THE EFFECT OF INDIRECT TAXATION ON CONSUMPTION IN NIGERIA
ABSTRACT
This study was intended to evaluate the effect of indirect taxation on consumption in Nigeria. This study was guided by the following objectives; To evaluate the effects of indirect taxation on consumption in Nigeria.To identify various forms of indirect taxation imposed in Nigeria and their respective effects.To determine other factors that affect prices of goods and consumption in Nigeria.The study employed the descriptive and explanatory design; questionnaires in addition to library research were applied in order to collect data. Primary and secondary data sources were used and data was analyzed using the chi-square statistical tool at 5% level of significance which was presented in frequency tables and percentage. The respondents under the study were 32residents of Abuja. The study findings revealed that there is a significant relationship between indirect taxation and consumption in Nigeria; based on the findings from the study, efforts should be made by the Nigerian government and stakeholders in banning or reducing indirect taxation to encourage consumption.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The mono-product status of the Nigerian economy has received series of criticisms in recent times. According to Okonjo-Iweala (2012), without the diversification of Nigerian revenue from oil, the economy will soon collapse. Recently, Nigeria’s dependence on crude export for revenue based on the projected price and assumed production is 80%. However, oil revenue has accounted for over 76% of government revenue. (Ebosele&Adekoya, 2012).
The implication of this overly dependence on oil revenue is the boom-and burstnature of the economy (Akpokodge, 2000). Against the backdrop of the need to diversify the economy of Nigeria, taxation has come extremely handy. Taxationis made up of two broad components and several subcomponents and basically we have indirect and direct taxation. For purposes of this study, emphasis is on indirect tax considering its eect
consumption in Nigeria. However, an indirect tax (such as sales tax, per unit tax, value added tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer), this is the major reason why it has great influence on consumption. The intermediary later files a tax return and forwards the tax proceeds to government with the return. In this sense, the term indirect tax is contrasted with a direct tax, which is collected directly by government from the persons (legal or natural) on whom it is imposed (Wikipedia, 2015). An indirect tax may increase the price of a good to raise the price of the products for the consumers. Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately, the manufacturer transfers the burden of this duty to the buyer of the car in the form of a higher price (Lim, 2008). Thus, an indirect tax is one that can be shied or passed on. This is a function of the relative elasticity of the supply and demand of the goods or services being taxed. Under this definition, even income taxes may be indirect.
