1.

0INTRODUCTION The idea of introducing VAT in Nigeria started as a result of all perceive, impressive, nonoil revenue and chronic over dependence on oil revenue. There was therefore a need. To diversity the revenue based from oil as oil price tend to be unstable and re determined exogenously. Furthermore there was the ongoing demand by the economic community of West African States (ECOWAS) for its members to develop a uniform tax system. In Nigeria, the idea of VAT started as a result of the report of the study group set up by the federal government in 1991 to review the entire tax system. This study group came up with a recommendation that have added tax should be introduced in Nigeria, following this recommendation of the study group vat was eventually established order. 7 of 1986.decree No 102 of 1993 on 1st of September 1994, to replace the sales tax decree No 7 of 1986.

1.1BACKGROUND OF THE STUDY Taxation is one of the sources of income of government revenue and such income is used to rum public utilities and performs other social responsibilities. The two main forms of taxes are as follows: 1. Direct taxes exams are i. ii. iii. iv. Personal income tax Company income tax Petroleum profit tax Capital gain tax

2. Indirect taxes examples are: i. ii. iii. iv. v. vi. Import duties Export duties Custom duties Excise duties Value added tax Entertainment pool and Casion taxes

There are currently five administrative setups in Nigeria with their various composition as well as functions for the administration of tax in Nigeria. The administrative machinery correctly in existence includes i. ii. iii. iv. v. The Joint Tax Board (JTB) Federal Board of Inland Revenue (FBIR) The State Board of Internal Revenue (SBIR) Local Government Revenue Committee Joint State Revenue Committee Value added tax is administered by the federal board of Inland Revenue services. VAT is a progressive form of taxation as distinct from sales tax over is the more you consume the more you pay. It is a tax imposed on the value, which is added to the goods and services as they pass on through the various stages in the business chain. VAT was adapted through historical revolution by Frence in 1954 and since 1960 European Economic Community (EEC) country

members decided to adopt VAT and united kingdom introduce it into her economic system in 1973. VAT has been rapidly adopted by many countries in the last forty five years. At present VAT is operated in over sixty (60) countries worldwide. 1.2STATEMENT OF RESEARCH PROBLEM Value added tax is a complex system to operate and its administration requires enormous paper work and adequate record keeping. The inadequacy of record by business man may impede the survival of VAT A and it does not, the yield in terms of revenue may be lower than anticipated and inadequate data can also give rise to the problem of over stated claims for tax refund and falsified invoices. There is problem of inflicting economic hardship on the marginalized masses because traders may take advantage of the situation to increase price arbitrarily and the excessive price can lead to inflation in the country.

VAT may be impracticable because it is likely to be full of evasion and avoidance of VAT due to poor record keeping, large number of illiterate etc. other problems include: the problem of inadequate coverage due to the absence VAT offices in some area, failure to register by potential VAT agent inconsistency in VAT revenue sharing formula etc. 1.3OBJECTIVES OF THE STUDY The main objective of the study is focused on the implementation and effectiveness of value added tax in Nigeria and others include: i. The need to improve the concept of fairness and equality in tax system. ii. The need to improve the financial position to the lowincome group since the government has been anxious to lower tax Borden on workers with low income and thus improve their financial position.

iii.

The need to increase reward for effort. This is to ensure that high personal income taxes did not act as a disincentive to earning.

iv.

Limitation and benefit of VAT in Nigeria.

1.4SCOPE OF THE STUDY The scope of the study is restricted on value added tax system in Nigeria: its features, objectives, composition. Administration, merits and demerit, registration procedure, variable persons, Goods and services exempted from VAT, issues, challenges and the computation of value added tax. It also covers the objectives significance and limitation of VAT in Nigeria. 1.5 FORMATION OF HYPOTHESES HYPOTHESIS 1 Considering the main objective of the study which is the implementation scope and effectiveness of value added tax system in Nigeria there is need to make a guess that the implementation of value added tax system in Nigeria has significant influence on

revenue generated to the federal government which is subject to acceptance or rejection base on the result of the research. HO: the implementation of value added tax in Nigeria has significant influence on revenue generated to the Federal Government H1: the implementation of value added tax has no significant influence on revenue generated to the federal government. And the second hypothesis is formed which also help to justify the research will work. HYPOTHESES II H0: most registered VAT agent do not remit VAT to the relevant local vat office, which would ha e increase, the total sum of revenue to the Federal Government. H1: most registered VAT agent do not remit VAT to the relevant local vat office.

1.6SIGNIFICANCE OF THE STUDY This study will be of agent importance to the academic and general world. This study will provide researchers scholars, public and private individuals VAT inspectors/administrators, consumers of goods and services etc.; information as a reference point for further research in the area of this study if improves fairness research in the tax system when proper records are kept since the tax evaders as in the retailers, the self-employed and small scale business owners who usually evade tax will be brought into the system. It also improves the tax system as the consumer pay tax in line with their ability to buy goods and services and it is also significant because it serves as a source (additional) of revenue to the government. 1.7 LIMITATION OF THE STUDY The scope of this research study is limited by a lot of factors, among which are time limit, shortage of finance and response. The

time constraint is as a result of combining the class work and the research study. The finance constraint (May likely) affect the capacity administering questionnaire and interview and one cannot compel the staff to respond without him willing to do so. As a result of these limits the research works is being carried out with in the available capabilities. 1.8DEFINITION OF TERMS i. DIRECT TAXES: these are taxes levied on the production and consumption of goods and services. E.g. import duties export duties, excise duties, value added tax etc. ii. INDIRECT TAXES: these are taxes levied on the production and consumption of goods and services e.g. import duties, excise duties, value added tax etc. iii. PERSONAL INCOME TAX: this is tax levied on the income of national individual. Legislation personal income tax decree No. 104 of 1993 as amended

iv.

COMPANIES INCOME TAX: this is levied on the profit of limited liability companies or plc. Legislation: CITA cap 60 LFW as amended.

v.

CAPITAL GAIN TAX: this is tax payable by an individual, partnership or limited liability company on profit derived from the disposal of assets. Legislation capital gain tax cap. 42 LFN90 as amended.

vi.

PETROLEUM PROFIT TAX: this is levied on the profit of any company engaged in the upstream petroleum operations. Legislation: petroleum earns petroleum operations.

Legislation: petroleum profit tax act. Cap. 354 LFN 1990 as amend INDUSTRIAL DEVELOPMENT (INCOME T AX) RELIEF This is also known as pioneer legislation that grant tax incentive to certain companies/industries which are engaged in t he production of certain products of establishment of certain industries. Pioneer companies are companies engaged in manufacturing, processing,

mining servicing and agricultural industries whose product have been declared pioneer products on satisfying certain condition. Legislation: industries development (income tax relief) Act cap.