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PROJECT TOPIC: VALUE ADDED TAX (VAT) AND ECONOMIC DEVELOPMENT OF NIGERIA: A CASE STUDY OF LAGOS STATE METROPOLIS

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CHAPTER ONE

INTRODUCTION

Taxation is one of the most important revenue generation mechanisms in any given economy. In fact, one of the main sources of government revenue is tax which is obtainable from different sources. Government has the mandate to impose tax via its various regulations. An efficient and effective tax system is capable of ensuring the basic necessities and services in the country. Taxes are used to achieve economic growth, achieve equity in income and wealth distribution and maintain equilibrium in the economy. Taxes are not only the most traditional means through which governments generate revenue; they are also the most reliable and predictable. One of these taxes is Value Added Tax (VAT). The Value Added Tax, is a special type of indirect tax in which a sum of money is levied at each stage of production and distribution of a product or service. Referring to history, Okoye and Gbegi (2013) reported that in 1954 the Value Added Tax system was initiated by the then Joint Director of the tax authority of France, Maurice Laure. VAT came into effect for the first time on 10th April 1954; although, a German Industrialist Wilhelm Van Siemens proposed the concept in 1918 the value added tax system has been adopted by different nations across the world. VAT has become a major source of revenue in many developing countries. In sub-Saharan Africa for example, VAT has been introduced in Benin Republic, Cote d’Ivore, Guinea, Kenya. Madagascar, Mauritius, Niger Republic, Senegal, and Togo. Evidence suggested that in these countries, VAT has become an important contributor to total government tax revenues (Adereti et al., 2011). In 1994, the revenue profile of the federal government and by extension sub-national governments increases. This is because, in addition to oil revenue and other taxes such as company income tax, government receives revenue at each stage of production. VAT was introduced in Nigeria following a study group set up by the federal government in 1991 to review the nation’s tax system. It was this group that proposed VAT and in that same manner, a committee was set up to conduct feasibility study on the implementation of the VAT.


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