Added tax the facts of a positive tax in nigeria, lagos. Cambridge core finance and accountancy the rise of the valueadded tax by kathryn james. The roles of value added tax in the economic growth of. A valueadded tax vat, known in some countries as a goods and services tax gst, is a type of general consumption tax that is collected incrementally, based on the surplus value, added to the price on the work at each stage of production, which is usually implemented as a destinationbased tax, where the tax rate is based on the location of the customer. Nigeria is a member of the economic community of west african states member trading bloc, which may affect international vat collection and regulations. Withholding tax in nigeria administration and rates. Output value added tax is the vat that is due on vatable supplies. Before then, sales tax was under the jurisdiction of the states and generally poorly. Personal income tax pit can be described as the income tax payable for any year of assessment upon the chargeable income of. The paper examined the impact of value added tax on revenue generation in nigeria.
Development of any tax policy on tax revenue for economic development should better be based on human development index rather than gdp. Taxation in nigeria and history of taxation in nigeria a tax in nigeria is a compulsory levy imposed by the federal government of nigeria on individuals and corporate entities in respective of return of service expected from the government. It is derived by multiplying the tax value of the aggregate supply by the tax rate. All you need to know a withholding tax is a system of taxation. This study examined the impact of etaxation on nigerias revenue and economic growth.
The impact of value added tax on nigerian economic growth. The incidence of tax in nigeria is borne directly or indirectly. 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. Personal income tax in one of the types of taxes in nigeria that is levied by the federal government of nigeria what is personal income tax in nigeria. In order to meet its revenue target, government intends to broaden the tax net, enhance the effectiveness of revenue collection. This is a study of the properties of the nigerias tax system particularly the bases of the company income tax, value added tax and personal income tax. The administration of tax in nigeria is vested in the various tax authorities depending on the type of. The input value added tax is what is charged on business purchases and expenses. This paper attempts to examine the relationship between value added tax and economic development. This tax is payable by the consumer at 5% of the net value added based on eligible transactions once consumed.
This act may be cited as the value added tax amendment act, 2007. The standard rate of tax is currently 5% of invoice value of goods and services except items specifically stated as exempt or zerorated. This page provides nigeria sales tax rate actual values, historical data, forecast, chart, statistics, economic calendar and news. The study focuses on the impact of petroleum profit tax, company income tax, personal income tax, value added tax revenue on nigerias economic growth between 1980 and 20. Company tax all companies operating in nigeria outside the oil and gas sector of the economy are. Jun 07, 2015 home finance value added tax vat in nigeria ii value added tax vat in nigeria ii on june 7, 2015 7.
These include goods and services supplied in nigeria or imported. However, if youre the chairman or ceo of a corporation and you work as an employee you dont have to pay the selfemployment tax. 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. We have also published, for the first time, an article by an academic. As a result, the gb exploited the resources and people of africa. The study investigated the role of tax administration in revenue generation in nigeria between 1994 and 2015. Value added tax vat and inflation in nigeria 1990 to 2003. Nigeria has a national valueadded tax vat of 5% as of 2020, administered by the federal inland revenue service firs. This tax is a replacement for the old sales tax which had a very narrow field of goods to which this tax could be charged. This edition of the nigerian tax journal summarizes the decided tax cases and administrative pronouncements by rtas and tax administrators in 2018. Value added tax and economic development in nigeria madugba, joseph ugochukwu1 joseph,u. Oct 23, 2014 this research work studied the impact of value added tax on revenue generation in nigeria. The rate of value added tax vat in nigeria increased from 5% to 7. Ex post facto research design was adopted for this study.
The roles of value added tax in the economic growth of nigeria. Value added tax vat is a tax on spending and it is borne by the final consumer of vatable goods and services, because it is included in the price paid value added tax known as vat for short is one of the types of taxes in nigeria, under the indirect tax category it replaces sales tax, which was characterized by a lot of lapses, inadequacies and restrictive coverage. Aruwa, phd department of accounting, nasarawa state university, keffi abstract. Nigerias general vat rate is 5%, with other rates including 0% that can apply to certain transactions. The british empire tried to fight for economic dominance in the region. Taxation in nigeria plus history of taxation in nigeria. Vat was proposed and a committee was set up to carry out. Overview of personal income tax in nigeria explained. This study provides a useful insight for the government, stakeholders and policy makers into the importance of tax revenue. The importance, how to, effect causes relationship, comparison, history, role, solutions are discussed. Only a limited number of supplies are nilrated, meaning any vat suffered may be. The aim was to increase the revenue base of government and make funds available for developmental purposes that will accelerate economic growth.
This institution was established in 1993 as pronounced by vat decree vatd n0. The idea of introducing value added tax vat in nigeria came as a report of the study. Value added tax vat was introduced by the federal government of nigeria in 1993 to replace sales tax. Effect of value added tax on the nigerian economy oraka, azubike o. The vat system in nigeria is administered by the federal inland revenue service firs.
Jun 14, 2017 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. To calculate the amount of vat a consumer or business must pay, take the cost of the goods or service, and. The objective of this study is to determine the extent to which value added tax has affected the. Trade union congress of nigeria tuc, has criticised an aspect of the finance bill signed into law by president muhammadu buhari on monday, endorsing the approval of the increase in value added tax. The valueadded tax vat is administered by the federal inland revenue service firs in abuja.
Effective date of vat rate increase kpmg united states. What you need to know about value added tax vat in nigeria. C 21 lfn 2004 as updated to may 2007 and section 15 of value added tax act vata cap. Read a february 2020 report pdf 125 kb prepared by the kpmg. This paper does not pretend to cover everything about vat, but some specifics that addresses the imperatives which are. Synopsis of value added tax administration in nigeria. Value added tax and economic development in nigeria. Makes it chargeable on all goods and services goods and.
The general objective of this study is to examine the impacts of value added tax on revenue generation in nigeria. Nigeria has a number of tax treaties referred to as double taxation agreements with a number of countries, these are designed to ensure that the tax payable in nigeria on the profits of a nigerian company being remitted into the country are reduced by the amount of foreign tax paid abroad and vice versa where an. In nigeria, nobody can dispute the fact that though this taxes are been collected, they are. Given that the purpose of introducing electronic tax system is to improve revenue collection which will in turn improve the countrys economic growth, the study empirically examined how the implementation of etaxation in 2015 has affected tax revenue, federally collected revenue and taxtogdp ratio. Valueadded tax and alternative sources of federal revenue, an. To examine the relationship between value added tax and revenue generation in nigeria to establish the effects of value added tax on revenue generation in nigeria 1. A valueadded tax vat is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production. I certify, in accordance with section 2 1 of the acts authentication act, cap. Value added tax vat in nigeria is a consumption tax that was instated by the value added tax act of 1993.
Visit this page for an executive summary of nigerias tax structure and rates, by salestaxhandbook. Activities of nonnigerian companies, which would attract tax in nigeria and other special issues, are spelt out in the laws. Azubike1 michael okpara university of agriculture umudike umuahia abia state nigeria. The value added tax vat act, 2007, governs the administration of vat in nigeria. Value added tax in nigeria how to calculate vatable.
One of the attempts to expand the tax net with minimum resistance and also to reduce tax evasion so that most of the tax income would get to the nigerian government is the introduction of value added tax in nigeria in 1993. The personal income tax pit is the most common tax type in the country. Pdf nigerian value added tax system and the concept of. Some even said that the success of vat in developing country like nigeria, is going to be dependent on the level of publicity bring into it, as well as the level of education of potential prayers.
Using a manufacturing company, the value added begins from the first stage, for instance, the. Implications of multiple taxation on the economy omesi, israel mba, ph. Synopsis of value added tax administration in nigeria the. The drop in oil prices, which has led to dwindling revenues for government in nigeria, has once again brought into. About the law this piece of legislation was enacted to impose and charge value added tax on certain goods and services to provide for the administration and tax and related matters. An evaluation of value added tax in nigeria myschooltrick. Tax credit allowable against tax payable on income derived from outside nigeria. Value added tax and economic growth in nigeria john chika. The federal inland revenue service firs has issued a public notice informing taxpayers of automation of the value added tax vat. Looking at the history of taxation in nigeria, the beginning of the colonization period was connected with various trading posts and companies in the west africa. The value added tax vat is a specially tax that charges establishments ten percent 10% of their turnover in a year. Nasiru ibrahim arab, clerk to the national assembly. Pdf the aim of this study was to examine the influence of indirect taxes on economic. The secondary source of data was sought from central bank of nigeria statistical bulleting 2010, federal inland revenue service annual reports and chartered institute of taxation of nigeria journal.
A withholding tax is the tax required by law to be withheld by a party from each payment made to another contracting party from the income or services rendered. 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 study period spans economic cycles for about 66 percent of the life of. Tax experts had argued in different ways as regards the success of value added tax 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 commencement of business. Business or trade only partially carried on or deemed to be carried on in nigeria. Value added tax vat in nigeria is levied on all products and services traded within the country and payable to government at a 5% rate, one of the lowest in the world. The paper empirically examined the contribution of vat to the development of the nigerian economy. Countries introduce a value added tax vat because they are dissatisfied with their existing tax structure. Discusses the fundamentals of a vat, its origin, the practice in nigeria as well as its shortcomings considering the presence of state sales tax. All existing manufacturers, distributors, importers and suppliers of goods and services are required to register for vat. Relevant tax authority may assess and charge tax on the turnover of a business, etc.
This publication is a summary of the major tax laws in nigeria, prepared for general purpose only. Includes 0 unallocable between personal and corporate income tax, 3000. Secondary data were used in this study, the data were collected from cbn statistical bulletin also gathered from journals and textbook that is related to the research topic, the study. The most difficult thing to understand may be income tax, this paper explores the concept of value added tax vat with respect to the most controversial treatment of basic food items.
The paper also looks at the adoption of vat in other federal states and how the states have been able to. It is a multistage levy on valueadded on each production or distribution stage of a good or service. Impact of value added tax vat on government revenue and economic growth in nigeria 94 revenue to gdp ratio of about 4. Nigeria pkf assurance, audit, tax, advisory and business. Vat is a tax levied on the supply of taxable goods and services. 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. Such tax withheld must be added up on monthly basis and remitted directly to the federal inland revenue service for withholding tax on limited liability companies or state internal. Additional investment allowance of 15% of the tax free period. Value added tax and economic development in nigeria madugba.
These include value added tax, capital gains tax, withholding tax and stamp duties. Applicability of value added tax to real property transactions in nigeria aderonke alexadedipe strachan partners the value added tax amendment act, 2007 the act is the principal legislation which dictates the application of value added tax vat to certain goods and services in nigeria. A value added tax vat, known in some countries as a goods and services tax gst, is a type of general consumption tax that is collected incrementally, based on the surplus value, added to the price on the work at each stage of production, which is usually implemented as a destinationbased tax, where the tax rate is based on the location of the customer. Value added tax vat in nigeria small business ideas. 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. Impact of value added tax on nigerian economic growth project material. The sale of real estate properties is subject to a 10% tax on the gains. However, allowing theimpact of vat to vary with country specifics will shift the effect to become negative though acting in the opposite direction are gains that. Nigerian value added tax system and its position on basic food items. Get free research paper on value added tax in nigeria.
The impact of value added tax on revenue generation in nigeria. Value added tax in nigeria vat all you need to know. The regressive tax system is not commonly used,even in developed countries since this will mean revenue from taxes to the government will only continue to reduce. Ezejiofor raymond department of accountancy nnamdi azikiwe university, awka abstract. Calculated as 5000 taxes on goods and services less 5111 value added taxes. Value added tax and economic growth in nigeria john chika onwuchekwa department of accounting, rhema university, aba, abia state, nigeria suleiman a. Vat is charged on most goods and services provides in nigeria and also on goods imported into nigeria. Federal inland revenue service firs we do our best to provide accurate and up to date information. Its an easier way for the government to get more people to pay their tax. It is a federal tax which is managed by the federal inland revenue service firs. Uniprojects aim of providing impact of value added tax on nigerian economic growth project research material is to reduce the stress of moving from one school library to another all in the name of searching for impact of value added tax on nigerian economic growth research materials.
Pdf effect of value added tax on the nigerian economy. The objective of this study is to determine the extent to which value added tax has affected the nigerian economy. Value added tax vat vat is a consumption tax levied on the supply of all goods and services supplied in or imported into nigeria, except those specifically exempted from the tax. Impact of value added tax on nigerian economic growth. The main objective of the study is to examine and appraise the implementation management and evaluation of value added tax in kaduna state and nigeria how vat is administered in terms of assessment computation offences and penalties collection and registration procedure in nigeria. Please, sit back and study the below research material carefully. Impact of etaxation on nigerias revenue and economic. Value added tax vat is a consumption tax, levied at each stage of the. 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. 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. The most commonly used ones in nigeria are the proportional tax system and the progressive tax system. The study is aimed at the appraisal of revenue generation in nigeria. Uniprojects aim of providing impact of value added tax on nigerian economic growth project research material is to reduce the stress of moving from one school library to another all in the name of searching for impact.