Problems And Prospect Of Value Added Tax (VAT): A Case Study In Enugu State

Project and Seminar Material for Business Administration and Management BAM

Project and Seminar Material for Business Administration and Management BAM


Abstract


The topic value Added Tax, which was introduced in the year 1993, is a tax on consumption born by the final consumer by paying five percent (5%) on any valuable product whether local produced or imported.
The researcher data collection was on two bases, which include the primary, and secondary. The primary data was the information got by the researcher when the researcher conducted on oral interview with the officials of the federal in land Revenue service, the Accountant General of Enugu state and some of his office staff, and Enugu North Local Government Council staff who are basically concerned with the collection and the disbursement of the money from value Added Tax.

The secondary data was got from the value Added Tax information circular No 93/ 04 dated 20th August 1993 and 93/ 05 dated 5th Nov. 1993. Other were value Added Tax Decree No. 102 of 1993 and principle and practice of Management by Breech E.F.L of 1975.
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The data collected was presented and analyzed accordingly and the following findings were made; that there were, “Registered person” at the time of this project which in actual sense is a success; that the money collected by the federal inland Revenue service officers the “Registered persons” were promptly recorded and paid to the central Bank of Nigeria in on the importance of value Added Tax offices has not been established in the local Government use the money as it suits them; and that the payment of value Added Tax rate through central Bank in each state to the central Bank in Abuja is a delay tactics which hinders the sharing at the appropriate time.

Based on the above findings, the following recommendations were made. That value Added Tax offices be established in all local government area to effect prompt payment and curb the value Added Tax rate evaders. By its establishment, it will become a household name in all the local government areas, that a specific project be mapped out by the federal Government for the utilization of the money realized from the Added Tax: that a specific account be opened into which the money realized will be paid instead of through the central Bank; and that a special Board be established for the sharing of the money realized.


Table of Content


Preliminary Page(s)

  • Title Page
  • Approval Page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table Of Content

Chapter One

1.0 Introduction

  • 1.1 Background Of The Study
  • 1.2 Statement Of The Problems
  • 1.3 Purpose Of The Study
  • 1.4 Research Questions
  • 1.5 Significance Of The Study
  • 1.6 Scope And Limitations
  • 1.7 Definition Of Terms

Chapter Two:

2.0 Literature Review

  • 2.1 Definition Of Value Added Tax (Vat)
  • 2.2 Contribution Of Vat
  • 2.3 Offences And Penalties
  • 2.4 Method Of Collection And Allocation

Chapter Three:

3.0 Research Design And Methodology

  • 3.1 Methods Of Research
  • 3.2 Source Of Data Secondary/Primary
  • 3.3 Population And Sample Size Determination
  • 3.4 Description Of Respondents
  • 3.5 Treatment Of Data

Chapter Four:

4.0 Data Presentation And Analysis

  • 4.0.1 Presentation, Analysis Of Data
  • 4.1 Summary Of Results

Chapter Five:

5.0 Summary Of Findings, Conclusion And Recommendation

  • 5.1 Findings
  • 5.2 Conclusions
  • 5.3 Recommendations
  • Appendices
  • Bibliography
  • References

Chapter One


Introduction

1.1 Background Of The Study

Value Added Tax (VAT) is a system of tax recently introduced in Nigeria, which is based on imposition, and charging 5 percent tax on certain goods and services imported or produced locally in Nigeria. The idea of introducing Value Added Tax in Nigeria came from the report of the study groups set up by the Federal Government in 1991 to review the entire Tax System.

Value Added Tax was proposed and a committee was set up to carry out feasibility studies on its implementation. In January 1993 government agreed to introduce Value Added Tax by the middle of the year and it was later shifted to 1st September, 1993. Value Added Tax is a replacement of the existing sale’s Tax, which has been in operation under Federal Government Legislated Degree N0. 7 of 1986.

In some advanced countries of the world, this system of taxation had been in operation and its enormous benefits being harvested. These countries are United States of America Britain, China and a host of others. Nigeria on her own wants to take the bull by the horn by introducing value added tax like other benefiting countries earlier mentioned above despite all pitches that may appear to impede the good intentions of government to introduce and implement the system.

The value added tax system has been introduced and made to get its location offices in all the 36 states of the Federation and Abuja. To ensure that the system works most effectively and efficiently so that the main purpose or goal for which the system was introduced is achieved, the then federal military government made a decree that backs its smooth take off. The value Added Tax System has taken off in earnest and its application on various sectors of our economy in Nigeria and some states.

Especially Enugu, seems to be producing good and bad effects on the economy generally.

The good effect of value added tax include the reduction of the tax evasion, provision of incentives to exporters, reduction of government excessive dependence on the oil sector as well as enhancing the provision of social infrastructure.

It produces bad effect on the general economy on the ground that in some sectors of our economy like manufacturing, its application especially on industrial machines, raw materials and other manufacturing inputs would cripple the growth of the real and exports sectors.

Despite this and high hopes in official circles that the newly introduced Value Added Tax would rest government’s over dependence on the oil revenue for its programmes, its implementation appears to hit the brick walls. This is because there is fear that the tax policy may actually escalate the rate of socio-economic disequilibrum in the economy.

Enugu State, which is the scope of this project, was created on 27th August 1919 with particular reference to Enugu North Local Government Council, which was also created in 1991.


1.2 Statement Of Problem

Value Added Tax and its introduction into the economy is a giant revenue generating mechanism, which will go a long way to boast revenue generation in the economy. It is based on this premise that there becomes the need to examine critically the mechanism or how far the imposition system of value Added Tax in various sectors of the economy has failed.

The study will therefore address the following issues.

  1. How the money is being collected
  2. How t he money is disbursed
  3. What the money is used for after disbursement

1.3 Purpose Of The Study

The following are the purpose of the study of Value Added Tax:

  1. To discover the techniques used in collecting the revenue.
  2. To determine the type of products and services which are vatable non-vatable.
  3. To understudy the distribution and usage of the money collected from Value Added Tax.

1.4 Research Question

The following research questions were used for the purpose of this project. They include:

  1. How is Value Added Tax collected and at what percentage.
  2. How is the money collected disbursed and at where is it disbursed;
  3. When does each money collected by Value Added Tax officials be disbursed?
  4. At what percentage is the money collected be disbursed to states and local government councils.
  5. Who is in charge of collecting both state and local government councils share;
  6. How is the money collected after sharing by each state and local government council used.

1.5 Significance Of The Study

The study would be useful in modifying the economy of Enugu State as it stands the chance of adding more revenue to the already existing revenue of the state. The study also stands as an eye opener to the citizens of Enugu State in highlighting them the amount that comes into the state purse through Value Added Tax.


1.6 Scope And Limitation

The scope of this project is Enugu State with particular reference to Enugu North Local Government Council.

Limitation

The time span for the research was limited as one had to do normal lecture with the research at the same time. Due to lack of time, some areas that needed attention for efficient and accuracy of this project was not properly attended to.

Poor response from the workers was one of the limitations in this project. Some workers that were consulted for useful information were usually reluctant to give their opinion about the matter for fear of being victimized by the management as one who unofficially leaks the confidential information of the establishments or ministry.

Another issue was the distance. The distance between institute of management and technology Enugu and the 32 local government councils is quite much and that deprived the researcher the opportunity to call at any time the author had a problem on the issue of Value Added Tax.

Moreover, visits to all the 32 local government councils were numbered unlike what would have been in all the local government councils were situated in Enugu North Local Government Council.

The author also encountered financial problems. As a poor student always with little money within his possession could not frequent his visit to the 32 Local Government Councils in Enugu State as needed for a more comprehensive and a well researched project. This financial predicament contributed immensely as the setback and the deprivation of the glorious look this project would have achieved.


1.7 Definition Of Terms

1. Value Added Tax (VAT):

This is tax on spending. The tax is born by final consumer of the goods and services because it is included in the price paid.

2. Federal Inland Revenue Services (FIRS):

This provides a free information and advisory services to help you. Federal Inland Revenue Services also collect the money on value added tax and pays same to the Central Bank of Nigeria within the state it operates. The Central Bank of Nigeria within the state pays same to Central Bank of Nigeria, Abuja.

3. Registered Person (RP):

This is any person registered under section 8 of the Decree.

4. Authorized Office (AO):

This means an officer who has been authorized by the board to perform any function under or in pursuance of this Decree.

5. Board:

This means the Federal Board of Inland Revenue.

6. Tax Period (TP):

This means one calendar month commencing from the beginning of the month to the end of that month.


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