This study investigates the effect of indirect tax on economic development of West African Monetary Zone (WAMZ) for the period of 1986 to 2022. Country-specific annual time-series data employed in this study were sourced from the official websites of the World Bank, Federal Inland Revenue Services of Nigeria and International Monetary Fund through the International Center for Tax and Development, guided by the tax reforms and structural adjustments within the WAMZ. A combination of the fixed and random effect panel approaches discriminated by the Haussmann test and the Pedroni panel cointegration test were adopted as the main analytical techniques.The findings of the study revealed that indirect taxes (proxied by Value Added Tax) negatively impact economic development (Human Development Index). This relationship was also found to be statistically significant. Furthermore, the study’s findings indicatedthat import duties affected development positively and significantly, while excise duties and export duties were detrimental to development. Finally, the results of the Pedroni cointegration test revealed a long-run cointegrating relationship among the variables. Based on these findings, the study recommended that governments should make value-added tax pro-poor, increase import duties to discourage import and encourage domestic production and consumption by reducing excise duties. Export duties should also be reviewed to boost exports across the zone.

Keywords: Indirect taxes, Economic Development, Human Development Index, Panel data, ARDL