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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.
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