The Administration and Problems of Value Added Tax in Nigeria

The Administration and Problems of Value Added Tax in Nigeria

THE ADMINISTRATION AND PROBLEMS OF VALUE ADDED TAX IN NIGERIA Finance and Accounting Research Monitor Volume 2 Number 2, September 2008 Suleiman A.S. ARUWA1 Abstract This study analyses the relevance and the problems of Value Added Tax (VAT) in Nigeria. Three research questions were formulated for the study. A survey of VATable Nigerian organizations, FIRS staff and the publics was conducted to gain insights into the way VAT is administered, its relevance in revenue generation, savings and consumption of consumers and the problems hindering its efficiency. Both secondary and primary data were used and descriptive statistics as tool for analysis. The survey shows that a majority of the FIRS staff perceive that they are not adequately equipped technically and administratively to handle VAT operations, VATable organizations have inappropriate knowledge of VAT operations, the government at the three tiers in Nigeria have raised substantial revenue from VAT but it is presently perceived as been underutilized due to high rate of tax evasion, lack of record keeping by business enterprises, use of unqualified FIRS staff and low VAT education is found among the VATable organizations and the public. It was found that these organizations treat VAT as cost contrary to expectations. Evidence from the way VAT revenue is being shared among the three levels of government in Nigeria suggests that this revenue is being reinjected into the economy through public expenditure. Governments should consider strategies for securing appropriate treatment of VAT by the VATable organizations while taking steps to ensure that the VAT revenue is targeted at sectors most likely to ameliorate the inadvertent adverse effects of VAT on consumer welfare, production, employment and income. Introduction An important landmark in tax reform in Nigeria was the adoption of the value-added tax (VAT) in January through the VAT Act No. 102 of 1993 but its implementation actually began in January 1994....
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