Value added tax in nigeria the standard vat rate in nigeria is 5% invoice value of goods and services except of course on items exempted or zerorated vat goods. The petroleum profit tax act ppta however exempts dividends payable by oil producing companies on petroleum operations from withholding tax imposition. Correlation between value added tax vat and national revenue. Department of accounting, gombe state university, gombe. Nigeria has a national value added tax vat of 5% as of 2020, administered by the federal inland revenue service firs. The drop in oil prices, which has led to dwindling revenues for government in nigeria, has once again brought into sharp focus the need to diversify the source of. Importance of value added tax the drop in oil prices, which has led to dwindling revenues for government in nigeria, has once again brought into sharp focus the need to diversify the source of. The taxable period is the fiscal year, which runs from 1 january to 31 december. Value added tax tax is a consumption tax chargeable on the value added to a product in the process of production. Request pdf the administration and problems of value added tax in nigeria this study analyses the relevance and the problems of value added tax vat. The personal income tax pit is the most common tax type in the country.
Government, tax administrators, practitioners and academics alike. It is levied on the price of a product or service at each stage of production, distribution or sale to the end consumer, except where a business is the end consumer which will reclaim this input value. Value added tax vat in nigeria of today replaced the existing sales tax which had been in operation under federal government, legislated decree no 7 of 1986 but which was operated on the basis of residence. This study analyses the relevance and the problems of value added tax vat in nigeria. Capital gains tax 10% imposed on capital gains derived from sales or disposal of chargeable assets.
The vat system in nigeria is administered by the federal inland revenue service firs. The value added tax vat in nigeria is tax payable on goods and services consumed by any person, whether government agencies, business organization or individuals. The value added tax act in this act referred to as the principal act is amended as set out in this act. Three research questions were formulated for the study. Value added tax vat in nigeria is a consumption tax that was instated by the value added tax act of 1993. Value added tax administration in east wollega z one has faced different challenges. Jun 14, 2017 value added tax administration in nigeria value added tax vat was introduced by the federal government of nigeria and is provided for by the value added tax decree 102 of 1993 which became effective in 1994 which requires manufacturers, wholesalers, importers and suppliers of vatable goods and services to be registered within six months of. Value added tax has no significant relationship with revenue generation in nigeria. It is a federal tax which is managed by the federal inland revenue service firs. Synopsis of value added tax administration in nigeria. Value added tax vat system which deviates from modern consumption tax designs, comprising a low standard vat rate of 5% and restricted recoverability of input vat.
Nigeria s general vat rate is 5%, with other rates including 0% that can apply to certain transactions. Assessments of value added tax vat administration in guraghe zone revenue authority article pdf available in research journal of finance and accounting 1007. Services performed and consumed in nigeria, on the order of nonresident persons, therefore, do not qualify as exported service nigeria. From there it spread rapidly to other developed countries. The tax system in nigeria is made up of the tax policy, the tax laws and the tax administration. Impact of tax administration on government revenue in a. 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. Problems affecting the successful operation of tax system in nigeria. According to the presidential committee on national tax policy 2008, the central objective of the nigerian tax system is to contribute to the. Value added tax act, 2014 c value added tax act, 2014 an act to provide for the imposition assessment and collection of value added tax on the supply and importation of goods and services in the bahamas and for connected matters enacted by the parliament of the bahamas part i preliminary 1. It can also be said to be tax on spending or consumption levied at every stage of transaction but eventually borne by the final consumer of such goods and services. The effectiveness of value added tax adminis sas publishers. Vat administration and efficiency in utilizing resources will determine the amount of vat collected all over the states of nigeria. The aim was to increase the revenue base of government and make funds available for developmental purposes that will accelerate economic growth.
Tax administration was nonetheless given to federal inland revenue services, which was already charged with the responsibility of administering most other taxes in nigeria. Over the years value added tax vat as a form of indirect tax was introduced in france in 1954. The value added tax vat administration in nigeria and the. The effectiveness of value added tax administration in north eastern nigeria. In ethiopia value added tax administration was introduced in january, 2003 primary to raise increasing revenue, modernizing tax implementation. The federal government arm responsible for administering this is the federal inland revenue service firs. The paper empirically examined the contribution of vat to the development of the nigerian economy. Like all other indirect taxes, it is a tax that targets the final consumer of goods and services. Synopsis of value added tax administration in nigeria part. Nigerian value added tax system and the concept of basic food. The general objective of this study is to examine the impacts of value added tax on revenue generation in nigeria. Broadly, there are three categories of tax authorities, namely.
As a result of the uncommon nature of vat system, majority of the populace in the country are unaware of its existence, consequently, the low credibility of government makes people scorn the payment and collection of vat. The value added tax vat is administered by the federal inland revenue service firs in abuja. This act may be cited as the value added tax amendment act, 2007. Value added tax vat was introduced by the federal government of nigeria in 1993 to replace sales tax. In the light of this reality and the general realisation that it would be foolhardy if nigeria continues to solely depend on oil revenues whilst neglecting other nonoil sources, adapting the tax administrative. Withholding tax in nigeria administration and rates. Pdf assessments of value added tax vat administration. Section 73 of personal income tax act and section of value added tax act.
The introduction of vat in nigeria through decree 102 of 1993 marks the phasing out for the sales tax decree no. Synopsis of value added tax administration in nigeria the. Value added tax imposed on the net sales value of nonexempt, qualifying goods and services in nigeria, it is 5% of the value. Apart from the high revenue generation capacity of value. The administration and problems of value added tax in nigeria. Vat was proposed and a committee was set up to carry out. The standard rate of tax is currently 5% of invoice value of goods and services except items specifically stated as exempt or zerorated. The modified value added tax and the nigerian economy. Government supplies of goods or services made by government authorities do not ordinarily amount to the carrying on of business. How important is the value added tax to the nigeria economy. All of these are expected to work together in order to achieve the economic goal of the nation. Any person or individual, corporate sole, organizations who consumes or buys any taxable product or service will have to pay a tax levy known as value added tax vat in nigeria.
Value added tax and economic development in nigeria. The main problems that encountered are the following such as. Contentious issues in value added tax act and administration in nigeria being paper presented at the citn mptp at ibadan on june 17, 20 introduction to vat in nigeria 2 nd edition jan 1993. Pdf public perception and attitude towards value added tax. In view of the above, this newsletter will examine recent developments in the administration of vat in nigeria and the overall importance of vat. Other factors, such as extensive use of tax incentives to encourage investment, have resulted in a narrowing of the corporate tax base. The drop in oil prices, which has led to dwindling revenues for government in nigeria, has once again brought into. The general objective of the study is to assess the contribution of taxes. This study evaluates the effect of vat on estate surveyors and. The aim of the study will generally, to assess the main problem relating to vat administration and vat payers in bishoftu town. Value added tax and economic growth in nigeria john chika. Visit this page for an executive summary of nigeria s tax structure and rates, by salestaxhandbook. Value added tax act vata cap d1 lfn, 2004 commencement 1st dec, 1993. Anyamu 1997 writing on tax policy planning and administration in nigeria opines that a tax system that ignores the tax planning and administrative aspect is deemed to remain a good system only on paper.
Pdf nigerian value added tax system and the concept of. Value added tax levied at each stage on value added in the economic chain of supply and it is a constant rate. A value added tax vat, known in some countries as a goods and services tax gst, is a type of tax that is assessed incrementally. The roles of value added tax in the economic growth of nigeria. Nigeria is a member of the economic community of west african states member trading bloc, which may affect international vat collection and regulations. Value added tax has no significant effects on revenue generation in nigeria. Unfortunately, we are far behind on tax law reform in nigeria as the last time any business tax legislation was enacted or. Nigerias value added tax is the very low single rate of 5% which is one of the lowest in the. The starting point of conventional economic growth theorisation is the neoclassical model of solow 1956. Refers to unearned income which accrues to the owner from past endeavors. For example in nigeria we have vat, company income tax, personal income tax and. The jurisdiction of vat lies with the federal government of nigeria and the proceeds from vat are distributed among the three tiers of. Vat is charged on most goods and services provides in nigeria and also on goods imported into nigeria.
Project topic on the impact of taxation as an aid to. Vat, administration, economic growth, seminars, workshops, nigeria introduction country seeking to improve its revenue generation would opt. It also contains information about international aspects of. Value added tax act an act to impose and charge value added tax on certain goods and services and to provide for the administration of the tax and matters related thereto. Stamp duties imposed on instruments executed by individuals and corporate. Specifically, the study aims at achieving the following. Contentious issues in value added tax act and administration in nigeria being paper presented at the citn. Value added tax vat was introduced by the federal government of nigeria and is provided for by the value added tax decree 102 of 1993 which became effective in 1994 which requires manufacturers, wholesalers, importers and suppliers of vatable goods and services to be registered within six months of commencement of business. Synopsis of value added tax administration in nigeria ii.
Under the law, all suppliers of goods and services, distributors. This study was restricted on bishoftu town vat registered business those who have annual sales turnover of birr 500,000 and above. S 2018 the value added tax vat administration in nigeria and the practice of estate surveying and valuation. Lack of awareness of taxpayers, resistance against registrations for value added tax by some traders, weak culture of taxpayers, poor value added tax administration system. The value added tax vat administration in nigeria and. Value added tax vat and inflation in nigeria 1990 to 2003. In order to meet its revenue target, government intends to broaden the tax net, enhance the effectiveness of revenue collection. The value of imported taxable goods for the purposes of this act shall be the amount which is equal to the price of the goods so imported and shall include. The roles of value added tax in the economic growth of. Businesses involved in cross border supplies in the gcc need to consider these additional requirements when planning for vat implementation. The economic impact of value added tax vat that was implemented in nigeria in 1994 has generated much debate in recent times, especially with respect to its effect on the level of aggregate prices.
The study was particularly focused on challenges of value added tax administration regarding the value added tax assessment, collection and implementation of value. Pre 2002 tax reform efforts the federal government had taken farreaching steps aimed at reforming the nations tax system before the pre 2002 reform efforts. Value added tax and economic development in nigeria madugba. The study focused on value added tax administration at bishoftu town. European journal of humanities and social sciences vol. The purpose of vat in nigeria is to increase governments federal, state and local revenue from nonoil sector thereby reducing the governments dependence on oil revenue majorly. Value added tax vat is administered in nigeria by the federal inland revenue service firs through the vat directorate abuja. I certify, in accordance with section 2 1 of the acts authentication act, cap. The idea of introducing vat in nigeria came from the study group set up by the. A survey of vatable nigerian organizations, firs staff and the publics was conducted to gain insights into. Value added tax simply regarded as vat is the tax levied on the supply of goods and services which is eventually borne by the final consumer of that good or service but collected at each stage of the production and distribution line. Data and research on tax including income tax, consumption tax, dispute resolution, tax avoidance, beps, tax havens, fiscal federalism, tax administration, tax treaties and transfer pricing. Administration of current taxes in nigeria vanguard news.