The study was aimed to examine the impact of Value Added Tax Revenue (VAT) Gaps on VAT Revenue Generation in Nigeria. Initially the study intended to use bottom-top approach, but the idea was later on discarded due to the problems of data availability and reliability, therefore time series data from 2010 to 2018 was used. Descriptive statistics were employed to compute VAT Policy Gap, VAT Compliance Gap and C-Efficiency Ratio for all the relevant years. Auto Regressive Distributed Lag (ARDL) model and Vector error correction model (VECM) were used to examine the impact of the independent variables on VAT Revenue. The short run empirical result revealed a positive relationship between previous Value Added Tax Revenue, Aggregate Consumption and the dependent variable (Value Added Tax Revenue). Similarly VAT Policy Gap and VAT Compliance Gap have a negative relationship with the dependent variable. However Cointegration Bounds Test revealed a long run relationship among the variables, and a long run model was run. The long run empirical result found a positive relationship between the dependent variable and Aggregate Consumption, while VAT Policy Gap and VAT Compliance Gap have a negative relationship with the dependent variable, but the impact of Aggregate Consumption on VAT Revenue both in the short and long run were statistically insignificant. Error Correction Term obtained confirmed that the model can correct it previous disequilibrium at the rate of 29.04 percent per quarter. Finally the study recommends that the Revenue Authority in charge of VAT in Nigeria, should liaise with the States and Local Revenue Authorities, so as to put additional efforts to increase VAT compliance level to at least 70%, from the 28% in 2018..Even though the study realised that the country VAT rate is the lowest in the West African Sub region, still the relevant stake holders should adequately take compliance factors into consideration, before making any increase in the VAT rate; because increasing VAT rate in an economic environment associated with low tax compliance rate, may lead to an increase in the team of VAT evaders and consequently falls in the tax revenue.
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