Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Value Added Tax (VAT) and Minimum Wage in Nigeria: Implications on Government Revenue and the Living Standard of the Populace


Affiliations
1 Lecturer, Ekiti State University, Ado-Ekiti, Nigeria
2 Department of Accounting, Faculty of Management Sciences, Ekiti State University, Ado-Ekiti, Nigeria
3 Student, Department of Accounting, Ekiti State University, Ado-Ekiti, Nigeria
     

   Subscribe/Renew Journal


The recent increase in the Value Added Tax (VAT) in Nigeria seems to reduce the patronage of disposable items through an increase in the general price level of goods and services. To ascertain this, this paper examined VAT and minimum wage in Nigeria: implications on government revenue and the living standard of the Nigerian workers. It was a qualitative study; hence, analysis was based on the available literature. Based on the findings, it was concluded that increase in VAT rate will undoubtedly reduce consumer patronage of disposable items of Nigerian worker and therefore will affect their purchasing power. Therefore, the intended benefits of the new minimum wage are defeated. Thus, it recommended that small businesses with a threshold of about N10m should be exempted from VAT. The government, through the appropriate agencies, should ensure a thorough supervision of how government revenues are utilized and how expenditures are controlled. This might avail the government-needed revenue to defray its expenditures. Also, the business environment should be made friendly to investors. This might engender the establishment of more companies through which tax revenue will be increased.

Keywords

Value Added Tax, Minimum Wage, Government Revenue, Standard of Living.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Abdul-Rahman, O. A., Joshua, A. R. & Ayorinde, A. O. (2013). Assessment of value added tax and its effects on revenue generation in Nigeria. International Journal of Business and Social Sciences, 4(1), 220-225.

  • Abiola, J., & Asiweh, M. (2012). Impact of tax administration on government revenue in a developing economy - A case study of Nigeria. International Journal of Business and Social Science, 3(8), 99-113.

  • Adekunle D, B. (2019). The Nigerian and new minimum wage. A Paper Presented on Labour Day, May 1, 2019.

  • Adelaja, B. (2020, February 9). Prices Rise as Traders Lament 7.5% Value Added Tax. Nigerian Tribune p 5. https://www.vanguardngr.com/2020/02/prices-rise-as-traders-lament-7-5-vat/

  • Adex, S. M. (2015). When is a good time to raise the minimum wage? Contemporary Economic Policy, 35(1), 29-52.

  • Agbo, E. I., & Nwadialor, E. O. (2020). The genesis and development of value added tax administration: Case study of Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 10(2), 15-30.

  • Anyaduba, J. O., & Aronmwan, E. J. (2015). Taxes and infrastructural development in Nigeria. Nigerian Journal of Banking, Finance and Entrepreneurship Management, 1(1), 14-28.

  • Atseye, F. A., Takon, S. M., & Ogar, O. A. (2014). Impact of national minimum wage on low income workers in Calabar municipality, Nigeria. Developing Country Studies, 4(26), 28-36.

  • Bassey, U. (September 2019). Why CBN Approved New Bank Charges, Proposed VAT Increase–Emefiele. Premium Time Newspaper, March 22, 2020. P 4.

  • Bleaney, M. (2010). Budget institutions and fiscal performance in Africa. CREDIT Research Paper, No. 10/02.

  • Chemli, L., & Smida, M. (2013). Interaction between poverty, growth and inequality during crisis: A panel data study. International Journal of Economics and Finance, 5(5).

  • Eastaugh, R., & Olakiigbe, O. (2019, December 17). Understanding the Impact of the Proposed Increase VAT rate. Retrieved from https://www.pwc.com/ng/en/assets/pdf/understanding-impact-vat

  • Eberinga, O. T. & Yadirichukwu, E. (2012). Analysis of tax formation and impact on economic growth in Nigeria. International Journal of Accounting and Financial Reporting, 2(2), 367-385.

  • Ebrill, L., Keen, M., Bodin, J. P., & Summers, V. (2002). The allure of value added tax. A Quarterly Magazine of the IMF, 39(2).

  • Emmanuel, O. G. (2016). Nigerian value added tax system and the concept of basic food items. SSRN Electronic Journal, 1-20.

  • Erero, J. L. (2016). National minimum wage in South Africa: A computable general equilibrium model analysis. Economic Research Southern Africa (ERSA) Working Paper 650.

  • Eyisi, C., & Nwaorgu. (2015). The effects of taxation on growth of Nigeria economy. International Journal of Economics, Commerce and Management United Kingdom, 21(1), 141-168.

  • Federal Inland Revenue Service (FIRS). (1999). Information Circular. No. 9901.

  • Femi, A. (2020, January 30). EKEDC Adjusts VAT on Electricity Tariffs, Meters, Copyright PUNCH.

  • Film House Cinemas. (2020). Change in Ticket Price of Cinemas. Retrieved from https://filmhouseng.com/ticket-prices

  • Gyang, P. Y. (2012). An insight into Nigerian taxation system (2nd ed.). Jos: Jos Professional Tutors Consult.

  • International Labour Organization’s. (ILO) Report VII (1) (1968) on Minimum Wage Fixing Machinery and Related Problems with Special Reference to developing Countries, Geneva: 8.

  • Inimino, E. E., Otubu, O. P. & Akpan, J. E. (2018). Value added tax and economic growth in Nigeria. International Journal of Research and Innovation in Social Science (IJRISS), 2(10), 211-219.

  • John, C. O., & Suleiman, A. S. A. (2014). Value added tax and economic growth in Nigeria. European Journal of Accounting Auditing and Finance Research, 2(8), 62-69.

  • Jones, E., Nwawuru, C. E., & Nmesirionye, J. A. (2017). Effect of value added tax on economic growth in Nigeria: Empirical investigation. International Journal of Economic and Business Review, 6(2), 73-81.

  • Kaisa, A., Mika, H., & Jukka, P. (2019). The effects of the value-added tax on revenue and inequality. The Journal of Development Studies, 55(4), 490-508.

  • Kimenyei, F. K. (2018). The Nexus between tax revenue and government expenditure in Kenya. International Journal of Economics and Management Sciences, 1-6.

  • Madugba, J. U., & Joseph, U. B. (2016). Value added tax and economic development in Nigeria. International Journal of Development and Economic Sustainability, 4(3), 1-10.

  • Mwangi, T., Simiyu, F., & Onderi A. (2015). The effects of minimum wages on the labour market and income distribution in Kenya - A CGE analysis. Journal of African Development, 14(1), 47-61.

  • Obaretin, O., & Uwaifo F. N. (2020). Value added tax and economic development in Nigeria. International Accounting and Taxation Research, 2(3), 11-37.

  • Obiakor, K., & Okwu. (2015). Value added tax and consumption expenditure behaviour of households in Nigeria. International Review of Social Sciences, 3(6), 16-29.

  • Ogwuru, H. O., & Agbaraevah, R. C. (2017). Impact of value added tax, company income tax, custom and excise duties on economic growth and development in Nigeria. Journal of Finance, Banking and Investment, 4(2), 88-96.

  • Ojo, S. (2009). Fundamental principles of Nigeria taxation (2nd ed.). Lagos, Sagribra Tax Publication.

  • Okoye, E. I., & Ezugwu, C. I. (2012). Explaining the imperatives of value added tax (VAT) in national development. The Nigerian Accounting Horizon, 5(1), 12-27.

  • Oyedokun, G. E. (2016). Nigerian value added tax system and the concept of basic food items. SSRN Electronic Journal. Retrieved from https://www.researchgate.net/publication/317995386_Nigerian_Value_Added_Tax_System_and_the_Concept_of_Basic_Food Philip,

  • T. A., & Paul, T. I. (2017). Macroeconomic and household welfare impact of increase in minimum wage in Nigeria: A computable general equilibrium model. American Journal of Economics, 7(5), 249-258.

  • Royal, O. D. (2020, January 29). EKEDC to begin new VAT rate on meters from Feb. 1. Retrieved from https://www.vanguardngr.com/2020/01/ekedc-to-begin-new-vat-rate-on-meters-from-feb-1/

  • Samuel, A., Atta, M. F. E. E., & Xicang, Z. (2012). Impact of VAT rate changes on VAT revenue in Ghana. International Journal of Social Science Tomorrow, 1(10), 1-10.

  • Sanni, A. (2012). Current law and practice of value added tax in Nigeria. British Journal of Arts and Social Sciences, 5(2), 186-201.

  • Shittu, R. (2020, January 14). Was the Nigerian government right to increase VAT? Stears Business. Retrieved from https://www.stearsng.com/article/was -the-government-right-to-increase-vat

  • Soyode, L., & Kajola, S. O. (2006). Taxation principles and practice in Nigeria. Ibadan: Silicon Publishing Company.

  • Timilehin J. O. (2019). Value added tax (VAT) increase from 5% to 7.5% examined. British Journal of Arts and Social Sciences, 5(2), 19-26.

  • Unegbu, A. O., & Irefin, D. (2011). Impact of VAT on economic development of emerging nations. Journal of Economics and International Finance, 3(8), 492-503.

  • Value Added Tax (Amendment) Act (2007). Retrieved from www.tellforceblog.com/2020/02/7-5-vat-here-is-new-mtn-call-and-smstariff.html

  • Zeofy, M. (2020, January 17). Adverse effects of VAT increase in Nigeria. Retrieved from https://zerofy.ng/ adverse-effects-of-vat-increase-in-Nigeria/


Abstract Views: 402

PDF Views: 1




  • Value Added Tax (VAT) and Minimum Wage in Nigeria: Implications on Government Revenue and the Living Standard of the Populace

Abstract Views: 402  |  PDF Views: 1

Authors

A. A. Ogunmakin
Lecturer, Ekiti State University, Ado-Ekiti, Nigeria
I. A. Adebayo
Department of Accounting, Faculty of Management Sciences, Ekiti State University, Ado-Ekiti, Nigeria
D. O. Ojo
Student, Department of Accounting, Ekiti State University, Ado-Ekiti, Nigeria

Abstract


The recent increase in the Value Added Tax (VAT) in Nigeria seems to reduce the patronage of disposable items through an increase in the general price level of goods and services. To ascertain this, this paper examined VAT and minimum wage in Nigeria: implications on government revenue and the living standard of the Nigerian workers. It was a qualitative study; hence, analysis was based on the available literature. Based on the findings, it was concluded that increase in VAT rate will undoubtedly reduce consumer patronage of disposable items of Nigerian worker and therefore will affect their purchasing power. Therefore, the intended benefits of the new minimum wage are defeated. Thus, it recommended that small businesses with a threshold of about N10m should be exempted from VAT. The government, through the appropriate agencies, should ensure a thorough supervision of how government revenues are utilized and how expenditures are controlled. This might avail the government-needed revenue to defray its expenditures. Also, the business environment should be made friendly to investors. This might engender the establishment of more companies through which tax revenue will be increased.

Keywords


Value Added Tax, Minimum Wage, Government Revenue, Standard of Living.

References