THE EFFECT OF VALUE ADDED TAX (VAT) AS A SOURCE OF REVENUE TO THE FEDERAL GOVERNMENT OF NIGERIA (2005-2009)
ABSTRACT
The value added tax(VAT) came into force decree of 1993,which did not only introduce VAT also the sales tax decree of 1986.
This project is to highlight more on effect of value added tax (VAT) As a source of revenue for the federal government of Nigerian. In the course of achieving this purpose, initial problems encountered in the introduction of vat and the mode of collection and administration on the federal government.
Chapter one started with the general introduction and overview of the topic. It also highlighted the problems which the government sensed that VAT might not be accepted adequately, and of what impact or effect VAT return to the federal government of Nigeria.
Chapter two reviews related literature covering VAT administration, registration, office, theories and models, current literature based on each of the relevant variable of the model and summary of the chapter.
Chapter three covered the finding, discussion of the theoretical frame work and methodology introduction, ration ate, for choice of variable, ditch selection and analysis etc.
Chapter four covers the s presentation and analysis of data, classification and calculation and the interpretation of the results.
Finally, a further research suggestion that needs to be conducted which are the impact of anti-corruption act on the effective implementation of VAT decree and the co-operative analysis of VAT and other forms of tax were also stated. Then the summary of every thing that has to do with effect of the value added tax as a source of revenue to the federal government.
TABLE OF CONTENT
Title page
Approval page
Dedication
Acknowledgement
Abstract
Table of content
CHAPTER ONE
- Introduction
- Background of the study
- Statement of the problem
- Objective of the study
- Research questions
- Significance of the study
- Scope of the study
- Limitation of the study
- Definition of terms
CHAPTER TWO
- Literature Review
- Value added tax in Nigeria
- Theories and models relevant to the research hypothesis
- Current literature based on each of the variable of the model theory
- Summary of the chapter
CHAPTER THREE
- Research methodology
- Population and sample size
- Nature and sources of data
- Data collection method
- Data analysis techniques
CHAPTER FOUR
- Data Presentation and analysis
- Presentation of data
CHAPTER FIVE
- Summary, Conclusion and Recommendations
- Summary
- Conclusion
- Recommendations
Reference
Appendix
CHAPTER ONE
INTRODUCTION
- BACKGROUND OF THE STUDY
Taxation is compulsory payment made by adult within a limited age to provide avenue of income for the government of a country.
As it implies, it can also be define as instrument for tools of any country to influence the level of economic activity of any country.further, taxation in other words is a liability imposed upon the tax payers who may be individuals, group or other legal entities. It is an amount paid on account of fact that the tax payers has as income of minimum amount from certain tangible property, so that he makes profit on economic activities which have been chosen for taxation.
A tax is an imposition that is generally created and regulated by law. In Nigeria such law includes the income tax management act of 1961, the capital gain tax act of 1976, the abrogated and the newly introduced VAT (value added tax) decree No 102 of ).
INTRODUCTION OF VAT
VAT (Value added tax) is a general consumption tax assessed on the value added to goods and services as they pass through the supply chain.
Today, about 135 countries utilize and implement VAT and it is either the largest or second of the largest source of tax revenue.
VAT has purpose, a committee that was set up to carryout resistibility study on its implementation in januray,1993 the federal government agreed to introduced VAT. It was intensified to fist September 1993.
Apart from the general need for money to finance the administration of tax, security and social service for the citizens, taxes are impose for restraining or certainly consumption n and the transferring rescues from consumption to invest.
The revenue generated from VAT is shared among the three tiers of government, during the implementation of this 1994, the state government received 80% of the proceeds while 20% went to the federal government for covering its administration cost. In the subsequent years the distribution formula continues to change until now.
1.1 STATEMENT OF PROBLEM
as a result of the unsuccessful nature of precious economic recovering policies such as the structured adjustment program (SAP) so many persons envisage VAT as another. Such government policies that would bring about waste of time and energy as it is bound to be failure in disguise, in the light of this prejudiced instance so many people have raised service of obligations against the introduction of VAT.
One of the problems that faces VAT is that some people see it as money machines for the government, this means that government is bound to device much money from this system of taxation, that is revenue increased, them when this happens, government willing to provide the necessary social amenities for its citizens.
Secondly, VAT will bring about an increase in goods and services as manufacturers would tend to transfer the burden of VAT to the cost of consumers who bears the cost of taxation on goods last resort of channel of distribution.
Thirdly, the public either directly or indirectly resist VAT or argue that VAT will lead to inflationary tendencies.
Finally, according to the Italian minister of economy and finance Mr. Domenico; smiscako, he has underlined thus ‘’to analysis of the pros and cons of VAT ‘’a tax that is bow largely applied at global level and a considerable sources of tax yield .
Although some problems contexts in which VAT imposed, there are certain issue that are common to all countries for example he put it as the coverage of the taxable base, which is necessary to ensure effectiveness and neutrality of the tax, clashes with problems in its application to the public sector ,financial sector as well as specific sector such as agriculture, the risks in applying differential in both administrative and compliance cost which would be borne, respectability by administrations and trades. He added the increasing international VAT fraud and evasion calls for prompt and effective measures in part of each country and above all for closer co-operation that at the national and internationals levels, which is currently based on instruments and systems for exchanging information that one still inappropriate and insufficient.
- OBJECTIVE OF THE STUDY
Its objectives are to ascertain the importance of its introduction unlike other system of taxation.
- VAT is a better source of government revenue now, this means that revenue reducing parts of tax reform lower tax rates, and repeal of the attentive minimum tax, also a shift from depreciations express must be financed by revenue increase.
- VAT certainly has helped finance the explosion of social welfare spending in Nigeria economy.
- VAT is alluring, it means that is a relatively non-destructive way to raise tax revenue like a flat tax, it is a single way that does not penalize savings and investment. Its understandable that officials would be tempted to enact a VAT that will bring about money to finance much needed reforms to the income tax.
- VAT facilitates higher tax rates on income service. A higher VAT must be accompanied by higher income tax burdens to ensure the tax burden was not being shifted to lower income tax payers.
1.4 RESEARCH QUESTIONS
This study is to be effectively tested the stated problems solved the following research questions are formulated. They are as follows
- Is VAT easier to administer than others forms of taxes?
- Does VAT yield more revenue than sales tax of tax?
- Does an agent represent the government very well in the process of VAT collection?
- ASSUMPTIONS OF THE STUDY
In the assumption of belief or feeling something or somebody is true will happen in the study that all the formation about is true.
- SCOPE OF THE STUDY
The study effectively covers Value added tax as it is being applied with respect to the Nigeria economics focuses. Thus, VAT is being implemented, managed and also the problems facing it as a system of taxation.
Further, the study also aims at unveiling those goods and services that must be subjected to VAT, as well as persons, organizations etc that are excepted to register for VAT, their rights and obligations.
It also has a single low rate with 5% with a zero rate for exports. It is borne by the final consumer of goods and service because it is included in the price paid. it also gives guidelines for VAT collection and examines the collection agencies.
The study also reveals tax performance directly and how it affects the country ability to meet the minimum development goals as well as public perception of the effectivness of government. It is therefore a key policy area for all concerned with revenue mobilization.
Finally the penalize for VAT defaulters and procecures to be followed for VAT refund in covered in the study.
- LIMITATION OF THE STUDY
There is an uncompromised attitude of some agencies, which should have been a vital information on the subject matter, which is VAT.
The study of this course is limited by certain factors among which are as follows;
- The time constraint
- Lack of adequate data and information with respect to value added tax as it is being applied in Nigeria.
- lack of finance
- Lack of co-operation by some respondent.
- DEFINATION OF TERMS
*VAT: this means value added tax that is imposed and changed under section of decree 102 of 1993
* VATABLE PERSON : this is a person who trades on vatable goods and services these are goods and service for consideration.
* SUPPLIERS : This deals with transaction, whether it is the sale of goods or the performance of service to a consideration that is for money or payment.
*TAX PERIOD: this means one calendar month starting from the beginning of the month to when it ended.
*TAXABLE PERIOD: any person under that public authority acting in that capacity that his/her own carries out in any place in economic activity as produce, wholesales, supplier or services or persons exploiting tangle income by a way of trade or business.