Studies have confirmed that an empirical relationship exist between the Value Added Tax and the level of aggregate consumption but the net impact of consumption taxes on growth and its sources is theoretically ambiguous, and depends on the interaction between utility parameters, the interest rate, and the tax structure. The study attempted to evaluate the extent to which VAT collection influences household cconsumptions expenditure in South Western Nigeria by adopting panel method covering a period of ten (10) years. Random sampling incorporated with Slovin Formula was used to select three hundred and fifty six (356) respondent tax officers, vatable persons and three hundred and fifty three (353) households of VAT rated goods on whom questionnaires were administered. Secondary data were sourced from the approved budgets of the selected states from 2002 to 2011. Panel regression method augmented with co-integration approach, and vector auto regression was used to analyse collected data. VAT and Consumption variables were co-integrated in the long run for the states. The study revealed that VAT has the potential of positively enhancing revenue generation of the sampled states. The result of the test clearly indicates that increase in VAT necessitates an increase in the consumption expenditure.
VAT, Consumption VAT, Income VAT, South western Nigeria, Revenue profile
