The Implication Of Nigeria Value Added Tax (vat) On The Payers.

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A research into the implications of Nigerian value Added Tax [VAT] on the payers [A case study of Enugu State] cannot be over emphasized. In pursuance of this investigation, the research used both primary source  of data collection, like oral  interview as well as secondary sources such as textbooks, Journals, Magazines and professional bodies. The data collection were analyzed using simple percentage. Effect was made in this research work to investigate on the constraints encountered in the imposition of VAT and also in the recommendation were given the way of overcoming them .The project is divided into five chapters in which the first chapter deals with the introductory part , statement of the problem, purpose of the study, significance of the study, research hypotheses, scope and limitations and definition of terms. Chapter two deals with review of related literature. Chapter three deals with research design and methodology used, primary, secondary, sources of data analysis, population and sampling procedures. In chapter four (4) the researcher discussed the presentation and analysis of results. Chapter five finally deal on findings, conclusion and recommendation.







Title page                                                                        I

 Approval page                                                              ii

Dedication                                                                     iii

Acknowledgement                                                         iv

Abstract                                                                         v

Table of content                                                           vi



1.0   Introduction

1.1    statement of problem

1.2Purpose of study

1.3   Significance of the study 

1.4Limitation scope of the study

1.5Definition of terms




2.1 The value added tax defined

2.2 Evolution of value added tax

2.3 Why modified value added tax  in Nigeria

2.4 Sales tax and value added tax

2.4Value added tax in Nigeria

2.6 The implication of VAT on the taxpayers




3.1 Geographical area of the study

3.2 Target population

3.3 Sampling size and procedure

3.4 Data collection techniques

3.5 Questionnaire design

3.6 Administration of instrument and validity   



4.0 Data presentation and analysis

4.1 Data presentation


5.0 Summary of findings, conclusion and recommendations

5.1 Findings

5.2 conclusions

5.3 Recommendations











       Taxes in modern economics are the most important source of government revenue. They are compulsory levies that are regularly imposed, and as a rule, not designated for a special purpose they are regarded as a contribution to the general revenue pool from which most government expenditure are financed.

       Taxation occupies a principal position in the Nigerian economy as in other countries. Value – Added –Tax (VAT) was introduced in Nigeria currently to replace the old sales tax. The old sales tax, has been in operation under the federal government legislated decree No 7 of 1986, but it is operated on the basis of residence.

       However, the newly introduced value added tax (VAT) is operated under the federal government legislated decree No 102 of July 1993. Value Added Tax (VAT) is a form of indirect tax whose burden is shifted from the manufacturers through the distribution channels to the final consumer who then bears the final burden. Value Added Tax (VAT) came into effect on 1st January 1994 the tax is a tax on consumption. Value Added Tax (VAT) is a multi stage tax which is impose on goods and services as they pass through the various stages in the business chain. From manufacturing, importation through wholesalers to retailers  The payment is borne by the final consumers because it is included in the selling price ,it’s administration involves a credit mechanism system whereby a taxable person who is charged tax on the supplies to his entitled to set off that tax against the tax charged by him is supply to other persons , this makes him only accountable for the excess of the tax on the supplies from him over the tax on the supplies to him.

       The tax paid or payable by a taxable person on the importation of a business carried on by him is known as his ‘input tax’ while the tax paid on the supplies made by him  is known as his ‘output tax’. The Value Added Tax (VAT) payable in essence is the output tax, less input tax.

       The tax on the supply of goods or services is chargeable only where:-

n  The supply is a taxable supply and

n  The goods and services are supplied by a taxable person in the course of a business carried on by him and is payable by the person supplying the goods and services.    

       Value Added Tax (VAT) in Nigeria is computed at a flat rate of 5% of the price of the goods and services. This is affected on behalf of the government by business and organization that have registered for Value Added Tax (VAT) purpose. Value Added Tax (VAT) is operated by over ,sixty countries including some countries on the west of Africa. In Nigeria, two agencies of the muted nations organization the international monetary fund [IMF] and the world bank which are closely identified with the establishment and monitoring of the structural Adjustment programme [SAP] had since 1987 been advising that the Nigeria tax system need to be reformed so that the government  will be  less dependent on the petroleum revenue  generation. In an attempt to effect this reformation of tax system, the federal government set up two tax study groups in 1991. The federal ministry of finance and economies development set up one study group to study and make recommendation on the reforms needed in direct taxes in Nigeria . The federal ministry of budget and planning set up another study group which   is more relevant to our study on indirect taxes and inaugurated on 26th April in 1991 with the objectives of among other to:

-Shift taxation towards consumption rather than saving.

-         Improve the administration of indirect taxes.

-         Provide incentives for export production.

-         Maintain a fairly ever tax incidence.

-         Reduce dependence on oil revenue.

        The general guideline for the establishment of Value Added Tax (VAT) in Nigeria was given by this committee. Value Added Tax (VAT) was introduced into Nigeria economy tax system in January 1st, 1994, following the elegant provision of decree No .102 of July, 1993 but it has been in operation in other countries before it was introduced in Nigeria. In the Nigeria context, it is a consumption tax of five percent [5%] imposed on every Value Added Tax (VAT) or vatable goods and services of Value Added Tax (VAT) are taxed and this is contributed to sales tax where the producers or sellers of goods and services pay the tax.

     The final consumers of these vatable goods and services bear the burden of the tax. AS a result the project topic which form the center of the study. The implications of Value Added Tax (VAT) on the payers.



          Much as it is known that Value Added Tax (VAT) will increase the revenue base of Nigeria, it cannot be free from some problem. In view of the compulsory nature of and strong aversion of tax payment effects must be constitute made to make any tax system as attractive and as conveniently as possible. 

   This can be achieved by regularly evaluating the tax system with a known set of criteria modified to suit the pervading circumstance of time.

      The Question which this research work aims at answering could be summarized into the following problem statement:

      Given the percent economic situation and industry condition, how are individual / companies dealing on goods and services which are subject to Value Added Tax (VAT), going to be affected by this tax system.

1.  Corporate performance could be improved upon under the value added tax. How realistic is this assumption.

2.  With the apparent difficulty encountered by firms in holding down costs, and give the incentives in Value Added Tax (VAT) accruing to firm operating at minimal costs, have a company’s pricing policy most likely to be affected.

3.      Industrialists, manufacturers, distributors, individuals and organization have not accepted Value Added Tax (VAT), they are the opinion that Value Added Tax (VAT) is not good for a developing country like Nigeria.

4.      The problems  of enforceability has to be tackle by employing honest and truthful personnel who will enforce the payment of Value Added Tax (VAT) so levied severe penalties has to be adopted so as to enforce  payment by Value Added Tax (VAT) defaulters.


The aim of this research work is to examine the implication of Nigeria value added tax (VAT) on the payer.  The major purpose of the study includes the following:

1.  To find out the extent to which the tax incentives will be applied to the tax payers in Enugu state.

2.  To investigate the implication which value added tax will have on the tax payers , that is the relationship between the tax and those paying it in the Nigerian context of tax system.

3.  To  Examine the various ways of tax collection in the state.

4.  To evaluate the problems faced by the tax administrators. And

5.  To proffer possible solutions to the problems identified.


The following research questions were formulated by the researcher:


1.  To what extent does are tax incentives applied to the tax payers in Enugu state?

2.  What are the implications of value added tax on the tax payers in Enugu state?

3.  What are the various ways of tax collection in the state?

4.  What are the problems faced by the tax administrators in Enugu state?


This work is of academic significance in the sense that it will contribute to the understanding of the Value Added Tax (VAT) and it’s implication on tax payers. The practical significance lies on the fact that the work would highlight the extent to which tax payers could take advantage of the opportunities in the tax system to improve their standard of living even of greater importance is the potential of this study in throwing more light on the unintended adverse effects of the tax on some industries.







This project work focuses on the implication of Nigeria value added tax (VAT) on the payers with particular reference to the tax payers in Enugu state.


The researcher in carrying out this study encountered numerous problems, which includes:



FINANCIAL PROBLEM– This included lack of enough fund to move around and visit the various areas in the state, and also lack of money to buy enough research material which constitutes on impediment of to researchers high cost of transportation in the city due to long distance also imposed its own limitation on the researcher.

TIME:– Time is also another constraints to the researcher.  This is because the researcher is combining school activities and at the same time this made him unable to cover a lot of interesting areas but therefore limited his research work only at Enugu metropolis.

       From the above points the researcher tried his best to bring out in details study on the implication of Nigeria value added tax (VAT) on the payers.  But the above


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The Implication Of Nigeria Value Added Tax (vat) On The Payers.