CHAPTER ONE
INTRODUCTON
1.1 BACKGROUND OF STUDY
Value added tax is a concept in Nigeria introduction in January 1994.It antecedent contract to 1987 when structural adjustment programme [SAP]was introduced in the country.
The architects of (SAP) which include the world bank and international monetary fund (IMF) had advised on total review of tax system in the country as a panacea for economic recovery.
The federal military government responded by setting up several committee in succession, which culminated in the introduction of VAT in 1994 through decree 102 promulgated in 1993.
Prior to the introduction of vat, sales tax had been in operation. Following recommendation from the committee, sales tax was abolished and VAT introduced as its replacement.
The economic blue print behind SAP was generally to a tract more revenue for government. Specifically VAT apart from halting wide deficit in government account resulting from government expenditure running steadily ahead of revenue, also intend to:
vReduce the country dependence oil revenue.
vBring in a lot of money because by the incidence on the consumer who hardly know that he is paying the tax
vProvide incentive for export and therefore enhance balance of payment position
vMaintain even tax incidence across various stages of production
vShift taxation toward consumption rather saving advocate of VAT had argued among other thing that the new system was desirable in economy because it will curb consumption of luxury and socially undesirable goods and services. It was advocated furthers that VAT would eliminate the multiplicity of tax in the country.
Moreover, it was argued that it will make room for more saving and subsequent investment since it, minimize consumption. VAT also was intended to promote export and discourage import because export will be given tax exemption while import will be taxed heavily.
From the general objective of the new tax system, it was intended to revamp the national economy through improved revenue and attitude changes. The enabling law clearly stated the modalities for its implementation, which was rested at the hands of federal inland revenue services (FIRO), at its inception, it was opposed by section fo Nigeria especially manufacturers association of Nigeria it was argued by the opponents that VAT was regressive, discriminative of its unpopularity, this is not however to suggest that VAT may not have its shortcoming VAT, has been in operation for five years, the players are several industries and services, which are publicly and privately owned. Five years is enough period for any policy to make its impact, in view of this, the effect of VAT in Nigeria industries
1.2 STATEMENT OF PROBLEM
Prescribing economic and fiscal policy that will keep the economy of Nigeria afloat has been a tall and tough other various economic methods principles and policies were put in place by several leaders in the past, yet the economy has defiled all the solution value added tax (VAT) was one of such conscious economic policies put in place to get the economy going.
The problems facing the economy were enormous and multi dimensional. To turn it around, the government in it fiscal and monetary policies always focuses on the private sector and the industries.
Industries are at the center stage of implementation and execution of VAT. They are the manufacturers of good and provide of several whose products are taxed at each production stages. Although VAT may attract more revenue for the ultimate beneficiary the government, but what problem does it constitute to industries?
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