VAT System

1.1 INTRODUCTION
Taxation has long been practiced in Nigeria. Initially, only men were expected to pay taxes but now all people working and anybody found in the capacity of paying tax are obliged to pay tax.
Tax is a mandatory levy on income charged for the purpose of carrying out government activities losses incurred by government in recent times through tax evasion are increasing rapidly despite the pathetic financial and economics state of the country. There are daily reports on newspapers and magazines that the government losses billions of naira yearly due to tax evasion and the fraudulent practices of the tax officials. This has been attributed to many factors. Most people attribute this to the fact that the country’s tax system is highly income based and since income is taxed only at one point or stage, a lot of evasion results.
In Nigeria many different goods are consumed. For this reason, tax experts see consumption as the actual liability and as such, the need to shift tax base from income tax to consumption tax. This necessitated the introduction of sales tax in Nigeria through degree No 7 of 1986.
However, it was discovered that tax is narrow because it does not cover a lot of goods and services. This prompted the introduction of value added tax (VAT) in Nigeria
The idea of introducing VAT in Nigeria came from the report of the study group set up by the federal government in 1991 to review the entire tax system. VAT was proposed and a committee was set up to carry out feasibility studies on its implementation. In January 1993, government agreed to introduce VAT through instrumentality of the VAT Degree 102 of 1993. This was meant to be effective from January 1, 1994. It came on stream as a replacement to its antecedent, the sales tax, which was characterized by a lot of lapses inadequacies and restrictive coverage VAT is a consumption tax imposed on all manufactured goods, industrial raw material and other imported into or produced in Nigeria at a single rate of five percent potentially, its dragnet covers virtually everybody, since one consumers one thing or the other expect in the cases of specific items that are example.
Several benefits which the government expected to derive from value added tax (VAT) were enumerated. Among several others they are.
i. Increase in revenue generation.
ii. Facilitation of administrative enforcement
iii. Reduction in revenue losses through tax evasion
iv. Enhancement of documentation of transaction
v. Encouragement of rapid industrial growth by allowing credit for input taxes for capital goods.
Maintenance of neutrality in tax payment since it is broad based and has a single rate.
The government has convened these benefits to the public and has also organized workshops and seminars to educate the producers, suppliers consumer, tax officials and the general public on VAT system in Nigeria. However the perception of tax payers is necessary at this stage and this is what this research is to find out.

1.2 STATEMENT OF THE PROBLEM
The Federal Government has made practice efforts to convince the public of the need for VAT system in Nigeria it has informed the public of the benefits which have been derived from VAT for example a reduction in tax evasion, increase in government revenue and so on. This implies that the government sees VAT as a good tax system. But the tax payer many not have the same view as the government. They may not see the relevance of the tax in which case they will most definitely by reluctant to pay.
The problem or the question therefore, is what is the perception of the taxpayers or the public on tax systems? Do they see it as being important as the government does/ it is in view of the above questions that the researcher has decided to find out and evaluate the perception of the public or taxpayers on the value added tax in Nigeria?

1.3 PURPOSE OF THE STUDY
It was the purpose of the study to evaluate the views of the tax payers on value added tax. On the basis of this, the researcher will be able to say if VAT has done more harm then good on the part of the tax payers. The finding will also enable me to make recommendations that will bring about modifications, if necessary, that will strengthen the machinery for the administration of Vat and also to its acceptance by the public.

1.4 SIGNIFICANCE OF THE STUDY
Every research work has to be significant. It must either create some form of new knowledge, or add to an already existing body of knowledge. To this end, this study will serve as information to the government to know the perception of the taxpayers on VAT; enables the government to know whether the taxpayers accept or disagree with VAT. It will also reveal areas in the VAT system that require corrections in order to achieve a more effective and efficient tax system.
Very importantly, apart from enlightening the general public on the practice of VAT in Nigeria, it will serve as a source of data to other researchers.

1.5 ORGANIZATION OF THE STUDY
For the information presented in a research work to be clearly understood and appreciated, a systematic and chronological presentation of the work is of great importance in keeping with this, this research as been organized and presented in five chapters.
Chapter one: This is the introductory chapter and it informs the reader on what the entire study is about. According to Ochei C. A. (1994:5) “the chapter specifics the problems that prompted the study, the assumptions of the study and the operational definition of terms.
Chapter two: This contains the review of all related literature, or previously existing materials or the subject. This chapter establishes clearly the nature of the already existing body of knowledge, thoughts, ideas, concepts on the subject thereby highlighting the new knowledge to be generated by the research.
Chapter three: Information on the methods employed in the collection of data and their analysis can be found in this chapter. Also in this chapter, justification is provided for the adoption of the methods and analytical techniques employed.
Chapter four: This involves the presentation and analysis of data findings from the testing of hypothesis are also presented here.
Chapter five: this is the final chapter and it contains the summary of the entire work done the conclusions drawn, and the recommendations made by the researcher based on the findings of the research work.
Appendices: It is a usual practice that in the final pages of research work, reproductions of some documents such as questionnaires relevant tables, statute, letters and so on attached for a better appreciation of the research work by the reader. This can also serve as a means of verifications of work done.

1.6 RESEARCH QUESTIONS
The questions below are to be answered in the course of this work. If at the end of this research, appropriate answers are provided to these questions, the aim of the research shall have been realized. The question are:-
1. To what extent has VAT curbed tax evasion?
2. To what extent has the government been able to generate expected revenues?
3. Is the administration of VAT in Nigeria perceived to be efficient/
4. To what extent is VAT a good replacement of sales tax?
5. Is VAT a fair and equitable tax?
6. What impact does VAT have on the revenue generation of the government?
7. Has the institution and implementation of VAT affected consumption habits of consumers?

1.7 HYPOTHESIS
1. Ho: Value added tax is not expected tax evasion.
2. Ho: Taxpayers are not perceived to be favoured with VAT system.
3. Ho: Taxpayers do not believed the merits of VAT affect their
response to payments.

1.8 DEFINITION OF TERMS
a. VAT: This is a consumption tax which is charged at 5% on goods and services which are not exampled by the VAT degree of 1993.
b. Vat able goods: These are goods and services, which VAT is paid.
c. Supplies: This refers to any transaction whether it is the ale of goods or the performance of a service for a consideration.
d. Vatable person: One who trades in vatable goods or services for a consideration.
e. Input VAT: This is the VAT that is due on VATable supplies.
It is derived by multiplying the tax value of the aggregate supply by the tax rate.
f. Input VAT: This is charge on business purchases and expenses.
g. Federal inland Revenue Service (FIRS): This is the authorized body for the collection of taxes.

1.9 TEST OF DATA
Since this study involves the significance between two means, which are summary measures of continuous variables, the z test which is a parametric test, will be used. The formular is
X – u
Z r
n
Where x is the means u is the assumed mean or assumed value, r is the standard deviation, n is the sample size. The study has three different samples; the producers, consumers and VAT officials. This means of each sample will be compared with assumed mean to find out if the different respondents in each category have the same view or not.

1.10 LIMITATION OF THE STUDY
Nobody can claim to have knowledge of an access to everything, nor can anybody claim he can get whatever he wants at anytime he want it.
This study therefore, cannot be excluded from these limitation which are started below: –
1. Finance required for an extensive works are not available and I had to concentrate on specific areas.
2. The possibility of inaccuracies in responses cannot be ruled out.
3. There will be no access to some information due to restriction in the organizations concerned.
4. Time factor was another factor.
According to Baridam (1980: 18) people who makes up organizations may behave differently if they become aware of the researcher’s hypothesis about themselves people being human brings are always are always sensitive to their environment “such awareness according to Behling (1980: 486) may create self fulfilling prophecies whereby participants change their behaviour to increase the charices of supporting the hypothesis”.
However, in spite of these problems relevant information were got from the respective bodies.