ABSTRACT
The federal government being a non‑profit oriented
organization generates its revenue through various sources. These1hources
include: Taxes, Loan and grants, Investment, Rates and Rents, Court Fees,
Royalties, and, Sales of confiscated properties.
Tax being the paramount of government revenue source is
sub divided into: Personal Income Tax, Companies Income Tax, Petroleum Profit
Tax. Capital Transfer Tax, Value Added Tax, Education Tax and Capital Gains
Tax.
In this project work, we shall be looking into the Value
Added Tax (VAT), which is the most effective of all other Taxes, due to the
process and procedures involved in its collection.
In chapter one of this project work, we shall be,
discussing briefly the historical development of the VALUE ADDED TAX (VAT) the
structure also the scope of VALUE ADDED TAX (VAT).
In chapter two we shall be looking into people’s opinions
and ideas on’ Taxes generally, precisely on the VALUE ADDED TAX (VAT).
However, In chapter three, the method used in this study
will be explained in terms of population sample. Size and sampling technique
Research instrument and method of data analysis collection of data analysis and
statistical tools.
Attention will be focused on breakdown of the data
collected as well as the analysis of the data and the testing of the hypothesis
in chapter four, the final chapter of this project. will be the summation of
the findings, the conclusions reached as well as providing practicable
recommendations that can help in checking and restraining the savage cycle that
has made VALUE ADDED TAX (VAT), ineffective in terms of revenue generation.
TABLE OF CONTENT
Cover Page
Title Page i
Approval Page ii
Dedication iii
Acknowledgement iv
Abstract v
Table of Content vi
Chapter One
1.0 Introduction 1
1.1 Brief
History of Value Added Tax (VAT) 1
1.2 Purpose
of the Study 5
1.3 Problems
of the Study 5
1.4 Hypothesis
of the Study 5
1.5 Significance
of the Study 6
1.6 Scope
of the Study 6
1.7 Limitation
of the Study 7
1.8 Structure
of the Project 7
1.9 Definition
of Terms 8
Chapter Two
2.0 Literature
Review 9
2.1 History
of Taxation in Nigeria 10
2.2 Types
of VAT 18
2.3 Methods
of Calculating VAT 19
2.4 Scope
of VAT 21
2.5 Supply
of VAT 22
2.6 Input
VAT 22
2.7 VAT Allocation to State and Local
Government in Nigeria 24
2.8 Remittance
of Money on VAT 25
2.9 Taxes 25
2.10 The
effect of tax rate on MPC, 27
2.11 Taxation
as a tool of Micro‑Policy 28
2.12 Consumer
prices and the turnover tax 28
2.13 Exemption
from VAT 31
2.14 Vatable
services 33
Chapter Three
3.0 Methodology 35
3.1 Design
of the Research 35
3.2 Sources
of Data Collection 36
3.3 The
Population 37
3.4 The
Sampling Size 37
3.5 Sampling
Procedure 37
3.6 Administration
of instrument 37
3.7 Method
of data analysis 38
3.8 Limitation
of methodology 38
Chapter Four
4.0 Presentation
and analysis of data 39
4.1 General
characteristics of respondents 39
4.2 Research
question analysis 40
4.3 Test
of hypothesis 47
Chapter Five
5.0 Summary,
conclusion and recommendation 50
5.1 Summary 50
5.2 Recommendation 51
5.2.1 Awareness 51
5.2.2 Qualified personnel 51
5.2.3 Orientation for the in‑service
personnel 52
5.2.4 Improvement on the
administration 52
5.3 Conclusion 52
Bibliography
54
Questionnaire 55
CHAPTER ONE
1.0 INTRODUCTION
VALUE ADDED TAX (M) as it is called is one of the means
through which the government generate fund and could be said to be the most
effective of all other taxes due to the process and procedure of its
collection. Generating funds generally through the public tax be faced with a
lot of administrative bottlenecks, this is why we are looking at VAT and to
compare it with other taxes and see how effective they are and to use VAT as a
means or yardstick of measuring the effectives of generated fund but before
then a brief history of this value added tax and the rational for introducing
the tax into Nigerian economy will be examined.
1.1 BRIEF HISTORY
OF VALUE ADDED TAX (VAT)
Taxation has been in time memorial but the year 1991 was a
major trademark in the tax administration of Nigeria, in that year the
Professor Edozien led study group on the review of Nigeria tax system first identified,
the need to transform the old scales tax that was then administered by the state
government. Within the same time, another study group on indirect taxation led
by Dr Sylvester U. Ugoh was given the task of studying the feasibility of
introducing value added tax after making series of consultation, studies and
researches both within and outside the country, the Ugoh study recommended in
November 1991 that after two years of preparatory work.
As a follow up, by 1991 the Isewere led modified value
added tax (MVAT) committee was set up to undertake preliminary work for the
introduction of the new tax. The committee was later to work in close collaboration
with the federal Inland Revenue ser4ces, in 1993 for them to take over the
administration of the new tax, which was scheduled to come on stream as value added
tax by 1st September 1993.When the federal government agreed to introduce the
new tax, decree No. 102 of 1993 was promulgated to back it up. Although the
scheme did not actually commence until 1st January 1994 due to administrative bottleneck
which were initially encountered by federal Inland Revenue services so value
added tax was therefore introduced as a replacement of the sales tax.
There are currently five administrative bodies set up in
Nigeria since 1992 to look into the related issues of tax. These administrative
machinery are important for the proper management of tax in Nigeria most
especially value added tax.
Value added tax is borne by the final consumer but
collected at each stage of the production and distribution chain. It has a
wider coverage than the sale tax and cover both imported and locally
manufactured goods except where a particular goods or services had been
described as exempted under the decree. So many companies tend to confuse value
added tax (VAT) exemption with tax exemption but under the decree individuals
companies or organizations are not generally considered for VAT exemption as
only goods or services may be so qualified.
In the 1930’s professor Card Shoup together with an
economist named professor Seligman wrote for Cuba a tax reform report but was
never implemented, though the professor Shoup had proposed to Japan the
introduction of value added tax in 1948. In the report of Japanese taxation,
Professor Shoup stood his ground on the need for the first time in fiscal history
for the introduction of value added tax fioni the report to Shoup mission USA.
Michingen state was said to have experienced the implementation of what looked
like a modified VAT in 1953 but the policy was neglected for about four years. Shoup
first proposed VAT in Japan, while the French government began a series of tax‑reforms
in 1954. These reforms included the imposition of VAT “Taxes Sur la Valuer a on
the consumption of goods. Few years later Nicholas Kaldor who later advised the
chairman government on tax reforms prescribed the implementation of the
expenditure tax in India (1967). Although the expenditure tax project in India
was twice implemented and twice rejected. It contributed to the fiscal ferment
that the idea of taxing purchases or consumption then enjoyed use French value
added tax could not but succeed the tax soon became popular and continued to
gain a prominent place in the fiscal armory of many countries, in Europe,
Latin, America, Asia and Africa.
Since the 1960’s and 1980’s many countries in the world
have moved over to (VAT). In the Europe (VAT) overshadow other system of
indirect taxation in Africa due to the fiscal influence of France. The Francophone
countries were the first to adopt the tax. VAT is a consumption tax. It is only
paid if there is consumption of either VATABLE goods or services. The above
statement has a very important implication on the efficiency on the part of the
administration of the tax and ease of completion, R on the part of the
administrator and even the taxpayer respectively.
VAT is a mufti‑stage tax and the incidence is on the final
consumer of goods and services. It is a mufti‑stage tax since it is a value
added tax. The tax must a paid at every stage in which value is added. At the
end of the day the final consumption, price of the goods will be addition of
all values added a. the various stages of handling the goods. VAT incidence is
on the final consumer ‑ being a consumption tax.
1.2 PURPOSE OF THE
STUDY
1. To look in the distribution formular since
inception of VAT and the achievement so far from the part of the federal
government, the duty payer and citizens.
2. To know how the revenue generated is
expanded throughout the federal, government to the state government and also to
the local government.
3. To find out
how the revenue is generated.
4. The research on the problem facing the
taxpayer and the government and to render solutions to their problems.
1.3 PROBLEMS OF
THE STUDY
Reaching a decision of using VAT. The government was faced
with the problem of its collection and the administration of the tax.
1.4 HYPOTHESIS OF
THE STUDY
1. There is relationship between
organizations that administer custom and excise duty with VAT.
2. There is a relationship between VAT and
the personnel involved in the collection.
3. VAT enhances
government revenue.
4. There no
relationship between income flax and VAT.
5. VAT has an
Impact on the economy.
1.5 SIGNIFICANCE
OF THE STUDY
1. To identify the process and procedures in
VAT collection and suggest solutions to problems encountered.
2. To make
people now the essence of VAT in the economy.
3. To know all the protocol and the legal
system involved in VAT.
4. To know if VAT has an impact on the people
and the economy.
5. To get the populace informed on how VAT can
improve the standard of living.
6. To create
awareness on the achievement.
1.6 SCOPEOF THE STUDY
The scope of the study will be covering at least three
years after the introduction and implementation of value added tax in September
1993 and the story is expected to cover Lagos geographically.
1.7 LIMITATION OF
THE STUDY
Conceptually, this study does not cover extensively all
the states in Nigeria but majorly Lagos State so as a result, findings here
cannot be applied to other parts of the countries of the world and furthermore,
the study is not covering the whole years since VAT has been in operation but only
about three years since the inception and lastly it deals with vatable goods
and services.
1.8 STRUCTURE OF
THE PROJECT
The study examines critically the analysis of the
effectiveness of Value Added Tax (VAT) in federal government revenue
generation. The project is structured in a way that the chapter one contains
the historical development of VAT, the structure and also the scope of VAT.
Chapter two deals with the literature review, which is
divided into works of various authorities on the subject and state of
development in the 6eld as well as the theoretical foundation of the study. The
chapter three explains the methodology used in the research work.
In chapter four the data collected shall be analyzed. also
the discussion and summary of all findings while the final chapter of the
project will be the summation of the findings, the conclusion reached as well
as providing practicable recommendation that can help.
1.9 DEFINITIOP OF
TERMS
1. VAT is defined as a tax on supply of goods
and services, which is eventually borne by the final consumer but collected at
each stage of the production and distribution chain.
2. Withholding tax is an advance payment of income
tax and purpose is to bring the prospective tax payer to the tax net, thereby
widening the income tax base.
3. Gross Product Vat: It is when the
input of capital purchase is allowed against the firm output tax.
4. Consumption Vat: It is when the
capital purchase are treated like the purchase of revenue items.
5. Vat Exempt: This is defined as
product or services on which the buyer or supplier does not have to charge VAT.
6. Tax Evasion: Is an attempt not to
pay tax at all. TAX WTE: If is the amount of tax that has to be paid. TAX BASE:
It’s the object at which tax is charged.
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