COMPARATIVE ANALYSIS OF VALUE ADDED TAX REVENUE AMONG DIFFERENT SECTOR IN NIGERIA (CASE STUDY OF FEDERAL INLAND REVENUE LAGOS STATE)
ABSTRACT
The study provides a conceptual and analytical study in a comparative analysis of value added tax revenue among different sectors in Nigeria, with a focus on the federal Inland Revenue Lagos state. The study evaluates the performance of the various sectors of the Nigerian economy in terms of contributing to VAT revenue in order to demonstrate their impact on economic growth.
INTRODUCTION
Tax can be defined as a compulsory contribution to support a government levied on personal, property income, commodities, transactions, and so on, now at a fixed rate that is mostly proportionate to the amount on which the contribution is levied (Crowder 1998), as confirmed in (Tilley 1981) Oyebangi (2006) identified two major types of taxes:
1. Direct Taxes: These are government-imposed taxes on the income of individuals and businesses that are usually paid by the person or persons on whom the tax is legally imposed. Personal Income Tax (PIT), Company Income Tax (CIT), Capital Gains Tax (CGT), Withholding Tax, Petroleum Profit Tax (PPT), Educational Tax, and Capital Transfer Tax are a few examples (CTT).
Individual earnings are subject to PIT, profits of organizations/corporate bodies are subject to CIT, oil purchasing/exploration companies are subject to PPT, profits from the sale of capital assets are subject to CGT, and transfers of property inter-viro and transfers on death are subject to CTT. However, the CTT on profit was repealed in 1996.
2. INDIRECT TAXES:
These are government taxes levied on goods and services. Indirect taxes can be avoided because they are only payable if the commodity or service on which the tax is imposed is purchased, and they have a lower administrative cost than direct taxes. It does not create a disincentive to exert effort in the case of direct taxes, and thus has no effect on the economic functions of tax payers. According to Oyebanji (2006), examples of indirect taxes in Nigeria include:
A. Import Duties/Tariffs: These are taxes levied on goods imported into the country.
B. Export Duties: These are taxes levied on goods produced for export.
C Excise Duties: Taxes levied on specific goods manufactured in the country.
D. Consumption Tax: A tax levied on the purchase of any commodity or the provision of a service. Sales taxes and value added taxes are two examples (VAT). The effect of consumption tax is that it is added as a percentage of the total invoice in the goods or services rendered rather than being included in the price tag of the affected commodity.
However, the purpose of this study is to provide a comparative analysis of value added tax revenue in Nigeria across various sectors. a case study of Lagos state’s federal inland revenue
CHAPTER ONE
1.1 THE STUDY’S BACKGROUND
VAT is a consumption tax levied at each stage of the consumption chain and borne by the final consumer of the product or service, according to Oseregho and Associates, as quoted by Aderdi, SannidAdesina(2011). Under the Value Added Tax Act of 1993, as amended, each person is required to change and collect VAT at a flat rate of 5% on all invoiced amounts on all goods and services that are not exempt from paying VAT.
Where the VAT collected on behalf of the government (output VAT) in a given month exceeds the VAT paid to other people (input VAT) in the same month, the difference must be remitted to the government on a monthly basis by the taxable person. In the opposite case, the taxpayer is entitled to a reduction in the excess VAT, i.e., no VAT is payable on exports.
Furthermore, VAT is payable in the currency of the transaction in which individual goods or services are exchanged. The precedent for the implementation of VAT in Nigeria was based on the fact that taxation as a tool of fiscal policy is critical in generating revenue to finance government activities,
redistribute income, stabilize the economy, and stimulate growth and development. Using the Lagos State Federal Inland Revenue as a case study, the research intends to investigate the performance of various sectors in the Nigerian economy in terms of contributing to VAT revenue.
1.2 THE PROBLEM’S STATEMENT
VAT was implemented to contribute to the nation’s economic growth by providing revenue to the government in order to accelerate development. However, this goal is still a long way off. Sector contributions to VAT revenue are critical to providing the government with the necessary revenue to impact economic growth.
As a result, the problem confronting this research is to provide a comparative analysis of VALUE ADDED TAX REVENUE among various sectors in Nigeria, with a case study of the Federal Inland Revenue Service of Lagos state.
1.3 QUESTIONS FOR RESEARCH
1. What is the nature and significance of TAX?
2. What exactly is Value Added Tax?
3. What are the sectoral contributions of VAT revenue?
4. What is the VAT Sectorial Analysis in Lagos State?
1.4 THE STUDY’S OBJECTIVE
1. To ascertain the nature and significance of TAX.
2. To assess the nature and significance of Value Added Tax
3. To ascertain the sectorial contributions of value added tax revenue in the state of Lagos.
1.5 THE STUDY’S SIGNIFICANCE
1. The study will provide a sectorial analysis of value added tax contributions in order to provide measures and policies to maximize value added tax and revenue in Nigeria.
2. The study will serve as a source of information for economists, accountants, managers, and the government in Nigeria on issues concerning Value Added Revenue.
1.6 STATEMENTS OF HYPOTESIS
1. H0, VAT has a significant impact on Nigeria’s economic growth.
H1, VAT has a significant impact on Nigeria’s economic growth.
2. H0, The effect of VAT on government revenue is minimal.
H1, VAT has a significant impact on government revenue.
3. H0,Sectorial VAT contributions in Lagos are low.
H1,Sectoral VAT contributions in Lagos are high.
1.7 THE STUDY’S OBJECTIVE
The study focuses on a comparative analysis of Value Added Tax revenue across various sectors in Nigeria, with a case study of the Federal Inland Revenue of Lagos state.
1.8 DEFINITIONS OF TERMS
VAT is defined as
VAT is a consumption tax that is levied at each stage of the consumption chain and is paid for by the final consumer of a product or service. Oserogho & Assoc (2011)
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COMPARATIVE ANALYSIS OF VALUE ADDED TAX REVENUE AMONG DIFFERENT SECTOR IN NIGERIA (CASE STUDY OF FEDERAL INLAND REVENUE LAGOS STATE)
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