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)