CHAPTER ONE
INTRODUCTION
Taxes in modern economics are the most important source of government revenue. The are compulsory levies that are regularly imposed, and as a rule, not designated for a special purpose they are regarded as a contribution to the general revenue pool from which most government expenditure are financed. Taxation occupies a principal position in the Nigerian economy as in other countries. Value – Added –Tax was introduced in Nigeria currently to replace the old sales tax. The old sales tax, has been in operation under the federal government legislated decree No 7 of 1986, but it is operated on the basis of residence However , the newly introduced value added tax is operated under the federal government legislated decree No 102 of July 1993. VAT is a form of indirect tax whose burden is shied from the manufacturers through the distribution channels to the final consumer who then bears the final burden Value added tax came into effect on 1st January 1994 the tax is a tax on consumption.
VAT is a multi stage tax which is impose on goods and services as they pass through the various stages in the business chain. From manufacturing, importation through wholesales to relating. The payment is borne by the final consumer because it is included n the selling price ,it’s administration involves a credit mechanism system whereby a taxable person who is charged tax on the supplies to his entitled to set o that tax against the tax charged by him is supply to other persons , this making him only accountable for the excess of the tax on the supplies from him over the tax on the supplies to him. The tax paid or payable by a taxable person on the importation of a business carried on by him is known as his ‘input tax’ while the tax paid on the supplies made by him is known as his ‘out put tax’. The VAT payable in essence is the output tax , less input tax. The tax on the supply of goods or services is chargeable only where:- n The supply is a taxable supply and The goods and services are supplied by a taxable person in the course of a business carried on by him and is payable by the person supplying the goods and services .
VAT in Nigeria is computed at a flat rate of 5% of the price of the goods and services. This is affected on behalf of the government by business and organization that have registered for VAT purpose . VAT is operated by over ,sixty countries including some countries on the west of Africa . In Nigeria , two agencies of the muted nations organization the international monetary fund [IMP] and the world bank which are closely identified with the establishment and monitoring of the structural Adjustment programme [SAP] had since 1987 been advising that the Nigeria tax system need to be reformed so that the government will be less dependant on the petroleum revenue generation . In an attempt to effect this reformation of tax system , the federal government set up two tax study groups in 1991 . The federal ministry of finance and economies development set up one study group to study and make recommendation on the reforms needed in direct taxes in Nigeria . The federal ministry of budget and planning set up another study group which is more relevant to our study on indirect taxes and inaugurated on 26th April in 1991 with the objectives of among other to : -Shift taxation towards consumption rather than saving . – Improve the administration of indirect taxes. – Provide incentives for export production. – Maintain a fairly ever tax incidence. – Reduce dependence on oil revenue.
The general guideline for the establishment of value added tax in Nigeria was given by this committee . value Added tax was introduced into Nigeria economy tax system in January 1st , 1994 ,following the elegant provision of decree No .102 of July , 1993 but it has been in operation in other countries before it was introduced in Nigeria . In the Nigeria context, it is a consumption tax of five percent [5%] imposed on every vat able goods and services of every stage of production The buyers of goods and services in the case of value Added tax are taxed and this is country to sales tax where the produces or sellers of goods and services pay the tax . The final cousumers of these vat able goods and service bear the burden of the tax . AS a result the project topic which form the center of the study that is the implications of VAT on the payers .
1.1 STATEMENT OF THE PROBLEM
Much as it is known that VAT will increase the revenue base of Nigeria , it cannot be free from some problem . In view of the compulsory nature of and strong aversion of tax [VAT] payment effects must be constitute made to make any tax system as attractive and as conveniently as possible . This can be achieved by regularly evaluating the tax system with a known set of criteria modified to suit the pervading circumstance of time . The Question which this research work aims at answering could be summarized into the following problem statement : 1 Corporate performance could be improved upon under the value added tax. How realistic is this assumption ?
