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