THE IMPACT OF VALUE ADDED TAX ON REVENUE GENERATION IN NIGERIA

VAT as a system of revenue generation has been in existence in Nigeria since January 1st 1994. It has recorded remarkable increase in revenue generation for the nation and has been shown by numerous researches to be more effective than the sale tax in revenue generation.

VAT, however, has not achieved all its objectives especially in the University of the Tax. While almost every one buys vatable goods, a lot of institutions, persons and vatable entities has not paid or remitted VAT to the appropriate authorities because they are not registered and the machinery to enforce their registration and the machinery to enforce their registration hampered, inadequate or simply not functioning, hence much revenue accruable from France in 1954 and since then has spread to over 70 countries in the world. It exists in most countries of the EU as well as the European Economic Community such as Germany, Italy, Ireland, Spain, etc. all the DECD countries, Japan, Canada and Michigan state in the USA cooperate VAT.

In Africa, many West African countries and most Francophone countries operate vat. Cote d’ivoire, Togo, Senegal all has vat systems. According to Aguolu (1996:99), most EEC countries have added tax as a means of ensuring uniformity of trading since goods and services more freely among these countries. Britain in 1973, introduced vat before joining the EEC.

Most developing state that has introduced vat, beginning with Brazil in 1967 has replaced their sales tax with vat, in order to ensure financial and economic coordination among the states in their countries. In Nigeria, vatm was recommended in 1991 in November 1991. The decision to accept the recommendation was made public in the 1997 budget speech. A committee set up on 1st June 1992 to examine the feasibility on the earlier recommendation, commended among other things that vat be administrated by an independent commission was rejected by the government. The administration of vat was given to Federal Inland Revenue Services (FIRS) which already had the responsibility of administering most other taxes in Nigeria.

Decree 102 of 1993 marked the phasing out of sales tax from 1st December 1993 and introduction of vat but by administration arrangement, involving for tax purpose commended on 1st January1994. (Chairman/Chief executive of FIRS 1996:1) presently there are 36 local vat offices in the federation each operating under supervision of a local vat officer. It is intended that local vat offices will be extended to all major commercial centers in the country and all local government headquarters in the federation.

Usman (1999:7) states that one of the cardinal objectives of 1999 budget is expanding the existing revenue base. bordering the vat base and increasing the number of vat offices among others is one of the avenue through which the policy thrust would be realized. The revenue estimate for vat 2002 was N50 billion and out of this amount, the state government will share N25billion, local government will share N17billion while the federal government will get N7.5 billion.

Vat is obviously a more efficient toll particularly in the globalization mitieu currently existing. It allows the state to use its vat revenues to assess its actual production with a view to assessing. The countries contributed via manufacturing and marketing in each state before the finished goods are produced. With the ECOWAS programme of regional economic integration in place, it is obvious that the EEC model of vat is more advantageous since every state, country is encourage to be part of the production process speeding up specialization, Okonma (2002:11).

It is against this backdrop that the researcher carried out an assessment of the impact of vat on revenue generation in Nigeria.