Journal • CITN Journal

Editorial Board

Editor-in-Chief

Professor Rafiu Oyesola Salawu

Department of Management & Accounting, Faculty of Administration, Obafemi Awolowo University, Ile-Ife

Managing Editor

Professor Godwin Emmanuel Oyedokun

Department of Management & Accounting, Lead City University, Ibadan, Nigeria

Editorial Board Secretary

Mary-Fidelis Chidoziem Abiahu

Director, Research and Professional Standard, Chartered Institute of Taxation of Nigeria

Editorial Board Members

Professor Chinedum Nathaniel Nwezeaku

Federal University of Technology, Owerri

Professor John Adeoti

Nigeria Institute of Social and Economic Research (NISER), Ibadan

Professor Uche Jack-Osimiri

Faculty of Law, River State University, Port Harcourt

Professor Aruwa Suleiman Akwu-Odo Salihu

Nasarawa State University, Keffi Nasarawa State Nigeria

Dr. Eiya Ofiafoh Ofiafoh (Associate Professor)

Department of Accounting, University of Benin, Benin City, Nigeria

Dr. Stephen Chukwuemeka Mark Abani

MCSA Worldwide Projects Limited, Abuja, Nigeria

Dr. Kenny Adedapo Soyemi

Department of Accounting, Olabisi Onabanjo University, Ago Iwoye, Ogun State, Nigeria

Professor Joseph Uchenna Uwaleke

Department of Banking & Finance, Nasarawa State University, Keffi Nasarawa State, Nigeria

Barrister Chukwuemeka Eze

Faculty of Law, Nasarawa State University, Keffi Nasarawa State, Nigeria

Mr. Simon Nwanmaghyi Kato

Federal Inland Revenue Service, Chairman’s Office, Abuja, Nigeria

THE REGRESSIVE STRAIN OF VALUE ADDED TAX ON HOUSEHOLD WELFARE IN NIGERIA

Description

THE REGRESSIVE STRAIN OF VALUE ADDED TAX ON HOUSEHOLD WELFARE IN NIGERIA

Authors

ELOM, Joseph Ogwu, NWORIE, Gilbert Ogechukwu, NWEKE-CHARLES Uchenna Esther and IKPOR, Isaac Monday

Abstract

This study examined the effect of Value Added Tax (VAT) regressive strain on household welfare in Nigeria, proxied by Final Consumption Expenditure of Households (FCEH). Ex-post facto research design was adopted in the study. Using annual data from 1994 to 2023 collected from Central Bank of Nigeria statistical bulletin, the analysis employed Least Square estimation under the Cauchy weighting scheme to account for outliers and data irregularities. The results revealed that VAT has a significant and negative effect on household consumption, with a coefficient of -109.34 (p = 0.000), indicating that increases in VAT reduce household welfare. Conversely, the control variables (government recurrent expenditure and inflation) have significant positive impacts on FCEH, suggesting some compensatory role through fiscal spending and price effects. The model explained approximately 73% of the variation in household consumption. In conclusion, increase in VAT directly suppress household consumption, and this reflects the regressive incidence of consumption taxation on welfare as VAT reduces the real disposable income. The adverse effect of VAT can be offset by well-targeted social safety nets such as conditional cash transfers, food vouchers, or energy subsidies for vulnerable populations. Such programs directly compensate households for increased tax-induced costs, thus preserving welfare and stimulating inclusive consumption growth. The study therefore recommended that the adverse effects of VAT can be offset by well-targeted social safety nets such as conditional cash transfers, food vouchers, or energy subsidies for vulnerable populations. Such programs directly compensate households for increased tax-induced costs, thus preserving welfare and stimulating inclusive consumption growth.

Keywords: