CHAPTER ONE
INTRODUCTION
Taxation has long been practice in Nigeria. Initially, only men were expected to pay taxes but now all people working and anybody found in the capacity of paying tax are obligated to pay tax.
Tax in a mandatory levy on income charged for the purpose of carrying out government activities losses incurred by government in recent times through tax evasion are increasing rapidly despite the pathetic financial and economic state of the country. There are daily report on newspaper and magazines that government losses billions of naira yearly due to tax evasion and the fraudulent practices of the tax officials. This has attributed to many factors. Most people attribute this to the fact that the country’s tax system in highly income base and since income is taxed only at one point or stage, a lot of evasion results.
In Nigeria, many different goods are consumed. For this reason, tax experts see consumption as the actual habit and as such, the need to shift tax base from income tax to consumption tax. This necessitated the introduction of sales tax in Nigeria through degree N0. 7 of 1986.
However, it was discovered that sales tax is narrow because it does not cover a lot of goods and services. This prompted the introduction of Value Added Tax (VAT) in Nigeria.
The idea of introducing VAT in Nigeria came from the report of the study group set up by the Federal Government in 1991 to review the entire tax system, VAT was proposed and a committee was set up to carryout feasibility studies on its implementation. In January 1993, government agreed to introduce VAT through instrumentality of the VAT Degree 102 of 1993. This was meant to be effective from January 1 1994. It came on stream as a replacement to its antecedent, the sales tax, which was characterized by a lot of lapses inadequacies and restrictive coverage. VAT is a consumption tax imported on all manufactured goods, industrial raw material and other imported into or product in Nigeria a single rate of five percent. Potentially, its draguel cover virtually everybody, since one thing or the other except in the cases of specific items that are exempted.
Several benefits which the government expected to derive from value added tax (VAT) were enumerated. During several others they are
i. Increase in revenue generation
ii. Facilitation of administrative enforcement
iii. Reduction in revenue losses through tax evasion
iv. Enhancement of documentation of transaction
v. Encouragement of rapid industrial growth by allowing credit for input taxes for capital goods.
vi. Maintenance of neutrality in tax payment since it is broad based and has a single rate.
The government has conveyed these benefits to the public and has also organized workshops and seminars to educate the producers, suppliers, consumers, tax officials and the general public on VAT system in Nigeria. However, the perception of taxpayers is necessary at this stage and this is what this research is to find out.
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