PROJECT TOPIC- IMPACT OF VALUE ADDED TAX ON CORPORATE ORGANIZATIONS IN EBONYI STATE
This study sought to out the impact of value added tax on corporate organizations in Ebonyi state. To carry out this study, three research questions were asked structured questionnaire was the only instrument used for data collection. Three hundred and thirty five (335) out three hundred and fifty (350) distributed were fully completed and returned, while (15) copies of questionnaire were not returned. Mean and standard deviation statistic were used for analyzing the data. The regard results revealed that the impact of value added tax on corporate organizations in Ebonyi state for Government Revenue with regard to this findings, conclusion were draw which include revenue, the impact of valve added tax on corporate organizations in Ebony state. Recommendation was made which include the tax authorities should organized public enlightenment programme in order to create the requisite awareness that will promote the acceptance of the tax on value added, this will go a long way to reduce of incompliance.
1.1 Background to the study
Taxation is that source of government revenue which constitute a veritable activity. Tax is generally used to pursue the various policies of the government. For instance increased taxation in private sector with draws money from circulation in the sector and this might keep inflation under check but will inevitably slow down the pace of economic activities in the affected sectors of the economy. On the other hand, reduced taxation increase money supply.
It also stimulates activities in the areas affected with the abundant benefits. The tax structure or combination of taxes in an economy at any particular time is known to reflect the fulure aspiration of that economy. Like in many other developing and developed countries there exist in Nigeria, a variety of taxes, which are paid by companies, other business firms and individuals. Among these are consumption taxes which although not meant to be borne by the companies, are collected meant to be borne by the companies are collected by them. Under the consumption tax category is fund the value added tax (VAT), whose impact on the Nigeria corporate organization we are studying.
VAT HISTORY :- The international monetary fund (IMF) and the world bank, two agencies of the united Nations organization which are closely identified with the establishment and monitors of the structural Adjustment programme (SAP) in Nigeria, had since 1987 been advising that the tax system in Nigeria needed reform so as to make the government revenue less dependent on revenue derived from petroleum.
The federal government, in an attempt to effect the tax reforms, set up two study groups in 1991. one was set up buy the federal ministry of finance and economic development to study and make recommendation on the reforms needed in direct taxes. The other group was setup by the ministry of budget and planning to study on indirect taxation, which is more relevant to our study. The cter group was inaugurated on 26th April 1991 with the following objectives.
- To shift taxation toward consumption (indirect for) rather than saving (Direct fore).
- To reduce dependence on (petroleum) oil revenue
- Provide incentives for export production.
- To improve the administration of indirect taxes.
- To maintain a fairly even tax incidence across various lines, stages and element of production, including foods.
It was this committee that gives a general guide line for establishment of modified value added tax (VAT), in Nigeria. Sequence to the recommendation of Dr. Ugoh panel on the workings of Nigeria indirect tax system (1991), the federal government set up machinery for the introduction of value added tax (VAT) known as the modified value added (VAT) committee. This committees is made up of 20 members and were to undertake the following assignment.
- Planning and execution of the computerization of sales tax administration.
- Recruitment and training of tax administrators and collectors.
- Recruitment and training of taxable person for sales tax and later to be used for modified value added tax.
- Modified value added tax legislation.
- Preparation of invoices, forms designs etc.
- Public enlightenment campaigns, workshop etc.
- Special training of administrators and collectors.
Valued added tax (VAT) initially was billed to tax effect early 1993 with the recommendation of VAT committee but for logistic reasons, the introduction was shifted to last quarter of 1993.
On 24th August 1993, the VAT decree 102 was finally promulgated. Although the law stipulated that VAT becomes collectible from December 1st to January 1994. the value added tax is a consumption tax that replaced the sales tax as was operated under the sales tax decree No.7 of 1986. according to an information circular issued by the federal in land revenue service, the rationale behind replacing sales tax with the value added tax was as a result of some factors and consideration’s which include among others:
- The base of the sales tax in Nigeria is narrow. It covers only nine (9) categories of goods. This narrow bade on the tax negates the fundamental principle of consumption tax which by nature is erupted to cut a cross all consumptable goods and services. VAT base is broader and includes most professional services and banking transactions which are high profit generating sector.
- Only locally manufactured good were targeted by the sale tax decree of 1986. vat, a considerable part of the tax is to realized from imported goods. This means that the locally manufactured goods will not be placed at a disadvantages relative to imports.
- Since VAT is based on general consumption behaviour of the people, the expected high yield from it will boost the future of the state government with minimum resistance from prayers of the tax. From the foreign, it is evident that the value added tax promises a brighter future for the Nigerian economy at last in terms of revenue generations. But that is as far as the macro economy is concerned. How the value added tax is going to influence the corporate performance of votable person is however, the subject mater of this study.
PROJECT TOPIC- IMPACT OF VALUE ADDED TAX ON CORPORATE ORGANIZATIONS IN EBONYI STATE
1.2 Statement of the Problem
The questions which this records work aims at answering could be summarized into the following problem statements:
- Given the present economic situation and industrial conditions, how are companies dealing on goods and services which are subject to VAT going to be affected by the new tax system.
- With the apparent difficulties encountered by firms in holding down losts and given the in centives in VAT according to firms operating at mineral cost, how is a company’s pricing policy most likely to be effected.
- Are there outstanding impact of value added tax on Nigeria, economy following two years of its successful Imposition with special reference to corporate performance.
1.3 Purpose of the Study
The value added tax (VAT) is a consumption tax the burden of which is not expected to be borne by business (acting as more collecting agent for the government0 but to be shifted forward to the final consumers in the from of an increase in the prices of goods and services equal to the amount of the tax.
The objectives of the study are as follows:
- to evaluate the value added tax with particular regard to its short-run and long run impact on corporate performance of the affected companies.
- To propose measures that could be adopted by corporate bodies in order to tax while at the same time making adequate provision for accommodating the adverse effects of the tax.
- To make recommendations based on the findings, on how the government could improve on value added tax in other not to stifle the growth and development of business organization which are pre-requisite for a sustained economic growth.
1.4 Significance of Study
This work is of academic significance in the sense that it will contribute to the understanding of value added tax and its impact on the economy with special reference to corporate performance. But the practical significance in addition to the above, lies in the fact that the work would highlight the extent to which company executive could take tax advantage of the opportunities in the system to improve that corporate image. Even the greater importance is the unintended adverse effects of the tax on some industries. The timing of this research work will make it possible for the authorities to consider evening VAT legislation with respect to same industries so as to achieve the overall objectives of tax. Finally, the study will act as eye opener to the beneficiaries of value added tax.
1.5 Scope Of The Study
- The scope of this research covers a critical examination of impact of the impact of VAT on Nigerian economy and a consumption tax will achieve its objective as business benefit tax.
- It covers the work study of finance, collecting date and the present rate of 5% of the tax on value added.
- It also covers the profitability point of view, of the VAT with sales tax is difficulty encountered by sires in holding down costs eg at mineral cost Ana industry conditions effected by the new tax system.
1.6 Research Question
- To what extent do you feel the VAT which is a consumption tax will achieve its objective as business benefit tax?
- How do you consider the present rate of 5% of the tax on value added?
- What extent can the Government improve on value added tax in growth and development?
- How are companies dealing on goods and services which are subject to VAT, going to effected by the new tax system?