Tax revenue allocation and its effects on consumpti on (VAT): A study of Calabar Municipal Council, Cross River State

This research was carried out to investigate the effects of ‘Tax Revenue Allocation on Consumption’ as the economy grows and to determine the dynamics (stability) of the various tax revenue allocations to the Calabar Municipal Council with predetermined time covering a period of 23 years (1980 to 2002), and to partly observe inter-temporal changes, if any, in the behavior of revenue flexibility coefficients. Secondary data of tax revenue records were used for the study. The data collected was analyzed using the ordinary least square method to evaluate the impact of tax revenues allocation to the local government and its effect on consumption tax (VAT ) also known as sales tax levied on the value added at each stage of production or distribution of goods and services and paid by the ultimate consumer. The emerging results, established that there was not sufficient tax revenue generated within the period of study through consumption (VAT), hence the inflexibility of Federal Government Tax Revenue Allocation, State Government Tax Revenue Allocation and Internally Generated Tax Revenue with respect to consumption. The implication of this result was that consumers could not easily shift their consumption due to the introduction of value-added tax by the federal, state and local governments. The study ended by making some recommendations thus: Local Governments should mobilize more revenue within their domain and in order to enhance the economic growth at the rural level, the federal and state government should discourage any fiscal policy that could cause a decline in revenue allocation to local government.