Key Features:

Chapters : 5
No of Pages: 114

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Introduction:

1.1 BACKGROUND OF THE STUDY
Countries seeking to improve its revenue generation would opt for a concept enabling it to best realize its objective with due regards to its peculiar socio-economic make-up, one of the way is by taxation.
Value Added Tax (VAT) was first introduced in France in 1954; it has been embraced by well over seventy countries all over the world. Japan, Canada, the state of Michigan and many African countries.
According to the federal revenue service (FIRS), the idea of introducing VAT in Nigeria originated from the report of a study group set up by the federal government in 1991 to review the entire tax system. Subsequently, a committee as set up to carry out feasibility studies of its implementation. It should be noted that the committee was not requested to carry out any analysis of the impact of the tax, neither was there any active debate among the various interest group such as the organized private sector, labour unions and academic as well as other professionals, through which certain aspect of the impact might have been considered and taken into account in its design and implementation.
Eventually, government agreed to introduce VAT but the actual implementation did not commence until January 1994 after the promulgation of the value added tax decree No. 102 of 1993. According to the decree, a vatable organization is an existing manufacturer distributor, importer or supplier of goods and service.
Firstly, value added tax is a single rate (5%) tax which makes it easier to administer. Secondly it adopts the input – output tax mechanism, which makes itself policing specifically, although it is a multiple stage tax, it is expected to have a single stage tax on consumers price and should not add more than the specified rate to the consumers price no matter the number or stage at which the tax is paid. In essence, it is the official view that the VAT should not be cascading what so ever since the tax liability of on output and VAT on inputs. In other words, the credit method of connection should eliminate any cascading effects.
It should be clear that the Nigerian VAT is a replacement of the sale tax which had been in operation under the federal government legislated decree No. 7 of 1986 which had a narrow base and discriminated against locally produced goods and services as it exclude import. The sale tax revenue accrued exclusively to the state government, while the VAT revenue is now shared by all level of government. As such it can be assumed that the VAT revenue is not sterilized but injected through increased government finance consumption expenditure.
Moreover, VAT is paid on virtually all goods and services but the credit system implies that VAT revenue received by government should be devoid of any cascading.
Value Added Tax is a consumption tax levied in value of goods and services in value in the cause of their production or supply (Anyanaduba: 1999). Value Added Tax is tax on the supply of goods and services which government reasoned it will be virtually impossible to avoid tax (Ama, 2000).