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ABSTRACT
The Purpose of this study is to
investigate the effect of Value Added Tax on the Nigeria economy as it relates
to how it can improve government revenue and throws more light in its
contribution to the economic growth and development of Nigeria. In addition to
the oral interview and questionnaires distributed, was a review of study of
literature relating to the impact, administration and collection of Value Added
Tax in Nigeria.
Simple percentages, bar chart, pie
chart, and chi-square
X2 = ∑(O-E)2
E
Were used for data analysis on
which purposive sampling technique was adopted. The findings shows that A Value
Added Tax has economic impact in consumption pattern in Nigeria B, Value Added
Tax has positive impact on the economy of Nigeria.
C, The payment of Value Added Tax
has improved the prospects of businesses, organizations and industries in
Nigeria and the study strongly recommends that:
There
should be functional Value Added Tax offices in every council area to
coordinate a vigorous campaign to educate people and seek their cooperation.
The above will no doubt erode the
negative attitude that some of the taxpayers have developed towards Value Added
Tax.
Government
should make adequate provision, for retrieving the Value Added Tax proceeds
from companies and other collection agents.
CHAPTER
ONE
INTRODUCTION
1.1 Background of the study:
Value Added Tax (VAT) in Nigeria
is a Federal Government tax, which is administered using the existing machinery
of the Federal Inland Revenue Services (FIRS).
VAT has a directorate within the
frame work of the Federal Inland Revenue Services (FIRS) with the head office
in Abuja. It has a network of zonal and local offices throughout the federation.
The Directorate of the tax is headed by a director who is assisted by two
deputy directors. The Zonal Coordinator of the Federal Inland Revenue Services
(FIRS) at Lagos, Ibadan, Enugu, Kaduna and Jos also coordinates the activities
of local VAT offices within their areas and are responsible to the VAT
Directors in Abuja for all Value Added Tax (VAT) related matters. VAT as a form
of tax was introduced in Nigeria with effect from 1st January 1994 based on the
report of the study group set up in 1991 by government to review the system of
indirect tax in Nigeria. Before the introduction of VAT in Nigerian economy,
the Federal Government has been working relentlessly on how to revamp the
Nigeria economy. To this effect, a lot of economic measures have been
introduced. Among the economic measures introduced included the Second-Tier Foreign Exchange Market (SFEM), Structural Adjustment Programme
(SAP), and Foreign Exchange Market (FEM) etc. All these efforts at revamping
the economy were to no avail as the economy seems to be an ailing child that
has defied all economic therapy or fiscal measures. Prompted by its avowed
position to revamp the Nigerian economy at whatever cost, the Federal Military
Government under the leadership of General Sani Abacha introduced a fiscal
policy, the Value Added Tax (VAT) in January 1994.
Value Added Tax is a consumption
tax at each stage of the consumption chain and is borne by final consumer. It
requires a taxable person upon registering with the Federal Board of Inland
Revenue to charge and collect Value Added Tax at a flat rate of 5% on all
vatable goods and services.
Where the supply is not subject to
VAT, the VAT liability will either be Zero-rated or exempted. Zero-rated goods
and supplies are all export goods and supplies. Supplies that are zero-rated
are still taxable but no actual tax is payable to the government. The important
difference between Zero-rated and exempt items is that any input VAT relating
to Zero-rated supplies is recoverable, whereas that relating to exempt supplies
are not recoverable.
The registration of Value Added
Tax (VAT) is to cover all the business activities of the vatable persons.
Therefore all domestic manufactures, wholesalers, distributors, importers and
suppliers of goods and services in Nigeria are expected to
register for VAT within six months after the commencement of the decree or six
months from the commencement of business, which ever is earlier.
A vatable person is one who trade
in vatable goods and services for a consideration. Every vatable person has the
obligation to register for Value Added Tax (VAT) payment.
Professionals like lawyers,
accountants, Engineers etc who provide professional services to their clients
are require to register. There is therefore no thresh-hold for registration.
VAT paid by a business on
purchases is known as input tax, which is recovered from VAT charges on company
sales known as output tax. If output exceeds input in any particular month, the
excess is remitted to the Federal Board of Inland Revenue (FBIR) but where
input exceeds output, the tax payer is entitled to a refund of excess from
Federal Board of Inland Revenue (FBIR) though in practice this is not always
possible.
A tax payer however has the option
of recovering excess input from excess output of a subsequent period.
It should be stated at this point
that recoverable input is limited to Value Added Tax (VAT) on goods imported
directly for resale and goods that form the stock-in trade sued for the direct
production of any new product on which the output VAT is charged.
Vat
in Nigeria were created as replacement or substitution for the sales taxes that
were in operation before. They were imposed on all goods that were manufactured
in the country as well as goods that had been made outside the country and were
selling there.
The impressive performance of VAT
within the first government fiscal policies such as:
1. Scraping
of some form of excise duty;
2. The
reduction of the marginal rate of personal income tax to 25% and lowest tax
bracket from 10 to 5;
3. The
reduction of company income tax rate to 30 and;
4. The
reduction of the rate of capital tax from 20% to 10%.
Following these, Value Added Tax
(VAT) seems to be the best among other types of taxes. It is against this
background that we are going to analyse VAT and to see the impact it has on the
nation‘s economy.
1.2 STATEMENT OF THE PROBLEM
The significant impact of VAT or
the role played by Value added Tax in the development of the nation cannot be
overemphasized. Revenue is raised by the government through taxation for the
development of the nation‘s project.
Vat was introduced as a revenue
mobilization strategy to cover up the deficiencies experienced with the former
sales tax because of its progressive nature. Government
ability to adequately and effectively retrieve the proceeds from companies and
other agents of collection remains a problem. It does not appear as if there is
adequate machinery for effectively monitoring of the remittance of the tax
withheld to the relevant tax authorities, this means that the federal inland
revenue , the body charged with the administration and implementation of Vat
lacks the logistic support , this invariably will give room for tax evasion and
avoidance. Secondly, the dishonest practice by some tax officials also posed a
serious threat to effective tax administration in Nigeria, especially when such
practices are capable of having demoralizing effects on the honest tax payers.
Consumers will still want to low how much they are paying as Vat as most of
these taxes are not duly reflected on their invoice. it is generally believed
that vat is another way of reflecting economic hardship on the consumer to the
advantages of the manufacturers and companies. It could be seen as an excuse to
raise prices of goods and services arbitrary. For instance, landlords are now
charging vat on house rents, some hotels are charging vat on their services
without remitting same to the appropriate authorities. These are contrary to
the regulation governing the vat system.
The uncommon nature of this tax
system, has resulted in unaware of its existence by majority with resultant
effects of low credibility by the government, this has made
people to scorn the payment.
Lack of trained personnel and
logistic support from the government and FIRS has contributed immensely to poor
vat administration and implementation which invariably has resulted in
reduction in revenue generation from vat.
It is against these backdrops,
that this research seeks to ask certain question to determine if the
introduction of VAT is a worthwhile venture or policy.
1. Has
Value added tax any impact on government revenue in Nigeria?,
2. Does
VAT have any economic on consumption pattern in Nigeria?
3. What
are the problems confronting the effective implementation and administration of
VAT in Nigeria?
4. And
to what extent has VAT impacted on the business organization, firms and
industries in Nigeria?.
1.3
OBJECTIVES OF THE STUDY
The main objective of the study is
to assess the implication of value Added Tax in revenue generation of Nigeria.
Specifically, the study attempts
1.
To
determine the economic impact of value - Added tax on the consumption patterns
of Nigeria.
3.
To
examine the impact of value added tax on the prospective businesses, firms,
organizations and industries in Nigeria
4.
To
identity the potential problems confronting the implementation and
administration of Vat in Nigeria.
TOPIC: THE EFFECT OF VALUE ADDED TAX ON THE NIGERIAN ECONOMY
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Chapters: 1 - 5
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