This study investigated the effect of Value Added Tax on governance of Nigeria in Ondo State.  It examine VAT as a supplementary source of government revenue.
One hundred respondents participated in the study by respondents participated in the study by responding to questionnaire designed by the researcher.  The distribution of respondents according to their business organization is presented in table.
The study showed that the final consumer bear the burden of VAT and the effort of government of Ondo State to make people alive and responsible to their civic responsibility in paying Tax and responding positively to VAT.
It was therefore recommended that government should not only justify her responsibility by collecting tax, it must also ensure the resources of people are genuinely and properly harnessed to development progress visible in the area of socio – economic spheres of the people.

Title page                                                                             
Table of content                                                                  
1.1       Background of the Study                                           
1.2       Statement of the Problem                                         
1.3       Objectives of the Study                                                       
1.4       Justification of the Study                                           
1.5       Basic Assumptions                                                    
1.6       Scope of the Study                                                  
1.7       Definition of Terms                                                     
1.8       Research Methodology                                                       
1.9       Limitation of Study                                                      
1.10    Chapter Organization                                                 
LITERATURE REVIEW                                             
3.1       Assessment Value Added Tax in Nigeria                
3.2       Value Added Tax                                                                 
3.3       Value Added Tax Periods and Returns                             
3.4       Liability to Value Added Tax                                              
3.5       Calculating Value Added Tax                                  
4.1       Distribution of Respondent                                        
4.2       Distribution of Respondent According to
level of Education                                                       
4.3       Distribution According to Knowledge about VAT    
4.4       Distribution according to their accessibility to
tax office                                                                     
4.5       Distribution according to the success of Value
Added Tax                                                                           
4.6       Distribution according to Charging of VAT              
4.7       Distribution according to effect of VAT in sale level         
4.8       Distribution according to effect on the people
of Ondo State                                                             
4.9       Distribution according to scraping of the VAT policy       
4.10    Distribution according to sustaining and repacking          
5.1       Summary                                                                    
5.2       Conclusion                                                                  
5.3       Recommendations                                                    

The history of Value Added Tax (VAT) in Nigeria dates back to November 1991 when the Federal Government of Nigeria set up a committee to review the entire tax system in the country, Adesina (2005:173).  Through the efforts of the committee Value Added Tax (VAT) was proposed and a sub – committee was inaugurated to carry out the feasibility study to ensure its implementation by June 1992 (Ibid : 175).
The Federal Government of Nigeria in January 1993 agreed to introduce VAT by the middle of the year which was later shifted to the 1st day of September same year when the relevant legislation was expected to have been concluded.  Value Added Tax is a replacement of the formerly existing sales tax which had been in operation under Federal Government of Nigeria Legislated Decree Number 7 of 1986 but was operated on the basis of residence consumption tax which was operational in most developed countries of the world due to the fact that it is relatively easy to administer and difficult to evade (FIRS information circular on VAT 1995; 109:2).
Of note, VAT covers both goods and services in comprehensive manner whereas, the other type of consumption covers mainly goods, for instance, some other tax regime such as “sales tax Decree Number 7 of 1989 which applies to Nine (9) categories of goods and to one type of services, Arowomole (2006:18).
According to the United Kingdom Statement of Standard Accounting Practice (SSAP) Number 5, which also opines Value Added Tax is a kind of tax on supply of goods and services which is eventually borne by the final consumer but collected at the final stage of consumption but collected of each stage of the production and distribution chain (FIRS VAT Training note module VII:1995:2).
Apart from the fact that sales exclude a large number of consumer goods; it almost exempt a large service sector of the economy.  The VAT system in Nigeria is administered by Federal Internal Revenue Service (FIRS).  The VAT Directorate with Federal Inland Revenue Service is centrally located at the Regional and ITO offices throughout the Federation.
Although, it is designed to further enhance revenue generation for the government, the Federal Government is responsible for revenue collection and revenue allocation for development programme at the three levels of government in the country.  It is further expedient to state that the introduction of Value Added Tax since 1993 in Nigeria has contributed immensely to revenue base of government even as it is much broader than sales tax. (op-cit:22).
At the time Value Added Tax (VAT) was introduced in Nigeria, the necessary and required machinery for the proper implementation had not been put in place which includes publicity, tax enlightenment and adequate consumer education, Arowomole and Oluwakayode (2006:104).  Even as at then, many companies were yet to register with the necessary authorities for VAT and many tax prayers were confused.  These among others adversely affected the result of the directorate in terms of evaluation, the problems created by the inadequate preparation and lack of understanding of how Value Added Tax (VAT) was to work made it so unpopular (Ibid:107).
Introductory strategy was weak, as the introduction of VAT world over has a lot of prerequisites which certainly will affect the result/output positively, still on the part of government, due to the complexity of the tax and the need for co-operation of the tax payers proper preparation and enlightenment for the public cannot be over emphasized.  Adigun (2000:46).
Also, another problem envisaged is the efficient administration of VAT in this country is the adequacy of records kept by business owners as some organizations do not use in voice at all and since VAT relies much on adequate records and accounts, the system may not serve effectively and not yield properly in terms of the expected revenue anticipated.  This in turn can also give rise to overstated claims of tax refund and falsification of invoice, Ojo (2009:26).
More so, prices of VAT able goods are expected to rise, making final consumers to pay more which inadvertently make retailers in Nigeria to take advantage of the situation to exploit final consumers as a result of arbitrary increase in price.  As noted by Adigun (2000:47) business has seized the opportunity to increase profit margin on their goods whether VAT able or not which have resulted to excessive price increase that has further led inflation in the country.
This research is to achieve the following objectives:
a)           To examine the effect of Value Added Tax on Nigerian governance.
b)           To investigate the effect of Value Added Tax in Ondo State.
c)           To examine the factors militating against adequate collection of revenue through the Value Added Tax in Nigeria.
This research work is expected to further contribute to existings works of Value Added Tax and Taxation as a whole especially in Nigeria.  Also, the findings of the study has potentials of benefiting all categories of the citizenry on their obligations towards ensuring and assisting the government in executing further developmental projects.  It is also believed that this work will expose how VAT system can be further and maximally utilized to ensure it produces more, better and effective result towards ensuring improved socio – economic uplightment in Ondo State.
This work is also necessary in that the end product of it would serve as a strong reference to further researches and researchers who may embark on works an Value Added Tax now and later in future.
a)           That Value Added Tax has effect on governance in Nigeria.
b)           That Value Added Tax contributes to income generated by the state government of Ondo.
c)           That compliance towards remitting appropriately constitutes major impediment to socio – economic growth in Ondo State.
This study shall cover the effect of Value Added Tax in Ondo State between year 2005 to 2010.
Value Added Tax (VAT): This according to Aluko, (2002:17) is the increase in value of goods and services right from the process of their production to delivery to the final consumer.  While according to Bayeiwu (2005:7) it is a “consumption tax” and also a tax on spending borne by the final consumer of goods and services also often included in price paid.  It is a self assessment tax that is paid when review are finally being rendered as it is separately indicated in the tax invoice of the taxpayer.  It is a multi – stage tax imposed on Value Added to goods and services as to the proceed through various stages of production and distribution and to service as they are rendered.
Input tax allowable is the form of tax on goods purchased or imported directly for retail and goods which form the stock – in – trade used for the direct production of any new product on which the output tax is further chargeable.  Ojo (2005:78).  It further can be opined to be the tax on any overhead services and general administration of any business which otherwise can be expended through the income statement (Ibid:79). Adesina (2003:178) in like manners further opine that inputs unit VAT are the VAT amount paid by the VAT able person on his purchases of VAT able goods and services and according to the FIRS (1995:32) input unit VAT is paid on purchases and other VATed expenses.

Output tax according to Ojo (2009:77) is the kind of tax payable by manufacturers, wholesalers, importers and suppliers of VATable goods and services, they are expected to register within six (6) months of commencement of business and such a registered person is expected to charge and colud VAT on supplied goods and services and the amount so collected constitutes what is known as VAT output.  Simply put, output VAT is a VAT charged on VATable goods and services sold.  It is a VAT charged on sales Ibid (2009:78).
VATable Person: This can be defined as someone who deals in VATable goods and services examples are a limited liability company, a firm, a sole trader, individuals, club or society, companies among others, Ojo (2009:77 – 80).
Moreso, FIRS (1995:6) states that a VATable person is the one who trade in VATable goods and services.

Oluwakayode (2006:145) described tax as a compulsory contribution (either financially, materially or in terms of service efforts) imposed by a government upon its citizens to raise revenue usually levied on the income or property of persons or organizations on the production cost or sales prices of goods and services.  In what Adesina (2006:217) opined as the enforced contribution of money exacted pursuant to legislative authority.  Generally, it could be seen as a compulsory payment imposed by government on every citizen.
This is described as the most important of all credit system, as it is the most important source of verification of transaction FIRS (1994:34).  Of note also, it is document issued in tax office as an evidence of payment, that is, wherever a person supplies VATable goods and services to another person, he must issue tax invoice in support of the transaction and retain a copy for himself FIRS (2001:17).
This research work derived its data from both primary and secondary sources of data collection.  The primary source of data collection was through magazines, textbooks, journals, newspapers, internet, government gazette, publications and periodicals while the primary source will entail the use of questionnaire that will be distributed among people residing in Ondo State which shall contain producers, consumers, retailers and members of staff of Federal Inland Revenue Services (FIRS).  Also, both qualitative and quantitative analysis could be used.
In carrying out this research work, some of the problem encountered include that of improper records kept by producers and retailers while they also deliberately keep away necessary data and information which they perceive would cause problems for them as they under disclose there turnovers as well as tax evasion strategies they have engaged themselves in. 
Another limitation is the lack of required knowledge about taxation and Value Added Tax by most of the citizens, thus it could be said that the poor understanding of the people affected their responses to the questionnaire they were to respond to.  Also, in the cause of this research work I was confronted with the problem of secrecy in the civil service moist especially on the part of the civil servants in the employment of the Federal Inland Revenue Service (FIRS) in Ondo State.

This research work is divided into five chapters.  Chapter one is the introduction that contains; Background of the study, Statement of the Problem, Objectives of the study, Basic assumptions, justification for the study, definition of terms, methodology, scope of the study, limitation to the study and chapter organization while chapter two contains the review of literature.  Chapter three deals with the assessment of Value Added Tax in Nigeria while chapter four contains data presentation and analysis.  Lastly, chapter five covers the conclusion, summary of the work and recommendation.

Adesina (2003): Taxation and Tax management in Nigeria, Lagos Mendlan Associates.
Adesina, W. (2005): Principle of Nigerian Taxation, Practical Approach: Ile – Ife; Cader Production.
Adigun (2000): Elements of Tax management and Practice in Nigeria Lagos sagitra Tax publications.
Adigun (2006): Selected Topics on Nigerian Taxation: a simplified approach; Akure Charity Associates.
Aluko (2002): Tax Planning and management and Practice Q & A. Lagos, Heremunn.
Arogundade, J.A. (2010): Nigeria Income Tax and it’s International Dimension; Ibadan; Spectrum Books Limited.
Aromowole & Oluwakayode (2006): Element of Taxation Lagos libriserve Ltd.
Aromowole (2006): Paper on Taxation and Economic Development Lagos sparbox Publications.
Bayeiwu, F.A. (2005): Basis Understanding of Taxation: Lagos; Hazekem Venture Publisher.
Federal Inland Revenue Service (1995): VAT Training Note Module VII.
Ojo S. (2005): Fundamental Principle of Nigerian Tax: Lagos Sagrobra Tax publication.
Oluwakayode, E. (2006): Administration of Petroleum Profit Tax in Nigeria: Lagos; King Julius Publisher.
Owoyori, A. (2008): Tax, Tax Practice & Tax Administration: Lagos, Fan – Right Ltd.


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