INCREASE IN VALUE ADDED TAX ON HOUSEHOLD WELFARE IN NIGERIA: A COMPUTABLE GENERAL EQUILIBRIUM APPROACH
Joshua Kpelai Nomkuha, Philip Terhemen Abachi and Aondoawase Asooso
Volume 1 Issue 1
Abstract
The fiscal action adopted by the Nigerian government to cut its deficit and increase domestic earnings through VAT reform is a matter of concern. This study analysed the effect of an increase in VAT on household welfare in Nigeria using Computable General Equilibrium Model for the 2018 base year which was calibrated on the reformatted Social Accounting Matrix of Nigeria. Results revealed that increase in VAT will constitute household welfare loss in Nigeria as indicated by the negative value of Equivalent Variation of -3131.30 which will lead to a fall in household consumption and income by 7.14% and 3.54 respectively due to the high price of products. The study concluded that the VAT policy will undesirably affect household welfare and therefore, the study recommends that the government should consider the reversal of the VAT reform and expand the base. Keywords: Value Added Tax, Welfare, Household, General Equilibrium
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