Empirical Evaluation of Contribution of Tax

Empirical Evaluation of Contribution of Tax

Author by Dr. Andy Okwu

Journal/Publisher: Middle Eastern Finance And Economics

Volume/Edition: 9

Language: English

Pages: 24 - 34

Abstract

This paper employed  the  tools  of  quantitative  empirical  analysis  technique   to

evaluate the contribution of value-added tax to the development of Lagos State economy. The generic central objective was to examine the effect of the contribution of value-added tax on the development of Lagos State economy. The tools of empirical analysis were simple regression models as abstractions of the respective sectors considered in the study. The study considered a vector of development indicators as dependent variables and regressed each on VAT revenue proceeds to Lagos State for the study period. Development aspects considered included infrastructural development, environmental management, education sector development, youth and social development, agricultural sector development, health sector development and transportation sector development. The state economy was disaggregated into seven strategic economic sectors in the development process, and simple regression models specified to enhance isolated analysis of each sector. The analysis showed that VAT revenue contributed positively to the development of the respective sectors. However, the positive contribution was statistically significant only in agricultural sector development. On the aggregate, the analysis showed that VAT revenue had a considerable contribution to development of the economy during the study period. The paper concludes that various sectors of the economy of Lagos State are yet to benefit significantly from VAT revenue expenditure of the state government. However, it had contributed significantly to the economy as a whole. Consequently, the paper calls for equity in sectoral spending of VAT proceeds in Lagos State in order to ensure balanced development and sustainability of the emerging mega city status of the state.


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