THE IMPACT OF VALUE ADDED TAX ON ECONOMIC SUSTAINABILITY IN NIGERIA

ABSTRACT This study investigates the impact of Value Added Tax (VAT) on economic sustainability in Nigeria from 1993 to 2023. It examines the influence of key fiscal and macroeconomic variables, including VAT, Government Expenditure, Foreign Direct Investment, Inflation Rate, and Exchange Rate, on the country’s economic sustainability using the Autoregressive Distributed Lag (ARDL) model. The result finding shows that Government Expenditure and Inflation Rate have positive relationships with economic sustainability (13015pv 0.6221) and (1.77E+08 pv 0.528, while VAT, Foreign Direct Investment, and Exchange Rate are negatively associated. However, none of these variables were statistically significant at the 5 percent level, suggesting limited effectiveness in explaining variations in economic outcomes. The findings imply that the current VAT structure may not contribute meaningfully to long-term development under existing economic conditions. The study concludes that for VAT to support sustainability, it must be part of a transparent and well-aligned fiscal strategy. Recommendations put forward include improving VAT administration, expanding its coverage, integrating tax policy reforms with national development plans, and prioritising government spending in key growth-stimulating sectors such as education, health, and renewable energy.