The purpose of this project is to determine to identify strategies
for administrative implementation of the variables amongst others. Also
to identify and appraise administration of VAT in Nigeria, highlight the
loopholes and suggest solution.
From the research carried out, the stuffy reveals that Value Added
Tax is an important element in the life of any nation and also that the
revenue generated by the government is not only beneficial to them as so
many Nigerians thinks but also to the people as it is been used for the
effective administration of the country. The research also reveals that
the payment of value added tax dues by so many people is always seen
with hatred and as much, the practice of tax evasion and avoidance have a
negative effect on tax generation.
Finally, the study reveals that if more revenue can be generated
through taxation, it will lead to an effective administration by the
government putting into consideration a true government who is ready to
serve the people.
Above all this research work recommends that in order for an
efficient and effective tax generation and administration, the
government should try to put in place provision of more staffs and good
welfare for them so as to perform their jobs effectively. It also
recommends that a good habit of administration should be inculcated by
the government in order to gear the citizens to pay tax.
For a country to exist in harmony, the government of such country
must live up to its public economic and social obligation by providing
economic and social amenities reduced or subsidized commercial rate.
To do so, this will normally involve huge expenditure and therefore, will also require revenue source.
Additionally, government at various levels will need to settle
operational costs to be able to offer the aforementioned social
amenities; one of the various sources of fund available to any
government for revenue is Taxation. This could either be in form of
direct or indirect tax or both.
Ojo (1998) described taxation as “the concept and the science of imposing tax on the citizen”.
Summerfield (1986) described Revenue as referring to a monetary
quality earning to a monetary quality during a given time period
regardless of the amount collected.
One of the forms of indirect tax is Value Added Tax (VAT) hereafter referred to VAT.
The introduction of VAT in Nigeria virtue of Decree No 102 of 1993
which took effect from 1st January 1994 mark the phasing out of the
Sales Tax which has been in force since 1986 by virtue of the ales
Decree No 7 of 1986.
VAT was adopted in Nigeria because the federal as well as the state
government need additional resources for development. This revenue can
only come from increase in taxation and productive effort. The need of
the government for more revenue cannot e over-emphasized particularly as
revenue from crude oil which is the most important source of oil in the
international market continues to influence, making it necessary for
government to explore pother source of review.
Similarly, revenue available from oil and present non-oil sources
mainly conventional and traditional taxes were not sufficient to meet
public needs, as expenditure continue to rise in an era of increased
socio and economic problems, particularly the pressure from population.
1.2 OBJECTIVES OF STUDY
The purpose of embarking on these research works are:
1. To collect addition on the subject and develop a mechanism for improving on existing level of knowledge and
2. To identify strategies for administrative implementation of the variables amongst others.
a. Identify and appraise administration of VAT in Nigeria, highlight the loopholes and suggest solution.
b. Highlight the effect of VAT on revenue generation of the country.
c. To consolidate and modernize the tax system n order to
provide a basis for strong revenue growth and flexible fiscal
d. To provide incentives for export production
e. To distribute the burden of taxation more evenly across
different goods and services through a broader coverage, so as to avoid
f. Identify problems faced by VAT administrator and how they can be abated.
g. Suggest ways of making the operation and administration of VAT better than what it is now.
h. To develop an approach to reduce the consumption of luxuries
and curb the increase in the consumption of non-essential. The approach
by implication would tax non-consumption goods relatively higher and
minimize impact on essential goods and services used by low income
earners and formulate a program of work for the accomplishment of the
1.3 RELEVANCE OF STUDY
The principal reasons that prompted the introduction an
implementation of VAT I Nigeria are enumerated under the historical
background of VAT in Nigeria. VAT was set out to meet some targets,
according to E.I. Ijewere, chairman Modified VAT (MVAT) committee. VAT
is a tax imposed on value, which the supplier or tax seller of a goods
or services adds to the public sectors.
In addition, the information circular 9304 of the FIRS advanced some
reasons justifying the replacement of sales tax with the Value Added Tax
rationales put forward by FIRS are as follows:
1. VAT is equipped to ensure voluntary compliance because of the multistage collection and credit mechanism involved.
2. Tax collection at the point of importation is easier under
VAT than under sales tax where the imported goods are levied at the
point of retail after leaving the ports.
3. VAT has higher revenue yielding potential than the retail sales tax.
4. VAT is inherently more comprehensive because it is better equipped to tax services than the sales tax.
5. The use of invoice under VAT provides self-police mechanism,
as VAT payers demands invoice so that they can make valid credit or
6. The use of invoices creates a well-defined audit trail, which the tax authority can follow.
It is also easier to integrate VAT audit with some tax audit since
VAT is comprehensive and restricted to the retail stage as the sales
This study would serve as a research work that would further
enlighten the level of subject scope especially vat able resource on the
importance and usefulness of VAT.
1.4 SIGNIFICANCE OF STUDY
Taxation is a vehicle of economic and administrative development in
an economy and VAT has provided to be a very useful tool of economic and
fiscal measure in Nigeria. If VAT system is improved, it will be a
great boost to the government revenue and the economy at large.
The study will provide explanation and reasons for introduction of
VAT in Nigeria it will identify differences in the administration and
implementation of VAT, it will offer suggestion to problems faced by the
1.5 SCOPE OF STUDY
1. Examination of the effect of Value Added Tax on final consumer, companies involved and the economy as a whole.
2. Interviewing, questionnaire as well as a literature review.
3. Suggestion of strategies for successful implementation of Value Added Tax.
4. List of product, service and companies affected by the policy of Value Added Tax.
1.6 STATEMENT OF PROBLEM
The introduction of Value Added Tax (VAT) requires a lot of
preparation and enlightenment on part of government because of
complexity of the tax and the need for co-operation of taxpayers.
However the followings are the major problems confronting the
implementation, registration and collection of VAT in Nigeria.
i. Lack of proper education on the subject matter
ii. Inadequate of records kept by businesses.
iii. Inadequate preparation and lack of understanding of how VAT
works and what government intends to do with the revenue tends to make
the tax unpopular.
iv. Increase in the price of goods and services that can result
in inflation, growing unemployment and under-utilization of industrial
v. Lack of confidence in the capacity of government judiciously allocated fiscal resources.
1.7 RESEARCH HYPOTHESES
Five hypotheses will be tested to show the level of significance of
estimated parameters and the suitability or otherwise of formulated
The various hypotheses are:
1. H0: That Value Added Tax administration and implementation has no significant effect in government source of revenue.
H1: That Value Added Tax administration and implement has significant effect in government source of revenue.
2. H0: That Value Added Taxation in Nigeria does not constitute double taxation on goods and services.
H1: That Value Added Tax double taxation on goods and services.
3. H0: That the incidence of state creation in
Nigeria cannot positively affect the realization and administration of
Value Added Tax (VAT).
H1: That the incidence of state creation in Nigeria can positively affect the realization and administration of Value Added Tax.
4. H0: That there is no relationship between appraisal of the effectiveness on VAT and Gross Domestic Product.
H1: That there is relationship between appraisal of the effectiveness on VAT and Gross Domestic Product.
5. H0: That Value Added Taxation should be abolished.
H1: That Value Added Taxation should not be abolished in Nigeria.
1.8 RESEARCH QUESTIONS
In the course of this study, some questions came under consideration, these questions include:
1. How effective is the administration of VAT system in Nigeria?
2. What are the effects of Value Added Tax on economy?
3. Does VAT not constitute double taxation on consumers?
4. What benefits accrue to tax payer?
5. What steps can be taken to ensure that the full potentials of VAT are realized?
6. What are the likely prospects of VAT?
7. How does VAT influence consumer behaviour?
1.9 LIMITATION OF STUDY
It is obvious that hardly can there be any administrative research
work like this, without limitations, has monopoly of knowledge, and the
facts that human beings are rational. Since, the material for carrying
out this research work may not provide conclusion answers to all the
issues relating to administrative level of operation.
Difficulties in getting relevant information, textbooks and relevant
journals to the studies are another inhibits factor. The available time
and financial resources also contributed but not significantly to the
limitations of this research and therefore, this inquiry many not
exhaust all that is necessary for maximum exposure.
This however, leaves room for other researchers whom may want to investigate further.