VALUE ADDED TAX AND HOUSEHOLD CONSUMPTION EXPENDITURE AMONG SELECTED ECOWAS COUNTRIES
DOI:
https://doi.org/10.61421/IJSSMER.2025.3401Keywords:
Value Added Tax, Household Consumption Expenditure, Consumer Price Index, Per capita incomeAbstract
The study examined the impact of Value Added Tax (VAT) on household consumption expenditure (HCE) in the selected ECOWAS countries (Nigeria, Ghana, and Cote d’Ivoire). This study employed several panel estimation techniques such as the Pooled Mean Group (PMG), Mean Group (MG) and Dynamic Fixed Effect (DFE) to investigate the impact of value added tax on household consumption expenditure in Nigeria, Ghana, and Cote d’Ivoire. The operational variables for this research work were value added tax, house hold consumption expenditure and per capita income as well as the inflation rate for the period 1994 – 2023. Data used for analysis were extracted from World Bank Development Indicators. Results showed that. The long-run effect of VAT on HCE is negative but statistically insignificant, indicating that VAT does not have a significant impact on household consumption expenditure in the long run. The study also showed a significant bidirectional causal relationship between VAT and HCE. This indicates that changes in VAT not only influence household consumption but that household consumption patterns also affect VAT revenues. Consequently, the study recommended that sustainable per capita income growth should be promoted as a top priority, as higher income levels directly lead to increased household consumption. Moreover, VAT policies need to be carefully calibrated to balance the need for government revenue generation with the potential adverse effects on household consumption.
Downloads
References
Abiola, J. & Asiweh (2012). Impact of tax administration on government revenue in a Sciences (IJRESS), Retrieved fromhttp://euroasiapub.org,
Adegbite, T. A. (2018). Analysis of the effect of value added tax on household consumption Expenditure in Nigeria. International Journal of Research in Economics and Social, 3(8):23-44.
Ajibola, J. O. & Olowolaju, P. S. (2017). Taxation and its influence on household consumption:s The Nigerian experience. International Journal of Economics and Business Management, 3(2):12-23.
Andoh, F.K. (2017). “Taxable capacity and efforts of Ghana’s value added tax”. African Review of Economics and Finance, 9(2): 225-284.
Anyanwu, C. (1995). Revenue Allocation and stable Fiscal Federalism in Nigeria, Journal of Economic Management, 2(2):1-28
Bala, A.S. & Sani, I. (2020). Effect of Value Added Tax on Consumption in Nigeria. IOSR Journal of Business and Management (JBM). 22(1):32-40.
El-Ganainy, A & Alm, A. (2012). Value added tax and consumption. (Working Paper No.1203). New Orleans, LA:Tulane Economics Working Paper Series
Fasina, H.T. & Oladejo, M (2016). Impact of Value Added Tax Collection on Household Consumption Expenditure in South Western Nigeria. International Journal of Marketing and Technology. 3(1):10-15. http:// www.ijmra.US
Fasoranti, M. (2009). The Determinants of Consumption Pattern Among Rural Dwellers of Ondo State (Case Study of Akoko North West Local Government) European Scientific Journal March edition vol. 8.
Fowler, B. (2016). Synopsis of Value Added Tax Administration in Nigeria. Retrieved on 23rd June, 2016 from www.firs.gov.ng.
Idris, M & Sebastine, E.N. (2022). Effect of Indirect Taxation on Household Consumption in Nigeria. Asian Journal of Economics and Finance. 5(1):21-37.
Ikwuagwu, E, Ariwa, F.O & Onyele,K.O (2017). Determinants of aggregate consumption expenditure in Nigeria (1981-2015). International Journal of Economics and Financial Management, 2(3):51–63. Available at https://iiardpub.org/get/IJEAGGREGATE.pdf
Kagan, J. (2019) Value added tax – VAT definition. Retrieved on 12th July, 2019 from www.investopedia.com /terms. On 12th July,2019.
Kathure, I.F. (2017). Analysis of the value added tax and household consumption expenditure in Kenya. Master’s Thesis in Economics, Kenyatta University, Nairobi, Kenya. Kenya revenue authority, Kenya (Masters’ project, University of Nairobi, Kenya).
Keho, Y. (2019). Impact of Government Spending on Private Consumption: Evidence from ECOWAS Countries. Modern Economy, 10(1): 600-614.
Nyiputen, R.I. & Abijia, O.P. (2022). Impact of value added tax on Private Consumption Expenditure on Manufactured Goods in Nigeria. International Journal of Multidisciplinary Innovative Research. 3(1):14-24.
Obiakor R.T, kwarbai J & Okwu A.T (2015). Value Added Tax and Consumption Expenditure Behaviour of Households in Nigeria: An Empirical Investigation. International Review of Social Research, 3(6):1-13.
Oghuma, R.I. (2017). Value added tax and economic growth in Nigeria.Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847
Omesi, I., & Nzor, N. P. (20150. Tax reforms in Nigeria: Case for Value Added Tax(VAT)>AfricanResearch Review;9(4):277-287.
Onwuchekwa, J.C & Aruwa S.A.S (2014) Value added tax and economic growth in Nigeria. European Journal of Accounting, Auditing and Finance Research, 2(8):62-69
Onyinyechi, O.C., Ihendinihi, J.U., Ekwe, M.C., & Azubuike, J.U. (2016). The impact of fiscal policy on the economy of Nigeria. European Journal of Accounting, Auditing and Finance Research, 4(7):84-105.
Oseni G. O. (2017). The impact of value added tax on the Nigerian economy: An empirical analysis. International Journal of Economic Development and Governance, 7(7):45-52.
Sani, A. B. & Ahmad, M. B. (2019). Impacts of tax revenue on economic growth in Nigeria: an aggregate and disaggregate analysis. International Journal of Economics and Financial Management, 4(4):62-78.
Schorfheide, F. (2010). Estimation and inference for structural VAR models: A Bayesian approach. Journal of Econometrics, 156(1):69-84.
Tim, M. (1996). Explanning Keynes theory of consumption and assessing it strength and weakness. www.economic-truth.co.uk/content-essays/bsckynesconsumption.pdf.
Ugwa, M. & Embula, A. (2012). Pay as you consume the value added tax. Guage: A quarterly publication of the Federal Inland Revenue Services, April June.
Umar, M. B, Aliero, H. M & Gatawa, N. M. (2018). An Empirical Study of the Determinants of Household Food Consumption Expenditure in Gombe State. International Journal of Humanites & Social Sciences Invention, 7(9):15-30.
World Bank. (2022). World development indicators. [Database]. Retrieved from https://data.worldbank.org/
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Emmanuel Tyav Tabulo
This work is licensed under a Creative Commons Attribution 4.0 International License.
All articles published in International Journal of Social Science, Management and Economics Research are licensed under a Creative Commons Attribution 4.0 International License.
