Effect of Goods and Services Tax on Capital Expenditure in Nigeria

Abstract

This study is an empirical examination of the effect of goods and services tax on capital expenditure in Nigeria for the period 2005 - 2020. The specific objectives are to ascertain the effect of value added tax (VAT) on capital expenditure (CAPEX) and secondly to determine the effect of Customs and Excise Duties on capital expenditure (CAPEX) in Nigeria. The study is theoretically linked to Benefit Received Theory. The study was an ex-post-facto research which made use of secondary data obtained from the Central Bank Statistical Bulletin. The study employed descriptive statistics and graphical representation using E-Views 10 software to check for the trends, linearity or otherwise of the data. Regression model was applied in determining the extent of the effect exerted on capital expenditure (CAPEX) by value added tax (VAT) and custom and excise duties (CED). The result of the analysis revealed that the duo independent variables which are value added tax and custom duties had a significant and positive effect on capital expenditure. The implication of this finding is that the capital expenditure has been influenced significantly by value added tax and customs duties. The study concluded that a long-run relationship existed among VAT, CED and capital expenditure. It is therefore recommended that revenues generated from VAT and CED should be invested and allocated adequately in major domestic sectors of the economy of Nigeria so as to expand the revenue sources of the nation.