Influence of value-added tax and local taxes on state government infrastructural development

This study examined the influence of Value Added Tax (VAT) and state levies (STV) on infrastructural development (IFD) in Bayelsa State, Nigeria, from 2011 to 2023. Utilizing an ex post facto research design and data sourced from secondary sources. Both descriptive and inferential analysis was conducted for the study. The Augmented Dickey-Fuller (ADF) test confirmed the stationarity of the differenced variables, while the Vector Autoregression (VAR) model assessed the dynamic relationships among IFD, VAT, and STV. Least Squares regression analysis revealed that VAT (p = 0.0476, coefficient = 3.837) and state levies (p = 0.0468, coefficient = 0.025) both had significant positive effects on infrastructural development. However, while VAT contributed strongly, state levies exhibited only a minimal influence, as evidenced by the moderate R-squared (0.394) and significant F-statistic (2.920, p = 0.0054). The findings suggest that VAT revenues are a vital resource for infrastructure development in Bayelsa State, with a unit increase in VAT potentially resulting in an increase in infrastructure spending. The impact of state levies, although statistically significant, was less substantial, highlighting the need for reform in local tax policies. The study recommends enhancing VAT collection systems through digitalization and compliance measures, alongside restructuring state levies to broaden the tax base and improve revenue allocation to developmental projects. By optimizing tax revenues, the Bayelsa State Government can accelerate infrastructure growth, thereby boosting socio-economic development and improving living standards in the state.