THE IMPACT OF VALUE-ADDED TAX ON REVENUE PERFORMANCE IN SIERRA LEONE: CASE STUDY OF THE NATIONAL REVENUE AUTHORITY IN SIERRA LEONE
Abstract
Value Added Tax (VAT) is a significant source of revenue for many countries around the world and Sierra Leone is not an exception. In Sierra Leone, GST is synonymous with VAT. It is a consumption-based tax levied on the value added at each stage of production or distribution of goods and services. VAT is designed to be collected at multiple stages of the supply chain, with businesses collecting the tax from their customers and then remitting it to the government. The revenue generated from VAT can play a crucial role in funding various government initiatives, including infrastructure development, healthcare, education, and other essential services. However, it is important to note that the effectiveness of VAT in increasing revenue collection in developing countries can depend on various factors, including the design of the VAT system, administrative capacity, compliance culture, and the overall economic context. Implementing VAT effectively may require addressing challenges related to taxpayer education, administrative capacity building, and ensuring that the tax burden does not disproportionately affect low-income individuals. This research aimed to understand the relationship between VAT and the increase in revenue collection. Except for the periods during the Ebola Virus Disease (EVD or Ebola) and Coronavirus Disease 2019 (COVID-19) pandemic, the research findings revealed a positive relationship between VAT and an increase in revenue collection in Sierra Leone. Furthermore, the research revealed that there is an inverse relationship between the outbreak of a pandemic and revenue collection. VAT is likely to remain a fundamental part of tax systems in most countries due to its revenue-raising potential; however, it needs to be adapted and improved to meet society's changing needs and demands.
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DOI: http://dx.doi.org/10.46827/ejsss.v10i1.1733
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