cointegration test. The result of cointegration test does not provide any evidence of long-run equilibrium relationship among the variables. An unrestricted vector autoregressions (VARs) technique were employed to analyze and draw policy inferences. Impulse response functions (IRFs) and Forecast error Variance decompositions (FEVDs) were compute through 1000 Monte Carlo simulations. The results derived from the impulse response function (IRF) and forecast error variance decomposition (FEVD) imply that value added tax have positive impact on economic growth in Nigeria , where variation in this variables growth rate will causes variation in real economic activity with about 50 percent in the near future. We conclude that the policy makers in Nigeria should continues this fiscal policy with other macroeconomic indicators. Per suing this policy will enhance the Nigerian economy positively, more specifically in this time of economic crisis in the world.

DOES TAXATION MATTER FOR ECONOMIC GROWTH IN A DEVELOPING COUNTRY? EMPIRICAL EVIDENCE FROM NIGERIA

Sokoto journal of the social sciences , 2021

This study o critically examined Taxation as a tool matter for Economic Growth in Nigeria while taking a cursory look at the objective of ascertaining the impacts of Company income tax, petroleum profit tax, Customs, Excise duties, and Value-added Tax on economic growth. Time series data from 1994Q1-2019Q4 was gathered from secondary sources that include the Central Bank of Nigeria statistical bulletin and Federal Inland Revenue service yearly reports. Augmented dickey Feller was used to testing for the variables' stationarity, and as much as all the variables are stationary at first difference. The Autoregressive Distributed Lag (ARDL) model is employed to estimate the regression equation. The study shows that there exist a positive and insignificant relationship between petroleum profit tax, company income tax, customs, excise duties, and value-added tax with real gross domestic product in the short run. Whereas, In the long run only company income tax has a positive and significant relationship with the real gross domestic product, while other variables maintained a positive and insignificant relationship with real gross domestic product. Therefore, this study recommends that an effective tax system be put in place to satisfy the twin purpose of raising maximum revenue and encouraging production.