CHAPTER ONE
INTRODUCTION
Value Added Tax is a consumption tax, which came to existence on first December, 1993, by decree number 102 of 1993 while its actual implementation commenced on first January, 1994. It is a transition from Lagos state sales tax. The tax was introduced sequel to the report of the 1991 study group on the review of indirect taxes in Nigeria under the chairmanship of Dr. Sylvester U. Ugoh.
The study group conducted a feasible study of the new tax, which after consideration was approved by the government.
The introduction of value Added Tax in Nigeria marked the phasing out of the sales tax, which has been in force in Nigeria since 1986. Sales tax can be defined as tax imposed on the floe of goods and services in production. A characteristics of this tax is that it deals with goods and services rather than the personnel circumstances of individual. Sales tax originated in Nigeria in 1982 when the Lagos State Government introduced sales tax on a number of goods and services.
This was successful in terms of revenue generation, because of this many other states introduced it in other to foster growth and development in the society. The role of the government in Nigeria mixed economy include:
· Provision of the legal framework and a social environment conductive to the effectiveness of the price system.
· Creation and maintenance of social and economic infrastructure.
· Redistribution of income
· Reallocation of resources
· Provision of macro economic objective
In other for the government to accomplish this tax, it requires substantial revenue which will be derived from the value added tax.
1.1 BACKGROUND OF THE STUDY
The match towards value added tax in Nigeria started with the acceptance of the recommendation of the study group on Nigeria Tax system and Administration in Nov. 1991.
Consequently the decision was made public in the 1992 budget speech. This resulted in the setting up of the modified value added tax (MVAT) committee on 1st June 1992 as recommended by the study group. Government on its own wisdom as informed by administered by the FIRS which already is charged with the serious responsibility of administering most other taxes including petroleum profit tax (PPT).
Value Added Tax is a tax imposed on the value that is added to goods and services as they pass through the registered person in the course of their taxable activities up to the final consumer. The net effect is that the final consumers pays vat while the registered person’s role in the process is to collect the tax for the Federal Board of Inland Revenue FBIR. It is important to consider some details, some elements in the definition of VAT, as this will explain the trouble that the VAT Directorate of FBIR must go into in the identification and registration of taxable persons.