PARATIVE
ANALYSIS OF VALUE ADDED TAX REVENUE AMONG DIFFERENT SECTOR IN NIGERIA
CASE
STUDY OF FEDERAL INLAND REVENUE LAGOS STATE
ABSTRACT
The
research provides a conceptual and analytical study in comparative analysis of
value added tax Revenue among different sector in Nigeria; focusing on the care
study of federal Inland Revenue Lagos state. The study assesses the performance
of the different sectors in the Nigeria economy in contributing to VAT revenue
with a view to showcase their effect in economic growth.
INTRODUCTION
Tax
can be defined as a compulsory contribution to support a government levied on
personal, property income, commodities, transactions etc. now at a fixed rate
mostly proportionate to the amount in which the contribution is levied (Crowder
1998) as it can equally be confirmed in (Tilley 1981) Oyebangi(2006) identified
two major forms of taxes, these are;
1. Direct
Taxes: these are taxes imposed by the government on the income of individuals
and companies which are usually paid by the person or persons or whom it is
legally imposed. Examples are Personal Income Tax(PIT), Company Income
Tax(CIT), Capital Gains Tax(CGT), Withholding Tax, Petroleum Profit
Tax(PPT),Educational Tax and Capital
Transfer Tax(CTT). The PIT is imposed on individual earnings, CIT on profit of
organizations/corporate bodies, PPT on oil purchasing/ exploration Companies,
CGT on profit from sale of capital assets and CTT on the transfer of property
inter-Viro and transfer on death. However CTT on profit was abrogated in 1996.
2. INDIRECT
TAXES: these are taxes by the government on goods and services. Indirect Taxes
can be avoided because it is payable only if one buys the commodities or enjoys
the services in which the tax is imposed and it involves little administrative
cost compared to direct taxes. It does not create dis-incentive to efforts used
in the case of direct taxes and hence does not affect the economic functions of
the tax payers. Examples of indirect taxes in Nigeria according to Oyebanji(2006)
are;
A.
Import Duties/Tariffs: levied on
goods imported into the country.
B. Export Duties: levied on goods produced for
export.
C
Excise Duties: imposed on specific goods produced in the country.
D.
Consumption Tax: levied on the purchase any commodity or employment of a
service. Examples are sales
Taxes and value added Tax (VAT). The characteristics of effect of consumption
tax is that it is not included in the price tag by the affected commodity
rather it is added as a percentage of the total of invoice in the goods or
services rendered.
However this research
aims to provide a comparative analysis of value added Tax Revenue among
different sector in Nigeria. a case study of federal Inland Revenue of Lagos
state.
CHAPTER
1
1.1
BACKGROUND
OF THE STUDY
According to Oseregho and
Associates as quoted by Aderdi, SannidAdesina(2011),VAT is a consumption tax
levied at each stage of the consumption chain and borne by the final consumer
of the product or service. Each person is required to change and collect VAT at
a flat rate of 5% on all invoiced amounts on all goods and services not
exempted from paying VAT, under the value added Tax Act 1993 as amended. Where
the VAT collected on behalf of the government (output VAT) in a particular
month is more than the VAT paid to other persons (input VAT) in the same month,
the difference is required to be remitted to government on a monthly basis by
the taxable person. Where the reverse is the case, the tax payer is entitled to
a refined of the excess VAT, i.e., no VAT is payable on exports. Also VAT is
payable in the currency of the transaction under individual goods or services
are exchanged. The precedence for the introduction of VAT in Nigeria was based
on the fact that taxation as an instrument of fiscal policy is vital in
generating revenue to finance the activities of the government, redistribute
income, stabilize the economy as well as stimulate growth and development. The
research intends to investigate the performance of different sectors in the
Nigerian economy in contributing to VAT revenue using Lagos state Federal
Inland Revenue as a case study.
1.2
STATEMENT
OF THE PROBLEM
VAT was introduced to contribute
to the economic growth of the nation by providing revenue to government to
accelerate developments. However this goal is still far from being achieved
sector contributions to VAT revenue is pivotal to providing the needed revenue
to government to impact on economic growth. Hence the problem confronting this
research is to provide a comparative analysis of VALUE Added TAX REVENUE among
different sectors in Nigeria with a case study of Federal Inland Revenue
Service of Lagos state.
1.3
RESEARCH
QUESTIONS
1. What
is the nature of TAX and its significance?
2. What
is the nature of Value Added Tax?
3. What
is the sectorial contributions of Value added Tax revenue
4. What constitute the sectorial Analysis of VAT
in Lagos state?
1.4
OBJECTIVE
OF THE STUDY
1. To
determine the nature and significance of TAX
2. To
appraise the nature of Value added Tax and the significance
3. To
determine the sectorial contributions of
value added Tax revenue in Lagos state
1.5
SIGNIFICANCE OF THE
STUDY
1. The
study shall provide sectorial analysis of contributions of value added tax with
a view to providing measures and policies to maximize value added tax and
revenue in Nigeria
2. The
study shall serve as reference point of informative for economist, Accountants,
managers and government on issues regards Value Added Revenue in Nigeria
1.6
STATEMEN
OF HYPOTESIS
1. H0,
VAT is significant to economic growth in Nigeria
H1,
VAT is significant to economic growth in Nigeria
2. H0,
The impact of VAT in government revenue is low
H1,
The impact of VAT on government revenue is high
3. H0,Sectorial
contributions to VAT in Lagos is low
H1,Sectorial
contributions to VAT in Lagos is high
1.7
THE
SCOPE OF THE STUDY
The study focuses on the
comparative analysis of Value added Tax revenue among different sectors in
Nigeria with a case study of Federal Inland Revenue of Lagos state
1.8
DEFINITION
OF TERMS
Definition of VAT
VAT is a consumption Tax levied at
each stage of the consumption chain and borne by the final consumer of product
or service. Oserogho& Associates (2011)