1.1Background of the study
Taxation is the central part of modern economic development. Their importance is not only due to the fact that it is by far the most important of all incomes, but also to the severity of the problems caused by the current high tax burden (Greene, 2011). The main objective of taxation is to generate revenue. In a welfare state, a large amount of tax is required to meet its obligations. According to Musgrave (2008), taxation is used as a means to achieve certain social goals, ie as a means of redistributing wealth and reducing inequalities. Taxation in a modern government is therefore not only necessary to generate the revenues needed to cope with the ever-increasing expenditure on administration and social services, but also to reduce income and wealth disparities. Taxation is also needed to withdraw money that would otherwise go into consumption and increase inflation.
In most countries around the world, the goal is to achieve rapid overall development through optimal tax collection and a broader income base. In order to achieve this goal, many countries of the world, especially developing countries, have selectively introduced new forms of taxation to boost their income opportunities in order to improve socio-economic conditions. their citizens and a rapid economic development. Countries (Iorun, 2012). One of these forms of taxation is value added tax (VAT), this impressive VAT performance in almost every country in which it was introduced. According to Ajakaiye (2000), he clearly influenced the decision to introduce VAT in Nigeria on 1 September 1993, although the actual transaction did not begin until 1 January 1994. VAT is a relatively simple excise tax to manage and difficult to avoid. adopted by many countries of the world (FIRS circular, 1999). To date, the evidence supports the view that VAT revenue is already a significant source of revenue in Nigeria and that VAT revenue is a fairly accurate measure of economic growth. A purchase that increases performance with the economy.
VAT is charged on the consumption of goods and services. This includes goods and services imported into the country. It is calculated throughout Nigeria at a fixed rate of five (5%). The 5% Exit Tax is calculated for all goods and services offered by a registered person and the tax burden is compensated by the end user (Ajakaiye, 2000). The broadening of the VAT base is leading to a sharp increase in federal revenue, indicating that the consumption patterns of the majority of Nigerians are increasing. The increase in consumption habits creates a market and has a positive effect on the economic activities of the country (Unegbu and Irefin, 2011). The study will examine the impact of VAT on Nigeria’s tax system.
1.2 Problem statement
Nigeria intends to increase the percentage of value added tax on goods and services due to its importance for income, economic growth and development by turning away from direct taxation a consumption based indirect taxation system in line with best practices worldwide, to achieve a stable flow of oil revenues and reduce corporate and income taxes. However, citizens have different ideas (including: too much burden on the end user, inflation and higher prices for fuel pumps). This view of the majority of Nigerian citizens made research on the impact of VAT on the Nigerian tax system relevant. It is therefore necessary to understand, on the basis of empirical facts, the impact of VAT on the Nigerian tax system.