ABSTRACT
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.
TABLE OF CONTENTS
Title
page
Certification
Dedication
Acknowledgement
Abstract
Table
of content
CHAPTER ONE:
INTRODUCTION
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
References
CHAPTER TWO
LITERATURE
REVIEW
References
CHAPTER THREE
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
References
CHAPTER FOUR:
DATA PRESENTATION AND ANALYSIS
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
CHAPTER FIVE:
SUMMARY,
CONCLUSION AND RECOMMENDATION
5.1 Summary
5.2 Conclusion
5.3 Recommendations
REFERENCES
QUESTIONNAIRE
CHAPTER ONE
1.1 BACKGROUND
TO THE STUDY
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).
1.2 STATEMENT
OF THE PROBLEM
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.
1.3 OBJECTIVES OF THE STUDY
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.
1.4 JUSTIFICATION FOR THE STUDY
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.
1.5 BASIC ASSUMPTIONS
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.
1.6 SCOPE OF THE STUDY
This
study shall cover the effect of Value Added Tax in Ondo State
between year 2005 to 2010.
1.7 DEFINITION OF TERMS
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 UNIT (VAT)
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 UNIT (VAT)
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.
TAX
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.
TAX INVOICE
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).
1.8 RESEARCH METHODOLOGY
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.
1.9 LIMITATION TO THE STUDY
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.
1.10 CHAPTER ORGANIZATION
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.
REFERENCES
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.
