The problems and prospect of value added tax (vat)(a case study in enugu state)

Thesis Overview

<p> </p><p><strong>INTRODUCTION</strong></p><p><strong>1.1 &nbsp; &nbsp; BACKGROUND OF THE STUDY</strong></p><p>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.</p><p>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.</p><p>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.</p><p>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.</p><p>Especially Enugu, seems to be producing good and bad effects on the economy generally.</p><p>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.</p><p>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.</p><p>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.</p><p>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.</p><p><strong>STATEMENT OF PROBLEM</strong></p><p>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.</p><ol><li>How the money is being collected</li><li>How t he money is disbursed</li><li>What the money is used for after disbursement</li></ol><p><strong>PURPOSE OF THE STUDY</strong></p><p>The following are the purpose of the study of Value Added Tax:</p><ol><li>To discover the techniques used in collecting the revenue.</li><li>To determine the type of products and services which are vatable non-vatable.</li><li>To understudy the distribution and usage of the money collected from Value Added Tax.</li></ol> <br><p></p>