THE EFFECT OF CONSUMPTION TAX ON HOUSEHOLDS STANDARD OF LIVING IN NIGERIA (A DISAGGREGATED ANALYSIS)
Abstract
The study was designed to examine the effect of consumption tax on standard of living of households in Nigeria. The study utilized household standard of living proxy or measured by Household Consumption Expenditure (HCE) and consumption tax proxy by Value Added Tax (VAT), excise tax (EXT), and personal income tax (INT). The study was anchored on the Keynesian theory of consumption and the benefit-received theory of taxation. The technique of estimation employed in the study was Error Correction Mechanism to examine the effect of consumption tax on household standard of living in Nigeria. The result shows that value added tax (VAT), personal income tax (INT) and excise tax (EXT) had negative effects on household standard of living in Nigeria. This implies that as these variables increase, the standard of living of households fall. Based on this, recommendation such as tax administrators should ensure that revenue accruing from consumption taxes such as value added tax, personal income tax and excise tax are streamlined to increase household consumption expenditure in order to induce household consumption behaviour in different part of the country among others were made.
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