Effects Of Value Added Tax (VAT) On Industries
The implementation of Value Added Tax (VAT) exerts a profound impact on various industries, influencing their operational dynamics, cost structures, and competitiveness. VAT, being a consumption-based tax, affects businesses differently depending on their size, nature, and market positioning. Smaller enterprises often face challenges as VAT introduces additional administrative burdens and compliance costs. The increased tax burden can potentially strain the financial resources of these businesses. Conversely, larger industries may have the capacity to absorb such costs more efficiently. VAT also plays a role in shaping consumer behavior, influencing purchasing decisions based on the tax implications. The adaptability of industries to VAT and their ability to streamline processes and manage costs becomes crucial in navigating the tax landscape effectively. Furthermore, VAT implementation necessitates a comprehensive understanding of its implications on supply chains, pricing strategies, and overall financial structures, highlighting the need for businesses to strategically adjust to these fiscal changes.
The effect of value added tax (VAT/on Nigerian industries. We propose to research and find out some of the effect of Value Added Tax (VAT).
In the first attempt the project is divided into three chapters, the first chapter highlights on the introduction part, which explain the Value Added Tax (VAT) as the economy system of taxation to Nigerian industries the problem and prospect its participation in economic operation in country.
As from chapter two engaged into detail discussion of the objective of the policy, which has to do with shift taxation towards consumption rather savings.
Finally, in chapter three by a having critical look on the programme and observation, implementation problem, you will see that the exercise which the several major enterprise listed for Value Added Tax (VAT) on Nigeria Industries.
Summary and conclusion I conveniently say that the idea of introducing VAT in our economy is a good one because it brings wire people to the tax sourcing of raw materials and helps to check excessive consumption of the luxury goods.
Title Page
Approval Page
Dedication
Acknowledgement
Abstract
Table of Contents
CHAPTER ONE
INTRODUCTION
1.1 General Background of the Subject Matter
1.2 Problem Associated with the Subject Matter
1.3 Statement of the Problems
1.4 objectives of the Study
1.5 Significance of the Study
1.6 Research Question
1.7 Scope of Study
1.8 Reference
CHAPTER TWO
LITERATURE REVIEW
2.1 The Origin of the Subject Area
2.2 School of Thought with the Sub Area
2.3 The School of Though Relevant to the Problem of Study
2.4 Different Method of Studying the Problem
2.5 Summary
2.6 Reference
CHAPTER THREE
3.1 Research Methodology and Design
3.2 Area of the Study
3.3 Population of the Study
3.4 Sample & Sampling Procedure
3.5 Validation of the Instrument
3.6 Reliability of Instrument
3.7 Instrument for Data Collection
3.8 Method of Data Analysis
3.9 Methods of Data Collection
CHAPTER FOUR
4.1 Presentation and Analysis Data
4.2 Analysis of the Data
CHAPTER FIVE
5.1 Conclusion
5.2 Recommendation
5.3 Conclusion
Reference
Bibliography
Questionnaire
INTRODUCTION
1.1 GENERAL BACKGROUND OF THE SUBJECT MATTER
This research work on the effort of Value Added Tax on the Nigeria economy is an evaluation and digestion of the newly introduced system of taxation with insight view on the general nature of VAT as applied to Nigeria industries the problems and prospect. This is a result of the narrow nature of VAT and the newness of the system in our economy.
The term Value Added Tax (VAT) was established by Decree 102 of 1993. According to the Decree. It is to be administered and monitored by the federal in card revenue services (FIRS).
By implication VAT is a replacement of the existing sale tax which has been in operation under Decree No 7 of 1986.
According tot eh information circular No 93 of 20th August 1993, published by Federal Inland Revenue services, VAT is a tax on spending”. The tax is borne by the final consumers of goods and services because it is included in the price paid. It was designed to reduce certain anomalies in the Nigeria tax system and also to insure certain growth by increasing the rate of savings and investments. The idea of introducing VAT in Nigeria came from the report of study group set up by Federal Government in 1991, to review the entire tax system.
However, this introduction was welcome with both hands by some sectors like the ministry of finance, while some sectors frowned at it for instance, the manufacturing Association of Nigeria (MAN) among other while some sector remained in different about this introduction.
1.2 PROBLEM ASSOCIATED WITH THE SUBJECT MATTER
The introduction of Value Added Tax in Nigeria, Tax system poses a lot of questions in the inquisitive mind of some people as to the “Why and How’ of the introduction. This brings about reaction form various sectors of the economy. These reactions are the problems this research work is young to address it to.
1.3 STATEMENT OF THE PROBLEMS
Problem arose as to whose and how to collected data (Taxation begum a very sensitive issued).
i. Value Added Tax increased the selling price of goods because the tax had been incorporated in the price. Buyers no longer buy because of increased price.
ii. We know that the Value Added Tax was a tax unconsciously paid when one bought a commodity. In facts, the incidence of VAT TAX falls on the final consumer.
iii. VAT was paid as a parts of money used to procured something of valued people that earns higher bought more goods that people of how income
iv. Most taxpayers found it very difficult to responded to questions correctly because they are not happy.
1.4 OBJECTIVES OF THE STUDY
Based on the statements of problems of this study, he writer intends to t-ray the following issued as to the inquisitive minds of the public reason for the introduction of VAT to replace sales tax.
i. To examined the reactions of the entire public as represented by the various sectors of the economy to VAT
ii. To t-ray the problems and prospects of VAT
iii. The claims of social and economy group, reaffirming the contemporary belief that enterprises do not exist for the some fit of the proprietors only, but for the society at large.
1.5 SIGNIFICANCE OF THE STUDY
The significance of the study is to achieve a great success in contributing the little; the research recommendation can, if not a great deal in solving the problem of Value Added Tax on the profitability of business organization which I believe in turn will bring about an increased profited value to economy.
It is as well hoped that his research will also bring to the notice of the government what the effect of value added tax on economy does to the general.
1.6 RESEARCH QUESTION
1. To what extent do you think Value Added effect the profitability of the organization?
2. Do you think taxpayer will offended the law arranges his affairs in such a way that he pays little or no tax?
3. How does VAT benefit the government?
4. How important do you think VAT is to government?
1.7 SCOPE OF STUDY
In project of this nature, one would like to accumulate data from many areas. But, in view of length of time allowed such a wide range sample study was difficult.
Therefore, I concentrated my field work in Enugu. The choice of Enugu was based on the time factor allowed and upon practical consideration including. The fact that I know much tax revenue office Enugu Urban.
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Effects Of Value Added Tax (VAT) On Industries:
Value Added Tax (VAT) is a consumption tax levied on the value added to a product or service at each stage of production or distribution. It is one of the most common forms of indirect taxation used by governments around the world. The effects of Value Added Tax on industries can be both positive and negative, and they vary depending on the specific circumstances of the country, industry, and its implementation. Here are some of the key effects of VAT on industries:
1. Increased Tax Revenue: Value Added Tax is a significant source of revenue for governments. When implemented effectively, it can generate substantial funds for public spending on infrastructure, healthcare, education, and other essential services. This can benefit industries indirectly by improving the overall economic environment.
2. Administrative Costs: One of the immediate effects of Value Added Tax is increased administrative costs for businesses. They must keep detailed records of their transactions, collect VAT from customers, and remit it to the government. Compliance with Value Added Tax regulations can be time-consuming and expensive, particularly for small businesses.
3. Consumer Behavior: Value Added Tax can influence consumer behavior. When Value Added Tax rates are high, consumers may reduce their spending on non-essential goods and services, which can impact industries that rely on discretionary spending. Conversely, industries that provide essential goods and services (such as food, healthcare, and housing) are less affected by changes in consumer behavior.
4. Price Increases: Industries may pass on the cost of Value Added Tax to consumers through higher prices. This can lead to inflationary pressures, which, if not managed properly, can harm the overall economy. However, the extent to which industries can pass on the tax depends on price elasticity, competition, and consumer demand.
5. Cash Flow: VAT can affect a business’s cash flow because companies often have to pay the Value Added Tax they’ve collected to the government before they receive payment from their customers. This can be especially challenging for small businesses with limited working capital.
6. Compliance and Enforcement: The effectiveness of Value Added Tax depends on the government’s ability to enforce compliance. If tax evasion is widespread, it can distort competition within industries, as some businesses may gain an unfair advantage by avoiding VAT payments.
7. Export and International Competitiveness: Value Added Tax is typically not applied to exports, which can make goods and services produced in a country more competitive in international markets. However, it can be a barrier to imports if a country has a high Value Added Tax rate.
8. Industry-Specific Effects: The impact of Value Added Tax varies by industry. For example, industries that rely on capital investments and high-value-added activities may benefit from VAT, as they can often reclaim the Value Added Taxpa id on inputs. On the other hand, labor-intensive industries may face higher costs if labor is subject to VAT.
9. Informal Economy: Value Added Tax can encourage formalization of the economy as businesses seek to comply with tax regulations to claim input tax credits. This can lead to a reduction in the size of the informal economy.
10. Economic Growth: The overall effect of Value Added Tax on economic growth is complex. When implemented efficiently and fairly, Value Added Tax can promote economic stability and growth by providing a stable source of government revenue. However, poorly designed or excessively high VAT rates can hinder economic activity.
In conclusion, the effects of Value Added Tax on industries are multifaceted and depend on various factors, including the design and implementation of the tax, the specific industry in question, and the broader economic context. Governments must carefully consider these factors when formulating VAT policies to ensure they strike a balance between revenue generation and economic growth while minimizing adverse effects on industries and consumers.