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

Type Journal Article - International Review of Social Sciences
Title Value Added Tax and Consumption Expenditure Behavior of Households in Nigeria: An Empirical Investigation
Author(s)
Volume 3
Issue 6
Publication (Day/Month/Year) 2015
Page numbers 236-248
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2765862
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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