Value Added Tax and Consumption Expenditure Behaviour of Households in Nigeria: An Empirical Investigation

Value Added Tax and Consumption Expenditure Behaviour of Households in Nigeria: An Empirical Investigation

Author by Dr. Andy Okwu

Journal/Publisher: International Review Of Social Sciences

Volume/Edition: 3

Language: English

Pages: 236 - 248

Abstract

In one way or the other, value added tax has been perceived to influence consumption expenditure behaviour of households as well as consumer price index. This study employed ex-post facto research design to investigate the effects of value added tax on consumption expenditure pattern and consumer price index in Nigeria. The study considered value added tax revenue, house hold consumption expenditure on durable and non-durable goods as well as consumer price index for the period 1994 - 2014. Data used for analysis were extracted from National Abstract of Statistics of the National Bureau of Statistics and the Statistical Bulletin of the Central Bank of Nigeria. The tools of analysis were multiple regression models on households’ durable and non-durable goods consumption expenditures and consumer price index with lagged valued variants. Results showed that value added tax and one-period lagged consumption expenditure on durable goods significantly affected households’ consumption expenditure on durable goods. Further, positive significant effects were established for value added tax in relation to households’ consumption expenditures on non-durable goods; and VAT, its variants and previous spending levels did not discourage households’ consumption expenditures; and value added tax did not bear significant relevance on consumer price index. Consequently, the study recommended that the current 5% value added tax rate should be maintained, since any increase would most likely affect the households negatively and escalate consumer price index to undesired levels


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