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THE ADMINISTRATION OF VALUE ADDED TAX (VAT) IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Value Added Tax (VAT) was introduced in Nigeria by the report of a study group set up by the federal government in 1991 during the regime of the military president, General Ibrahim Badamasi Babangida. The study group came up with Value Added Tax (VAT). The alternation of the bases of tax and the credit system brought to tax led to the promulgation of the Vat Decree became effective from 1st December 1993. This idea, that is the introduction of VAT in Nigeria must be managed implement and administered by somebody.  From the topic, administration can be seen as the ways and manners by which an institution, group, board, parastalals, government establishment etc are being run.

The day to day activities of an establishment will be channeled, run and administer for Vat to be effective, their must be an effective and efficient administration in the execution of Vat policies because of alternatives and uncertainties before them, the risk of making a wrong decision or choice in the administrative cadre will hinder the progress of Vat in the country. This is why efforts have been made to select capable hands and brains to man the affairs of Vat as established by Value Added Tax Decree (VATD) of 1993. The VAT are administered by Federal Board of Inland Revenue (FBIR) sub-section of provides that the board (FBIR) may do such thing as it may seen necessary and expedient for the assessment and collection of tax and shall account for all amount so collected in accordance with the provision of this decree with reference to section 3; paragraph 7, sub section 1 (3.7 (1) of the Value Added Tax Decree (VATD) no 102 of 1993. This research work will look into the effectiveness and efficiency of administration of VAT, merits and demerits.

1.2     THEORETICAL BACKGROUND

The Value Added Tax (VAT) is a specially tax that charges establishments ten percent (10%) of their turnover in a year. This institution was established in 1993 as promulsented by VAT Decree (VATD) N0. 102 during the General Ibrahim Badamasi Badangida regime: The idea of introducing Value Added Tax (VAT) in Nigeria came as a report of the study group set up by the Federal government in 1991.  In January, 1993 government agreed to introduce VAT by the middle of the year, which was later shifted to September, 1993. The alternative of the bases of tax and the credit system brought to tax led to the promulgation of the VAT Decree (VATD) N0. 102 at 1993 through the Decree came effect from 1st December 1993, the full effect implication commenced from January 1st, 1994. According to Encyclopedia American Vol. 27 (1981) VAT was First Instituted in France in 1954 being the result of over hurling of turnover tax introduced on called “Taxes Surla Values Ajouta (VAT).

The administration of VAT is established as contend in section 3, paragraph 7, subsection 1 of the VAT Decree N0. 102 of 1993, the tax shall be administered and managed by the Federal Board of Inland Revenue (FBIR) may do such thing as it may seen necessary and expedient for the assessment and collection of tax and shall account for all amount so collected in accordance with the provision of this decree. The administrative body of VAT comprise the VAT technical committee and they are changed with the following functions as contend also in section 17 of the VAT decree of 1993 state that there is hereby established committee to be known as the value added tax technical committee which shall comprise of a chairman of the Federal Board of Inland Revenue (FBIR) A Director in Nigeria Customer (NCS) and three representative of the state government who shall be member of Joint Tax Board.

1.3       STATEMENT OF PROBLEM

Valued Added Tax is a service industry like National Electric Power PLC (NEP PLC) Nigeria Port Plc.  The complaints range failing by some few minister and government to embrace VAT fully, accept VAT invoice from the contractor and make reluctant remittance a many the tiers of government has generate some lively debate. The burden of tax under VAT is regressive and business nuns additional cost of keeping VAT records and processing information required for the payment of tax and claiming returned from tax agent.

1.4      NEED FOR THE STUDY

There has been a citizen about the way VAT is been administered.  The researcher wants to carryout a research on what VAT do and find out if they adopt the condition of policy services. The research also wants to have an empirical base either to support all the sources about the poor impression people have of the VAT and to advice the administered on how to improve their service by adopting the services policy.

1.5     PURPOSE OF THE STUDY

From all that has been written above it is the aim of this study to take a segment at the VAT and study they approach of VAT to their administered.

This research work will look into the effectiveness and efficiently of administration of VAT, merits and the demerits.

1.6   DEFINITION OF TERMS

The following, terms used in this study should be taken to mean the following.

TAX: A tax is a compulsory levy imposed by the government on individuals and business enterprises which is paid by them to the governmental is a special kind of payment in the sense that it is compulsory but the benefits for payment do not necessarily correspond to the amount of tax paid according to John Orji, 1976.

VALUE ADDED TAX (VAT): Value Added Tax (VAT) is a specially tax that changes established ten percent (10%) of their turnover in a year.

ADMINISTRATION: This can be seen as the way and manner by which an institution, group, board parastalals, government establishment etc are being run.

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