AN EVALUATION OF ROLE OF VALUE ADDED TAX AS SOURCE OF INCOME IN NIGERIA

Taxation is the primary source of income to the government. It is a compulsory levy on economic agents of an economy by the government (Gbosi, 2006). Though tax has been defined differently by various authors but the primary aim of any tax system is to raise funds in the public sector for use in promoting government programmes. In some instances, however, a tax may exit primarily, or at least very importantly, for regulatory purposes.
Traditionally, taxes are classified into direct and indirect taxes. Direct taxes are those type of taxes in which its liability is determined with direct reference to the tax paying ability of the taxpayer like, “personal income tax, company income tax, petroleum profit tax, capital transfer tax, capital gains tax, inheritance tax, wealth tax”, etc;while in the case of indirect taxes such an ability to pay is assessed indirectly (Bhatia, 2004). Examples of indirect taxes in Nigeria include entertainment tax, and the subject of this study, the Value Added Tax (VAT).
Value Added Tax (VAT) is an indirect tax levied on goods and/or services as a percentage of their value added. The consumer pays VAT on purchases in addition to the normal prices; the seller then pays the government the value of the VAT collected on sales less VAT they have paid on purchases inputs (Ahabi & Ijewere, 1998). VAT is levied in many countries. It was introduced in the United Kingdom in 1973. It is a kind of tax on the supply of goods and services, and it is borne by the final consumer but collected at each stage of the production and distribution chain. Originated from the treaty of Rome signed by the European Union countries in the late 1960’s. VAT is today practiced in more than sixty other countries cutting across Europe, Latin America, Asia, and Africa including Nigeria. Most of these countries just like Nigeria switched from sales tax to VAT as a major form ofcollecting revenue (tax) on consumption.Interestingly, it was first introduced in Nigeria on the 1st of January 1994 under Decree 102 of 1993 within the daysof General Sani Abacha as the Military Head of State.
VAT is a replacement of the then existing sales tax which had been in operation under the Federal Government Legislated Decree No 7 of 1986; but in operation on the basis of residence (Anyafo, 1998). Since VAT is based on the general consumption behavior of the people, the expected high yield from it will boost the fortunes of the government with minimum resistance from the payers of the tax. This has invariably serve has a source of huge income for the government of Nigeria. As a result of the importance attached to VAT by the government since inception, it will therefore be necessary if a clear study is carried out in order to evaluate the role of VAT as a source of income in Nigeria so as to avoid a sweeping conclusion, hence the aims of this study which are to empirically evaluate the role of value added tax as a source of income in Nigeria.
Imposition of taxes affects the income of the various agentsbut the problem with income generation in Nigeria is the inability of the Federal, State and Local Government to judiciously apply the income generated from VAT. If this income from VAT is properly utilized, physical and social infrastructures will be welled developed that the citizen standard of living will be affected positively. This has raised doubts among VAT payers on the proper evaluation and utilization of income from VAT.As a result of these, the public does not have confidence in the ability of the government to honestly utilize VAT money to improve the living standard of its citizens. This constitutes a serious stumbling block in the administration, assessment, implementation of VAT in Nigeria and in terms of affecting the disposal income of the citizens negatively.          
Also, persistent economic stagnating evidenced by worsening macro-economic indices such as rising inflation, growing unemployment and continued individual under-capacity utilization is not helping matter too. However, this study is evaluating the role of value added tax as a source of income in Nigeria.
The following are the objectives of this study:
1.  To evaluate therole of value added tax as a source of income in Nigeria.
2.  To examine the level of proper utilization of VAT income generated by Nigeria government.
3.  To examine the effect of income generated from value added tax on economic development in Nigeria.
1.  What is therole of value added tax as a source of income in Nigeria?
2.  What is the level of proper utilization of VAT income generated by Nigeria government?
3.     What is the effect of income generated from value added tax on economic development in Nigeria?
The following are the significance of this study:
1.  Outcome of this study will provide information for stakeholders in financial sector and the general public about the role of value added tax as a source of income in Nigeria. It will also educate on the effect of VAT on economic development in Nigeria.
2.  This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area.
This study will cover the role of value added tax as a source of income to the government of Nigeria.
Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.