SUMMARY OF THE DISSERTATION

NAME: TEMATIO NGUEKEU SANDRINE

MAT: 12T0023
OPT: ACCOUNTANCY
JULY: 2017

TITLE: THE EFFECT OF INFLATION ON VALUE ADDED TAX REVENUE

COLLECTED IN CAMEROON

PLAN:
 INTRODUCTION
 METHODOLOGY
 RESULTS OF STUDY
 CONCLUSION AND RECOMMENDATIONS

I-INTRODUCTION
Back ground of the study and problem statement
Financial capacity of any government depends among other things, on its Tax resources and the
way these resources are generated.
Today, the most common Tax used in the world is Value Added Tax.
Cameroon introduced VAT in 1999 and ever since this Tax represents an essential source of his
fiscal budget revenue. In other words, VAT represent 2.7% of GDP in 2010.
More over the introduction and full recognition of VAT efficacity in revenue generation in many
African countries has become a controversial issue.
Several authors said that the VAT is an inefficient Tax because of inflation that reduces the
consumption of the economic agents.
Otherwise, Cameroon VAT efficiency ratio has never attained the world wide average standard
which is 34%.
The problem is therefore to know if the inflation has any affection on VAT revenue of
Cameroon.
In other to establish and analyze the link between inflation and VAT revenue in Cameroon we
answered to the following questions.
RESEARCH QUESTIONS
 What empirical relationship is emerging from the existing data on VAT revenue and
inflation rates in Cameroon?
 How much, on an average, a one percent inflation increase in the rate can be expected to
raise or reduce VAT revenue?

Our main objective is therefore to:

RESEARCH OBJECTIVE
 To examine the effect of inflation on VAT revenue collected in Cameroon.
 To establish the function of VAT revenue collected using the inflation parameters.

To better understand and attain our objectives, the following hypothesis has been stated:

RESEARCH HYPOTHESIS
H0: Inflation has no significant effect on VAT revenue in Cameroon.
H1: Inflation has a significant effect on VAT revenue in Cameroon.

To verify our hypothesis we used the following methodologies

METHODOLOGY OF STUDY
SCOPE OF STUDY AND SOURCE OF DATA
For this work, we use the quantitative data. This data are the annual series of VAT revenue,
inflation, and GGDP.
As to the source, the data were obtained from NIS, and TA, data base and website from the fiscal
year 2001 to 2016. The data was obtained through internet and interview.

METHOD AND TECHNICS OF STUDY

As method used to treat our data, we employ multiple regression analysis, using the Ordinary
Least Square regression technologies.
Since the models are specified time series, to avoid spurious regression we did the pre-test of
variables using the over rall FISHER significant Test. To check the stationarity of variables.
After regression of variables, we proceed to the to the following validation test:
  The Shapiro-Wilk to check the normality of variables
 The over roll FISHER significant test to verify if our result is useful for policy
recommendations(significant of the variance) or To determine the risk of rejecting the
null hypothesis when it is true.

PRESENTATION AND DISCUSSION OF RESULTS

 VAT indicators
 Trend of variable
 Regression analysis

PRESENTATION OF RESULTS

VAT (in billions) line chart

600

500

400
VAT (in billions)

300

200

100

0
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Year

VAT (in billions)

Figure 4. 4: VAT Revenue collected evolution line chart

The figure reveals that the trend is deterministic
It is noted that the VAT collected has subtainable increase from 2001 to 2008 when the amount
was 312.2 billions CFA franc.

INFLATION (%) line chart

7
6
5
INFLATION (%)

4
3
2
1
0
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Year

Economic growth (%) (GGDP)

Figu
re 4. 2:Trend of GGDP

The graph shows that the trend of GGDP is deterministics

It is observe that the GGDP rate is unstable and fluctuates intensely from 2001to 2008.
 INFLATION (%) line chart
7
6
5
INFLATION (%)

4
3
2
1
0
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Year

INFLATION (%)
Figure 4. 2:Trend of Inflation line chart

It is noted that the trend of inflation is stochastic because it knows very large fluctuation during
the period. we observed continuous decrease from 2001-2005 with respectively rate 4.4% and
2%.

VAT Efficiency

20.000

18.000

16.000

14.000

12.000

10.000
VAT Efficiency
8.000

6.000

4.000

2.000

0.000
2000 2002 2004 2006 2008 2010 2012 2014 2016

Source: computerized by author using EVIEW 5.0

We can observe that the standard good level of VAT efficiency which is 34% has never been
reach during the period 2001 to 2016.

REGRESSION RESULTS
Regression results are:

 The regression coefficient of inflation is 1.1800 indicating that inflation has a positive
effect on VAT revenue collected in Cameroon.

Hence, the amount of goods and services produced increase. The amount of revenue collected
through VAT also increase.

 Coefficient of GGDP is -20.3293 has a negative effect on VAT revenue collected.

This implies as price increase, the consumption of goods decrease and the revenue collected by
the state from VAT decrease.

 The coefficient of Age of VAT is : +23.1389

This is showing that there is a positive relationship between VAT and time

In other words as time passes, the number of vatable persons increase and the old vatable person
compliance with the VAT REGULATION

The 0.0001 P-value show that this coefficient is statistically significant at 1% level of significant.

PRESENTATION OF VAT function

VATi=-46157+23.13893*AG+1.98026*INF-0.06409*GGDP
CONCLUSION AND RECOMMENDATIONS

Given the fact that the adjusted R-square is 0.9462

We can conclude that 94.62% of the variation in VAT revenue is explained by inflation rate, age
of rate and GGDP rate.

Referring to the P-value of inflation coefficient

We decide to reject the null hypothesis and accept the alternative hypothesis which state that
inflation has a significant effect on VAT revenue collected in Cameroon.

The model was useful and and therefore we can say that inflation rate is useful for predicting
VAT revenue in Cameroon.

RECOMMENDATIONS

In other to avoid high inflation, and also optimize the VAT revenue we recommend to the
Government;

 To increase the price control over all the national market to limit the growth up of price
level.
 To encourage the local production and consumption of goods through allocation of
subvention.