The objective of
this research work is to analyze the impact of value added Tax (VAT) using
Federal Inland Revenue Service as a study. The objective of this study
include the following: to determine whether there is significant
relationship between valued added tax and the Federal generated revenue; to determine the
impact of value added tax on prices of goods and services. The research
methodology involves survey method of sample size of 52 and use of
questionnaire with chi-square to test the hypothesis which led to the following
findings; that VAT as non-oil revenue increases the government revenue on
total revenue with better percentage and this reduces the dependence of
government on oil revenue. Based on these findings, we recommended that the
statutory provisions and amend all faces or areas of laws that could be subject
interpretations. The staff should be with remunerated with
up to date incentives and working benefit to avoid the act of
conniving with VAT payers.
1.1 BACKGROUND TO THE STUDY
The essence of
value Added Tax (VAT) In Nigeria in 1994 was to boost the revenue base of the
government, re-activate the economy and as possible- reduce the poverty level
by appropriately reallocating resources from personal and private sections to
promote growth and development. The adoption of this form of consumption tax
was also necessitated by the decline in the oil revenue due to fluctuations in
the price of oil in the international market, which makes the oil revenue
insufficient to run the affairs of the government similarly the present non-oil
revenue Sources mainly taxes are not enough to meet public needs,
as expenditure continue to rise. Custom duties, which used to be an important
source of government revenue in the 80's have dwindled significantly.
duties provided 75 percent of Federal receipt in 1994 but decrease to 19 percent in 2003.
Company income tax, which accrued to 32 percent of federally collected revenue
to 5 percent in Nigerians pay tax 50 increasingly. The bull: of the self-employed
traders, farmers and businessmen evade taxes and would only pay flat rate
levies when compelled
More so, this
gives personal income tax a narrow base that cannot be elongated to yield
higher revenue; more so, company income tax cannot also be increased, because
of the need to encourage industries.
government reduced corporate tax from 40 percent to 35 percent. Till this year,
increasing the corporate tax will have a devastating effect on production level
and the national output. This there is need for a tax increase and broad based
consumption tax rather than an income tax.
Value Added Tax
is a consumption tax which is broad based and can start from a low rate, with
exemptions for essential goods to reduce its burden on the poor, it was
believed that that propensity to consume is higher that the propensity to same.
Value Added Tax is therefore meant to influence the consumption habit of the
people and it is directed at high-income earners. Value added Tax has provided
a visible achievement in terms of its proceeds since its inception in
the Nigerian economy with a 5 percent rate on the "Vatable" goods and
services. The non -oil revenue has therefore increased tremendously. The
proceed from this source (i.e. Value Added tax) in 1994 amounted to
N8.2billion. It increased to N21 billion in 1995 and was N29 billion in 1996.
The yield has
been witnessing substantial annual Increase. However, the sharing formula
adopted for Value Added Tax proceeds in Nigeria has been criticized by economic
analysts. They believed it is providing revenue for reckless spending in the
three tiers of government. The sharing formula as at 2000 budget is 15%,
50% and 35% to federal, State and Local Government respectively.
1.2 STATEMENT OF PROBLEM
Added Tax (VAT) is in principle of a good fiscal measure that is intended to
broaden the revenue base of the government. The revenue is also to be channeled
towards improving the social services being provided to the people. So, Value
Added Tax as a fiscal policy cannot be faulted. However, it is pertinent to
state on clear term the problem that led to this study. They are;
Apart from passing on tax and compliance cost to consumers,
business organizations and enterprises have seized the opportunity to increase
profit margin on their goods whether 'Vatable' or not.
Despite the huge proceeds accruing from Value Added Tax
(VAT), a remarkable attribute to the source has not been felt on the economic
and social activities in the country.
With the nature of Value Added Tax, as self-assessing
consumption tax, it is still witnessing considerate evasion.
The Frequent revenue list of Value Added Tax (VAT)
exempted goods and services hinder the performance of the tax. It has adverse
effect on the revenue base as well as the entire economy.
There is no significant effect of the amount being
generated through Value added Tax (VAT) on the federally generated revenue.
1.3 OBJECTIVES OF THE STUDY
Specific: This study is
specifically generate toward achieving the following.
To determine whether, there 1S significant relationship between
Values Added Tax and the federal generated revenue.
To determine the impact of Value Added Tax on prices of
goods and services.
To examine the negative impact of Value added Tax on the
Nigerian economy since the introduction.
To identify the effect on Value Added Tax on the revenue
of the Federal Government.