ABSTRACT
A
research into the implications of
Nigerian value Added Tax [VAT] on the payers [ a case study of Enugu State ]
cannot be over –emphasized .
In pursuance of this investigation , the
research used both primary source of
data collection , like oral interview as
well as secondary sources such as textbooks , Journals ,Magazines and
professional bodies . The data collection were then analysis using simple
percentage , pie chart and the chi- square .
It will be noted that any VAT depends
on the value Added and there is no way VAT could be attempted in isolation of this value
Added. Since VAT also depends on income and profitability of individuals and
companies, the quest for VAT should be planned and coordinated
Effect
was made in this research work to investigate on the constraints encountered in
the imposition of VAT and also in the recommendation were given the way of
overcoming them .
This study is obvious
if we should realize that this work will enable us to know this contribution
from VAT has helped in the Nigerian general economy so far and know if it worth
it or not.
The project is divided into five chapters in which the first chapter
deals with the introductory part , statement of the problem, purpose of the
study , significance of the study, research hypotheses , scope and limitations
and definition of terms.
Chapter tow deals with review of related literature as related to
VAT and as it affects the tax payers,
definition of VAT. The evolution of Value Added Tax , why modified value added
tax in Nigeria , sales tax and value added tax , value added tax in Nigeria and
the implication of VAT don the tax payers .
Chapter three deals with research
design and methodology used , primary ,
secondary, sources of data analysis , population and sampling procedures.
In chapter four was discussed , define presentation and analysis and
testing of hypothesis
Chapter five finally deals with findings , conclusion and
recommendation.
TABLE OF CONTENT
Title page
I
Approval page
ii
Dedication
iii
Acknowledgement
iv
Abstract
v
Table of content
vi
CHAPTER ONE
1.0 Introduction
1.1 statement of
problem
1.2 Purpose of study
1.3 Significance of the study
1.4 Research hypothesis
1.5 Limitation scope of the study
1.6 Definition of terms
CHAPTER TWO
2.0 REVIEW OF RELATED LITERATURE
2.1 The value added tax defined
2.2 Evolution of value added tax
2.3 Why modified value added tax in Nigeria
2.4 Sales tax and value added tax
2.4 Value added tax in Nigeria
2.6 The implication of VAT on the taxpayers
CHAPTER THREE
3.0 RESEARCH DESIGN AND METHODOLOGY
3.1 Geographical area of the study
3.2 Target population
3.3 Sampling size and procedure
3.4 Data collection techniques
3.5 Questionnaire design
3.6 Administration of instrument and validity
CHAPTER FOUR
4.0 Data presentation and analysis
4.1 Data presentation
4.2 Test of hypotheses
CHAPTER FIVE
5.0 Summary of findings, conclusion and recommendations
5.1 Findings
5.2 conclusions
5.3 Recommendations
BIBLIOGRAPHY
APPENDIX: QUESTIONNAIRE
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Taxes in modern economics are the most
important source of government revenue. The are compulsory levies that are
regularly imposed, and as a rule, not designated for a special purpose they are
regarded as a contribution to the general revenue pool from which most
government expenditure are financed.
Taxation occupies a principal position in the Nigerian economy as in
other countries. Value – Added –Tax was introduced in Nigeria currently to
replace the old sales tax. The old sales tax, has been in operation under the
federal government legislated decree No 7 of 1986, but it is operated on the
basis of residence
However , the newly introduced value added tax is operated under the
federal government legislated decree No 102 of July 1993. VAT is a form of indirect tax whose burden is
shifted from the manufacturers through the distribution channels to the final
consumer who then bears the final burden
Value added tax came into effect on 1st January 1994 the tax
is a tax on consumption. VAT is a multi stage tax which is impose on goods and
services as they pass through the various stages in the business chain. From
manufacturing, importation through wholesales to relating. The payment is borne by the final consumer
because it is included n the selling price ,it’s administration involves a
credit mechanism system whereby a taxable person who is charged tax on the
supplies to his entitled to set off that tax against the tax charged by him is supply
to other persons , this making him only accountable for the excess of the tax
on the supplies from him over the tax on the supplies to him.
The tax paid or payable by a taxable person on the importation of a
business carried on by him is known as his ‘input tax’ while the tax paid on
the supplies made by him is known as his
‘out put tax’. The VAT payable in essence is the output tax , less input tax.
The tax on the supply of goods or services is chargeable only where:-
n The supply is a taxable supply and
n The goods and services are supplied
by a taxable person in the course of a business carried on by him and is
payable by the person supplying the goods and services .
VAT in Nigeria is computed at a flat rate of
5% of the price of the goods and services. This is affected on behalf of the
government by business and organization that have registered for VAT purpose .
VAT is operated by over ,sixty countries including some countries on the west
of Africa .
In Nigeria , two agencies of the muted nations organization the
international monetary fund [IMP] and the world bank which are closely
identified with the establishment and monitoring of the structural Adjustment
programme [SAP] had since 1987 been advising that the Nigeria tax system need
to be reformed so that the government
will be less dependant on the
petroleum revenue generation .
In an attempt to effect this
reformation of tax system , the federal government set up two tax study groups
in 1991 . The federal ministry of finance and economies development set up one
study group to study and make recommendation on the reforms needed in direct
taxes in Nigeria . The federal ministry of budget and planning set up another
study group which is more relevant to
our study on indirect taxes and inaugurated on 26th April in 1991
with the objectives of among other to :
-Shift taxation towards consumption rather than
saving .
-
Improve
the administration of indirect taxes.
-
Provide
incentives for export production.
-
Maintain
a fairly ever tax incidence.
-
Reduce
dependence on oil revenue.
The general guideline for the
establishment of value added tax in Nigeria was given by this committee . value
Added tax was introduced into Nigeria economy tax system in January 1st , 1994 ,following the elegant provision of
decree No .102 of July , 1993 but it has been in operation in other countries
before it was introduced in Nigeria .
In the Nigeria context, it is a
consumption tax of five percent [5%] imposed on every vat able goods and
services of every stage of production
The buyers of goods and services in the
case of value Added tax are taxed and this is country to sales tax where the
produces or sellers of goods and services pay the tax .
The final cousumers of these vat able
goods and service bear the burden of the tax . AS a result the project topic
which form the center of the study that
is the implications of VAT on the payers .
1.1 STATEMENT OF THE PROBLEM
Much as it is known that VAT will increase
the revenue base of Nigeria , it cannot be free from some problem . In view of
the compulsory nature of and strong aversion of tax [VAT] payment effects must
be constitute made to make any tax
system as attractive and as conveniently as possible .
This can be achieved by regularly evaluating the tax system with a known
set of criteria modified to suit the pervading circumstance
of time .
The Question which this research work aims at answering could be
summarized into the following problem
statement :
1. Corporate performance could be
improved upon under the value added tax.
How realistic is this assumption ?
2 Given the percent economic situation
and industry condition , how are individual / companies dealing on goods and
services which are subject to VAT , going to the affected by this tax system.
3 With the apparent difficulty
encountered by firms in holding down costs, and give the incentives in VAT
accruing to firm operating at minimal costs, have a company’s pricing policy
most likely to be affected.
Industrialists, manufacturers ,
distributors , individuals and organization have not accept VAT ,they are the
opinion that VAT is not good for a developing country like Nigeria. The
problems of enforceability has to be tackle
by employing honest and truthful personnel who will enforce the payment of VAT
so levied severe penalties has to be adopted so as to enforce payment by VAT defaulters.
1.2
PURPOSE OF THE STUDY
The purpose of the study is find out the
extent to which the tax in investigation , VAT will imply to the tax payers and
final consumers. Thus the study is designed to investigate the implication
which value added tax will have on the tax payers , that is the relationship
between the tax and those paying it in the Nigerian context of tax system.
1.3
SIGNIFICANCE OF THE STUDY
This
work is of academic significance in the sense that it will contribute to the
understanding of the Value Added Tax and
it’s implication on tax payers. The practical significance lies on the fact
that the work would highlight the extent to which tax payers could take
advantage of the opportunities in the tax system to improve their standard of
living even of greater importance is the potential of this study in throwing
more light on the unintended adverse effects of the tax on some industries
1.4
RESEARCH OF HYPOTHESIS
Hypotheses 1
Ho : VAT is tax based on consumption of goods and services .
H1 : VAT is not tax based
on consumption of goods and services .
Hypotheses 2
Ho :there are effect on the price of variable
goods and services
H1 :there is no effect on the
price of variable goods and services
1.5 SCOPE OF LIMITATION
This is the scope of the study that
works out aspects of the study to concentrate efforts upon.
Though the study is supposed to be
carried out on the variable persons and establishments in the thirty six (36)
states of Nigeria and the federal capital territory, Abuja , the study due to
financial cost of transportation and time limit is concentrated only on the tax
payers in Enugu state.
In this state not all payers will
concentrate but rather few selected was based in Enugu urban will be
concentrated.
The implication on the tax payers
investigated however will be taken to be applicable to all the tax payers in
the state and all over the country.
1.6 DEFINITION OF TERMS
There are certain complex and unfamiliar technical terms which needs to be clearly defined as
regards their usage , applied to this study for easy understanding , there are explained in a way as to make their
contextual usage clear to the reader.
i)
VAT : This is a
tax of the supply of goods and services which is eventually borne by the final
consumer , both collected at each stages of production and distribution chain.
ii)
VARIABLE GOODS\SREVICES: These are goods or services
that subject to VAT. There are list of these goods and services in the appendix
iii)
VARIABLE
PERSON: These are business organization that are registered for VAT purpose ,
the firms collect VAT from the customers and rant to the Vat secretarials.
iv)
TAXABLE PERIOD :
This is the period covered by any particular return. In Nigeria the taxable
period is one month , in other words the returns and payment are normally made
monthly to the local VAT office on or before the 14th day of the
month next following that in which the supply was made.
v)
TAX INVOICE : This is the key to any credit claim on
VAT. Whenever a person supplies a
variable tax invoice in support of the transaction and take a copy for himself
vi)
OUTPUT TAX: These are taxes paid by variable persons on the supplies he made.
vii)
INPUT TAX: These are those VAT paid by the customers
and collected by the variable persons.
viii)
ZERO RATED GOODS: These are goods that attracts a VAT
rate of 0% while the normal rate of VAT in Nigeria is 5% for all goods and
services variable
ix)
CHI-SQUARE: This is the statistical techniques used in
testing the hypothesis concerning the difference between a set of observed
frequencies of a sample and a corresponding set of expected frequencies
x)
DEGREE OF FREEDOM : This is the range within which the
hypothesis is to be tested.
xi)
CONFIDENCE LEVEL : The level of limit within which we
may be confident that the population mean lies.
xii)
TAX INCIDENCE : This is the final person(s) who bear
the tax burden .
xiii)
NIGERIA ECONOMY : This is the aggregate out put of Nigeria
as a whole.
xiv)
TAX SYSTEM : This is the way tax is being regulated and
administered
xv)
SALES TAX: This is the tax imposed on the sales of a
commendation usually collected at whole sales or retail stages.
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