Factors Influencing Value Added Tax (VAT) on Revenue Profile in Oyo State, Nigeria

Abstract

VAT has become a significant component of Nigeria’s non-oil revenue and contributes to financing critical public services. Understanding the factors influencing VAT and their impact on revenue generation remained a subject of concern in the revenue collection and enhancing state capacity for development. Therefore, this study examined the factors influencing Value Added Tax (VAT) on revenue profile in Oyo state, Nigeria. Ex-post factor research design was employed for the study. Secondary data covering a period of 15 years was collected through the use of annual reports extracted from internal records of Oyo State, Nigeria. The study population consists of the entire eight (8) revenue collecting agencies of Oyo state government. The eight (8) revenue agencies constitute the sample. Analytical techniques involved both descriptive and inferential statistics. Principal Component Analysis (PCA) was used to examine the factors influencing tax Value Added Tax (VAT) on revenue profile in Oyo state, Nigeria. Findings from the result of PCA on the actors influencing tax Value Added Tax (VAT) on revenue profile in Oyo state, Nigeria showed that VAT Collection Efficiency (VATCE) and Compliance Rate (COR) has high positive loadings (0.677 and 0.662 respectively), indicating they strongly influence this component. Based on the summary of findings, the study concluded that there is positive significant variation in the determinant factors of Value Added Tax (VAT) in Oyo State. It is therefore recommended that the government and relevant tax authorities should strengthen mechanisms for identifying key determinants of VAT performance. This includes improving the VAT collection infrastructure, enhancing taxpayer education, addressing informal sector leakages, and leveraging digital technologies for transparency.