1.1 Background Of The Study

For a country to exist in harmony, the government of such country must live up to its public economic and social obligation by providing economic and social amenities reduced or subsidized commercial rate. To do so, this will normally involve huge expenditure and therefore, will also require revenue source. Additionally, government at various levels will need to settle operational costs to be able to offer the aforementioned social amenities; one of the various sources of fund available to any government for revenue is Taxation. This could either be in form of direct or indirect tax or both. Ojo (1998) described taxation as “the concept and the science of imposing tax on the citizen”. Summer-field (1986) described Revenue as referring to a monetary quality earning to a monetary quality during a given time period regardless of the amount collected. One of the forms of indirect tax is Value Added Tax (VAT) hereafter referred to VAT. The introduction of VAT in Nigeria virtue of Decree No 102 of 1993 which took effect from 1 st January 1994 mark the phasing out of the Sales Tax which has been in force since 1986 by virtue of the ales Decree No 7 of 1986. VAT was adopted in Nigeria because the federal as well as the state government need additional resources for development. This revenue can only come from increase in taxation and productive effort. The need of the government for more revenue cannot e over-emphasized particularly as revenue from crude oil which is the most important source of oil in the international market continues to influence, making it necessary for government to explore pother source of review. Similarly, revenue available from oil and present non-oil sources mainly conventional and traditional taxes were not sufficient to meet public needs, as expenditure continue to rise in an era of increased socio and economic problems, particularly the pressure from population.


The purpose of embarking on these research works are:1. To collect addition on the subject and develop a mechanism for improving on existing level of knowledge and 2. To identify strategies for administrative implementation of the variables amongst others. a. Identify and appraise administration of VAT in Nigeria, highlight the loopholes and suggest solution. b. Highlight the effect of VAT on revenue generation of the country. c. To consolidate and modernize the tax system n order to provide a basis for strong revenue growth and flexible fiscal management d. To provide incentives for export production. e To distribute the burden of taxation more evenly across different goods and services through a broader coverage, so as to avoid multiple taxation .f. Identify problems faced by VAT administrator and how they can be abated g. Suggest ways of making the operation and administration of VAT better than what it is now.h. To develop an approach to reduce the consumption of luxuries and curb the increase in the consumption of non-essential. The approach by implication would tax non-consumption goods relatively higher and minimize impact on essential goods and services used by low income earners and formulate a program of work for the accomplishment of the assignment.


The principal reasons that prompted the introduction an implementation of VAT I Nigeria are enumerated under the historical background of VAT in Nigeria. VAT was set out to meet some targets, according to E.I. Ijewere, chairman Modified VAT (MVAT) committee. VAT is a tax imposed on value, which the supplier or tax seller of a goods or services adds to the public sectors. In addition, the information circular 9304 of the FIRS advanced some reasons justifying the replacement of sales tax with the Value Added Tax rationales put forward by FIRS are as follows: 1. VAT is equipped to ensure voluntary compliance because of the multistage collection and credit mechanism involved. 2. Tax collection at the point of importation is easier under VAT than under sales tax where the imported goods are levied at the point of retail after leaving the ports. 3. VAT has higher revenue yielding potential than the retail sales tax. 4. VAT is inherently more comprehensive because it is better equipped to tax services than the sales tax. 5. The use of invoice under VAT provides self-police mechanism, as VAT payers demands invoice so that they can make valid credit or refund claims 6. The use of invoices creates a well-defined audit trail, which the tax authority can follow. It is also easier to integrate VAT audit with some tax audit since VAT is comprehensive and restricted to the retail stage as the sales tax. This study would serve as a research work that would further enlighten the level of subject scope especially vat-able resource on the importance and usefulness of VAT.

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