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PROJECT TOPIC AND MATERIAL ON THE EFFECT OF VALUE ADDED TAX (VAT) ON CONSUMER’S STANDARD OF LIVING (A STUDY OF VAT OFFICE, UYO)
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- Name: The Effect Of Value Added Tax (Vat) On Consumer’s Standard Of Living (A Study Of Vat Office, Uyo)
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1.1 BACKGROUND OF THE STUDY
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 destination-based tax, where the tax rate is based on the location of the customer (Bickley, 2008).
Tax, the whole world over is a major source of revenue to the government. The major reason why government imposes tax is for the generation of revenue in support of government programmes and to enable it continues to perform the legitimate functions of the state. Tax is also used by government as a tool for income redistribution and economic regulation which also affect the customer standard of living both positively and negatively. For these reasons, government imposes various forms of taxes grouped under direct and indirect taxes. Value Added Tax (VAT) falls under the indirect types of tax. Value added tax is a consumption tax that has been embraced by many countries of the world (Cole, 2015).
Traditionally, incomes have been the major tax reforms by many countries in recent times and have led to the discovery of consumption as having potentials for higher yield and greater chances of success than income. Thus, emphasis has been shifted from income-based to consumption-based taxes in developed and developing economics.
Again, of all the consumption-based taxes such as custom and exercise duties, import and export duties, sales and purchase taxes, VAT is rated the highest in terms of yield and ease of administration. It was in realization of these great potential of VAT and mainly to increase the revenue profile of government that led to the introduction of VAT by the Nigerian government in 1993, through Decree 102 of 1993. This Decree actually took effect from January, 1994, value added tax was to replace the sales tax, which was already in existence by operated on a very narrow scale by state government.
Since its emergence on the Nigerian fiscal scene about ten years ago, VAT has witnessed some teething problems and scathing criticisms. For instance, Lagos state government has threatened to re-introduced sales tax against the letter and spirit of the VAT degree. This in a way is a protest to the failure of the VAT policy in achieving it objectives. Therefore, increase economic consequence on the general standard of living of individual and the nation at large. This research is therefore to investigate the effect of VAT in consumer standard of living.
1.2 HISTORICAL BACKGROUND OF UYO VAT OFFICE
The Uyo VAT office was created alongside with other local VAT offices in November, 1993 when VAT operation however stated in January 1994. The Uyo Office was given the mandate to administer VAT throughout Akwa Ibom State VAT jurisdiction. The office had Mr. P. A. Okon as the first VAT officer. The state VAT office is under the setting targets for the local VAT officers under it, as over as coordinating the activities of the local VAT offices. As VAT activities in the state began to increase, there was need to create additional sub-offices, in the other two senatorial districts of the state to coordinate the collection and administration of VAT in those areas. Accordingly, the Ikot Ekpene and Eket sub offices were created in 1996.
These offices were manned by tax officers who reside in those areas with minimal autonomy. However, about early year 2000, this arrangement was dispensed with as it tends to bring about friction and was first becoming inimical to the goal congruence of state VAT office. Although the sub-office, reporting directly to the state controller of taxes.
1.3 STATEMENT OF THE PROBLEM
When VAT was introduced into the Nigerian fiscal system in 1993, it was vaunted as the panacea for all governments’ problems concerning revenue generation, especially from indirect taxation which has been experiencing very low yield in terms of revenue. Prior to this time VAT came with a promise that it was the main (and only) answer to all indirect taxes, and that the administration and management of VAT would ensure that completely obviates the need for sales tax.
This VAT come on board with an expounded (tax) based and enhanced list of goods and services subject to tax under the VAT system. In recent times however, there have been widespread complaints and criticisms about the collection and the general administration of VAT in the country and also affect consumer’s standard of living in responses to consumption of goods and services.
1.4 OBJECTIVE OF THE STUDY
1) To ascertain whether value added tax (VAT) affect consumers standard of living in the economy.
2) To determine whether there is any relationship between VAT and consumer standard of living.
3) To know the reaction of consumer’s toward VAT.
4) To identify the problems of VAT in the consumer’s standard of living since its implementation of the policy in the economy of the country.
5) To make recommendation based on useful findings.
1.5 RESEARCH QUESTIONS
1) Does value added tax affect consumer’s standard of living?
2) Is there any relationship between VAT and consumer’s standard of living?
3) Is there any problem associated from the consumer’s standard of living as a result of the implementation of VAT system in economy?
4) Is there any re-action by consumers toward VAT?
1.6 STATEMENT OF HYPOTHESIS
H0: There is no significance relationship between VAT and consumer’s standard of living.
Hi: There is significance relationship between VAT and consumer’s standard of living.
1.7 SIGNIFICANCE OF THE STUDY
This study is significant in the following ways:
(i) It will explore the working dynamics of VAT and create awareness on operation of this novel tax.
(ii) VAT payers and the general public would be better informed on valuable and non-valuable products and services and how to take advantages of VAT inputs.
(iii) The findings of this study would be useful in fiscal policy formulation.
(iv) It would educate the consumer’s on the usefulness of VAT in economic development.
(v) The study would also bridge the gap in knowledge about the value added tax and serve as a source of reference for further research on the subject.
1.8 SCOPE AND LIMITATION OF THE STUDY
Although taxation is a national fiscal tool but the scope of this study is limited to value added tax (VAT), because of limited resources in carrying out, a wicter study. There is no intention to generalize that finding of this study, because of limited scope already explained. But it is hoped that the findings of the study among other things would in store further research work on this subject, this time on a larger scale than this. The limitation was lack of funds and times to carry out the study effectively.