The Effect of Value-Added Tax on Economic Growth of Nigeria

Abstract

The paper examined the effect of VAT on economic growth in Nigeria between 1994 and 2020 using consumer price index (CPI) as a threshold. A technique of Threshold Vector Autoregressive (TVAR) was employed and the results reveal that a VAT above the 10 percent threshold value endangers the economy while a VAT below the 7.59 percent threshold value does not harm the economy; rather, it improves people's well-being.  It is therefore recommended that Nigerian economy should maintain the lower VAT threshold to cushion the effect of ever rising CPI on the citizens.