APPRAISAL OF THE EFFECTIVENESS OF VALUE ADDED TAX ADMINISTRATION IN NIGERIA

  APPRAISAL OF THE EFFECTIVENESS OF VALUE ADDED TAX ADMINISTRATION IN NIGERIA

ABSTRACT

The purpose of this project is to determine to identify strategies for administrative implementation of the variables amongst others. Also to identify and appraise administration of VAT in Nigeria, highlight the loopholes and suggest solution.

From the research carried out, the stuffy reveals that Value Added Tax is an important element in the life of any nation and also that the revenue generated by the government is not only beneficial to them as so many Nigerians thinks but also to the people as it is been used for the effective administration of the country. The research also reveals that the payment of value added tax dues by so many people is always seen with hatred and as much, the practice of tax evasion and avoidance have a negative effect on tax generation.

Finally, the study reveals that if more revenue can be generated through taxation, it will lead to an effective administration by the government putting into consideration a true government who is ready to serve the people.

Above all this research work recommends that in order for an efficient and effective tax generation and administration, the government should try to put in place provision of more staffs and good welfare for them so as to perform their jobs effectively. It also recommends that a good habit of administration should be inculcated by the government in order to gear the citizens to pay tax.

TABLE OF CONTENT

Pages

Title page                                                                                         i

Certification                                                                                     ii

Dedication                                                                                        iii

Acknowledgement                                                                           iv

Abstract                                                                                           vi

Table of contents                                                                             vii

CHAPTER ONE

1.1    Introduction                                                                           1

1.2    Objectives of study                                                                2

1.3    Relevance of study                                                                3

1.4    Significance of study                                                             4

1.5    Scope of study                                                                       5

1.6    Statement of problem                                                           5

1.7    Research hypotheses                                                            6

1.8    research question                                                                  7

1.9    Limitation of the study                                                         7 

CHAPTER TWO

LITERATURE REVIEW

2.1    Introduction                                                                           8

2.2    Conceptual clarification of taxation                                     11

2.3    Elements of effective administration of VAT                       30

2.4    Productivity in revenue collection                                        30

CHAPTER THREE

RESEARCH METHODOLOGY

3.0    Introduction                                                                           50

3.1    Research design                                                                   50

3.1.1 Types of research method                                                    51

3.2    Population of the study                                                       51

3.3    Data collection instrument                                                   51

3.4    Validation of an instrument                                                 51    

3.5    Reliability of the Instrument                                                52

CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION OF RESULT

4.1    Introduction                                                                           53

4.2    Data Analysis                                                                         56

4.3    Formation of model                                                               56

4.4    Specification of Model                                                           58

4.5    Analysis of the estimated models                                        66

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1    Summary                                                                                71

5.2    Findings                                                                                  72

5.3.   Recommendations                                                                 77

5.4    Conclusion                                                                             86

CHAPTER ONE

1.1   INTRODUCTION

For a country to exist in harmony, the government of such country must live up to its public economic and social obligation by providing economic and social amenities reduced or subsidized commercial rate.

To do so, this will normally involve huge expenditure and therefore, will also require revenue source.

Additionally, government at various levels will need to settle operational costs to be able to offer the aforementioned social amenities; one of the various sources of fund available to any government for revenue is Taxation. This could either be in form of direct or indirect tax or both.

Ojo (1998) described taxation as “the concept and the science of imposing tax on the citizen”.

Summerfield (1986) described Revenue as referring to a monetary quality earning to a monetary quality during a given time period regardless of the amount collected.

One of the forms of indirect tax is Value Added Tax (VAT) hereafter referred to VAT.

The introduction of VAT in Nigeria virtue of Decree No 102 of 1993 which took effect from 1st January 1994 mark the phasing out of the Sales Tax which has been in force since 1986 by virtue of the ales Decree No 7 of 1986.

VAT was adopted in Nigeria because the federal as well as the state government need additional resources for development. This revenue can only come from increase in taxation and productive effort. The need of the government for more revenue cannot e over-emphasized particularly as revenue from crude oil which is the most important source of oil in the international market continues to influence, making it necessary for government to explore pother source of review.

Similarly, revenue available from oil and present non-oil sources mainly conventional and traditional taxes were not sufficient to meet public needs, as expenditure continue to rise in an era of increased socio and economic problems, particularly the pressure from population.

1.2       OBJECTIVES OF STUDY

The purpose of embarking on these research works are:

1.      To collect addition on the subject and develop a mechanism for improving on existing level of knowledge and

2.      To identify strategies for administrative implementation of the variables amongst others.

a.       Identify and appraise administration of VAT in Nigeria, highlight the loopholes and suggest solution.

b.      Highlight the effect of VAT on revenue generation of the country.

c.       To consolidate and modernize the tax system n order to provide a basis for strong revenue growth and flexible fiscal management.

d.      To provide incentives for export production

e.       To distribute the burden of taxation more evenly across different goods and services through a broader coverage, so as to avoid multiple taxation.

f.        Identify problems faced by VAT administrator and how they can be abated.

g.       Suggest ways of making the operation and administration of VAT better than what it is now.

h.      To develop an approach to reduce the consumption of luxuries and curb the increase in the consumption of non-essential. The approach by implication would tax non-consumption goods relatively higher and minimize impact on essential goods and services used by low income earners and formulate a program of work for the accomplishment of the assignment.

1.3       RELEVANCE OF STUDY

The principal reasons that prompted the introduction an implementation of VAT I Nigeria are enumerated under the historical background of VAT in Nigeria. VAT was set out to meet some targets, according to E.I. Ijewere, chairman Modified VAT (MVAT) committee. VAT is a tax imposed on value, which the supplier or tax seller of a goods or services adds to the public sectors.

In addition, the information circular 9304 of the FIRS advanced some reasons justifying the replacement of sales tax with the Value Added Tax rationales put forward by FIRS are as follows:

1.      VAT is equipped to ensure voluntary compliance because of the multistage collection and credit mechanism involved.

2.      Tax collection at the point of importation is easier under VAT than under sales tax where the imported goods are levied at the point of retail after leaving the ports.

3.      VAT has higher revenue yielding potential than the retail sales tax.

4.      VAT is inherently more comprehensive because it is better equipped to tax services than the sales tax.

5.      The use of invoice under VAT provides self-police mechanism, as VAT payers demands invoice so that they can make valid credit or refund claims

6.      The use of invoices creates a well-defined audit trail, which the tax authority can follow.

It is also easier to integrate VAT audit with some tax audit since VAT is  comprehensive and restricted to the retail stage as the sales tax.

This study would serve as a research work that would further enlighten the level of subject scope especially vatable resource on the importance and usefulness of VAT.

1.4       SIGNIFICANCE OF STUDY

Taxation is a vehicle of economic and administrative development in an economy and VAT has provided to be a very useful tool of economic and fiscal measure in Nigeria. If VAT system is improved, it will be a great boost to the government revenue and the economy at large.

The study will provide explanation and reasons for introduction of VAT in Nigeria it will identify differences in the administration and implementation of VAT, it will offer suggestion to problems faced by the administrators.

1.5       SCOPE OF STUDY

1.      Examination of the effect of Value Added Tax on final consumer, companies involved and the economy as a whole.

2.      Interviewing, questionnaire as well as a literature review.

3.      Suggestion of strategies for successful implementation of Value Added Tax.

4.      List of product, service and companies affected by the policy of Value Added Tax.

1.6       STATEMENT OF PROBLEM

The introduction of Value Added Tax (VAT) requires a lot of preparation and enlightenment on part of government because of complexity of the tax and the need for co-operation of taxpayers. However the followings are the major problems confronting the implementation, registration and collection of VAT in Nigeria.

i.        Lack of proper education on the subject matter

ii.       Inadequate of records kept by businesses.

iii.      Inadequate preparation and lack of understanding of how VAT works and what government intends to do with the revenue tends to make the tax unpopular.

iv.      Increase in the price of goods and services that can result in inflation, growing unemployment and under-utilization of industrial capacity.

v.       Lack of confidence in the capacity of government judiciously allocated fiscal resources.

1.7   RESEARCH HYPOTHESES

Five hypotheses will be tested to show the level of significance of estimated parameters and the suitability or otherwise of formulated models.

The various hypotheses are:

1.     H0: That Value Added Tax administration and implementation has no significant effect in government source of revenue.

          H1: That Value Added Tax administration and implement has significant effect in government source of revenue.

2.      H0:  That Value Added Taxation in Nigeria does not constitute double taxation on goods and services.

          H1: That Value Added Tax double taxation on goods and services.

3.      H0: That the incidence of state creation in Nigeria cannot positively affect the realization and administration of Value Added Tax (VAT).

H1: That the incidence of state creation in Nigeria can positively affect the realization and administration of Value Added Tax.

4.      H0: That there is no relationship between appraisal of the effectiveness on VAT and Gross Domestic Product.

H1: That there is relationship between appraisal of the effectiveness on VAT and Gross Domestic Product.

5.      H0: That Value Added Taxation should be abolished.

H1: That Value Added Taxation should not be abolished in Nigeria.

1.8        RESEARCH QUESTIONS

In the course of this study, some questions came under consideration, these questions include:

1.      How effective is the administration of VAT system in Nigeria?

2.      What are the effects of Value Added Tax on economy?

3.      Does VAT not constitute double taxation on consumers?

4.      What benefits accrue to tax payer?

5.      What steps can be taken to ensure that the full potentials of VAT are realized?

6.      What are the likely prospects of VAT?

7.      How does VAT influence consumer behaviour?

1.9       LIMITATION OF STUDY

It is obvious that hardly can there be any administrative research work like this, without limitations, has monopoly of knowledge, and the facts that human beings are rational. Since, the material for carrying out this research work may not provide conclusion answers to all the issues relating to administrative level of operation.

Difficulties in getting relevant information, textbooks and relevant journals to the studies are another inhibits factor. The available time and financial resources also contributed but not significantly to the limitations of this research and therefore, this inquiry many not exhaust all that is necessary for maximum exposure.

This however, leaves room for other researchers whom may want to investigate further.

 Project Topics and Research Project Materials 

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How To Write Chapter Three Of Your Research Project (Research Methodology)

  • Methodology In Research Paper


    Chapter three of the research project or the research methodology is another significant part of the research project writing. In developing the chapter three of the research project, you state the purpose of research, research method you wish to adopt, the instruments to be used, where you will collect your data, types of data collection, and how you collected it.

    This chapter explains the different methods to be used in the research project. Here you mention the procedures and strategies you will employ in the study such as research design, study design in research, research area (area of the study), the population of the study, etc. You also tell the reader your research design methods, why you chose a particular method, method of analysis, how you planned to analyze your data.

    Your methodology should be written in a simple language such that other researchers can follow the method and arrive at the same conclusion or findings.

    You can choose a survey design when you want to survey a particular location or behavior by administering instruments such as structured questionnaires, interviews, or experimental; if you intend manipulating some variables.

    The purpose of chapter three (research methodology) is to give an experienced investigator enough information to replicate the study. Some supervisors do not understand this and require students to write what is in effect, a textbook.

    A research design is used to structure the research and to show how all of the major parts of the research project, including the sample, measures, and methods of assignment, work together to address the central research questions in the study. The chapter three should begin with a paragraph reiterating the purpose of research. It is very important that before choosing design methods try and ask yourself the following questions: Will I generate enough information that will help me to solve the research problem by adopting this method?

    Method vs Methodology

    I think the most appropriate in methods versus methodology is to think in terms of their inter-connectedness and relationship between both. You should not beging thinking so much about research methods without thinking of developing a research methodology.

    Metodologia or methodology is the consideration of your research objectives and the most effective method and approach to meet those objectives. That is to say that methodology in research paper is the first step in planning a research project work.

    Design Methodology: Methodological Approach

    Example of methodology in research paper, you are attempting to identify the influence of personality on a road accident, you may wish to look at different personality types, you may also look at accident records from the FRSC, you may also wish to look at the personality of drivers that are accident victims, once you adopt this method, you are already doing a survey, and that becomes your metodologia or methodology.

    Your methodology should aim to provide you with the information to allow you to come to some conclusions about the personalities that are susceptible to a road accident or those personality types that are likely to have a road accident.

    The following subjects may or may not be in the order required by a particular institution of higher education, but all of the subjects constitute a defensible in metodologia or methodology chapter.

    Click here to complete this article - How To Write Chapter Three Of Your Research Project (Research Methodology)

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