VALUE ADDED TAX (VAT) - A STUDY OF ITS ADMINISTRATION AND PROCEEDS IN KADUNA STATE

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Date
1999-06
Authors
FADEN, TIMOTHY SAUL
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Abstract
As Government expenditure was steadily on the rise and revenue to meet this demand by government continually declined resulting into deficit financing, the Federal Government then decided to introduce the Value Added Tax into the Nigerian tax system. VAT was introduced to complement the financial resources of government needed for development projects. Decree number 102 was promulgated in 1993 introducing VAT as a replacement to the existing sales tax that had been criticized for its non performance. Inspite of the laudable reasons given by the tax policy formulator for introducing the VAT, the tax was at the initial stage received with some misgivings by the Nigerian Public. However, no sooner had this initial hurdle been crossed and the tax illuminated a lot of potential in terms of revenue generation, that reports of irregularities, such as, fraud, perpetrated by both taxpayers and tax officials started making headlines of some of the national newspapers. What could have gone wrong so soon? This questions amongst others inspired this research. The purpose of this research therefore is to: examine the machinery charged with the administration of VAT with a view to identifying the problems of administration of the tax and suggesting remedies; To determine the amount VAT collected over the years in comparison to projected revenue figures from inception of the tax to the first quarter of 1997; and to show cause for the disparity between actual and projected revenue figures observed, if any exist. The methodology employed for this study was the social survey research approach. Data were gathered using a stratified random sampling. The sampled population was divided into two strata, each according to the role performed in respect of VAT administration in Kaduna State. Questionnaires were administered predominate in the state: 50 questionnaires were administered to VAT able persons. the remaining 100 questionnaire were administered to VAT able persons. The data which was obtained through primary and secondary sources were analyzed using statistical tools as frequency tables to compute simple percentages ami Ihe mean. Results from this analysis were used in making inferences concerning Iho research related observations and thus draw conclusions about these rel-ith The findings of the research revealed that the three hypothetical poalllol tested should be accepted as correct based on the data generated. The hypothesis tested are as follows: (i) that ineffective administration is responsible for the lose of VAT revenue; (ii) that low motivation of tax officials and taxpayers hinders effective administration of VAT; and (iii) that the revenue collectible from VAT exceeds the actual revenue collected. Data from the study revealed that: (a) gaps existed in the administration of VAT in Kaduna State especially between what is provided for in the VAT laws and prnctli These gaps are to be located in two areas of the operations of VAT, the enormity of the task and the comparative weakness of resources for the administration <>l the tax; (b) that so many VATable persons have still not registered for the I mo refuse to pay and this has impacted negatively on amounts generated; (c) Urn data obtained pointed out that both tax officials and tax payers are not adequately motivated to effectively perform their different roles in the administration of VAT While taxpayers opined that non responsiveness of government towards using lax revenue judiciously as reason for non conformity to the tax, officials advanced that low salaries, inadequate personnel, shortage and lack of work material posed various acute problems to them in their work; (d) that, the so many VATable organizations who failed to conform to the tax went unpunished and this tended to encourage nonconformity and discourage those that had conformed to the law; (e) that tax officials feel powerless to deal decisively with tax offenders, pj • to interference from superiors; (f) data obtained showed that information on how much was projected revenue receipts from VAT and what were the actual collections over the years was not available due to bureaucratic bottle necks, however information from secondary sources revealed that the actual receipts were below expected. We conclude from this study that it is not a wise decision to always judge a phenomenon on its face value, but that we should always try to understand its underlying properties. The phenomena may not be what it appeared to be on closer examination.
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A THESIS SUBMITTED TO THE POSTGRADUATE SCHOOL, AHMADU BELLO UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF PUBLIC ADMINISTRATION (MPA) JUNE, 1999
Keywords
VALUE,, (VAT),, STUDY,, ADMINISTRATION,, PROCEEDS,, KADUNA STATE
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