The Effect of Indirect Taxation on Consumption in Nigeria
Chapter One
OBJECTIVE OF THE STUDY
The objectives of the study are;
- To ascertain the effect of indirect taxation on consumption in Nigeria
- To ascertain the effect of indirect taxation on Nigeria economy
- To ascertain the relationship between indirect taxation and consumption
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
Taxation plays a very important role in the economic life of a developing country like Nigeria. Nigeria needs an efficient tax system to be able to function well. Taxation is seen as a burden which every citizen must bear to sustain his or her government because the government has certain functions to perform for the benefits of those it governs. Taxation is the most important source of income to the government, it accounts for ninety percent or more of their income. According to Ifurueze & Ekezie (2014), tax is “a compulsory levy imposed on a subject or upon his property by the government to generate the needed revenue for the provision of basic amenities and create enabling condition or the economic wellbeing of the society”… These levies are made on personal income, such as salaries, business profits, interests, dividends, discounts and royalties. It is also levied against company‟s profits petroleum profits, capital gains and capital transfer. Whereas, Ojo (2003) stresses that, taxation is a concept and the science of imposing tax on citizens. According to him, tax is itself a compulsory levy which is required to be paid by every citizen. It is generally considered as a civic duty. The imposition of taxation is expected to yield income which should be utilized in the provision of amenities, both social and security and creates conditions for the economic wellbeing of the society. According to Bariyiman and Gladson (2009), tax administration in Nigeria is carried out by the various tax authorities as established under the relevant tax laws. According to the report of the presidential committee on National Tax policy (2008), The National tax policy provides a set of rules, modus operandi and guidance to which all stakeholders in the tax system must subscribe. Tax policy formulation in Nigeria is the responsibility of the Federal inland Revenue Services (FIRS), Customs, Nigerian National Petroleum Corporation (NNPC), National Population Commission (NPC), and other agencies but under the guidance of the National Assembly i.e. the law making body in Nigeria (Presidential committee on National tax policy, 2008). Suffice it to say that if there must be any effective implementation of the Nigerian tax system or attainment of its goal, the use of the national tax policy document remain absolutely essential. According to the Presidential Committee on tax policy (2008), “Nigeria needs a tax policy which does not only describe the set of guiding rules and principles, but also provide a stable point of reference for all the stakeholders in the country and upon which they can be held accountable. James and Nobes (2008) decried the inability of tax policy to meet up with efficiency and equity criteria against which it is being judged. It was further noted that tax policy is continually subjected to pressure and changes which most time does not guarantee outcome that are in line with the overall goal (James and Nobes 2008). Unfortunately, most policy changes in Nigeria are without adequate consideration of the taxpayers, administrative arrangement and cost plus the existing taxes. This has in no small measure hindered the effective implementation and goal congruence of the nation‟s tax system. James and Nobes (2008) stated as follows the best approach to reforming taxes is one that takes into account taxation theory, empirical evidence and political and administrative realities and blend them with good dose of local knowledge and a sound appraisal of the current macroeconomics and international situation to produce a feasible set of proposals sufficiently attractive to be implemented and sufficiently robust to withstand changing times, with reason and still produce beneficial results.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to the effect of indirect taxation on consumption in Nigeria
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on the effect of indirect taxation on consumption in Nigeria. 200 staff of federal Inland Revenue service, Lagos state was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was the effect of indirect taxation on consumption in Nigeria. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of the effect of indirect taxation on consumption in Nigeria
Summary
This study was on the effect of indirect taxation on consumption in Nigeria. Three objectives were raised which included: To ascertain the effect of indirect taxation on consumption in Nigeria, to ascertain the effect of indirect taxation on Nigeria economy, to ascertain the relationship between indirect taxation and consumption. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of federal Inland Revenue service. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made tax officers ii, tax officers i, senior officers and junior officers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
One of the most important resources of revenue for every Government is tax; tax payment became a compulsory contribution by every citizen to Government to enable the Government to fulfill its commitments towards society. In all countries tax policy is at the heart of the political debate on the level of public services that should be provided and who should pay for them. Taxation has either direct or indirect effects on almost every aspect of production and distribution in modern economies and is therefore an important aspect in economic research. Taxes are classified according to the point, which they are paid, and by who is paid. Direct taxes are paid to the Inland Revenue by the individual taxpayer according to whom the tax is levied. Indirect taxes are paid by the consumer according to the goods that they are purchased. Direct and indirect taxation have different impacts on the consumer, they have advantages and disadvantages in the same time. Direct taxation is equitable for consumers because higher incomes are taxed more heavily and lower incomes slightly. Furthermore, direct taxes satisfy the condition of certainty because tax payer is certain as to how much he is expected to pay, and similarly the state is certain as to how much it has to receive income from direct taxes. Disadvantages from direct taxation identified that it is possible for tax payers to make evasion, because people in the higher income groups do not reveal their full income. They do not hesitate to fill up false returns. One advantage of indirect taxes is the solution to the problem of externality, because increases in indirect taxation will push up prices, decrease consumption and hence reduce the effects of negative externalities such as damage to the environment.
Recommendation
The government should adequately make provision for retrieving the proceeds of VAT from companies and other gents of collection.
From the above, it is expected that in a given tax system such as VAT an effective tax administration would yield maximum revenue with a minimum cost. This however depends on the quality of the machines for tax administration which include manpower devoted to tax collection and assessment, the equipment and VAT Decree. When the people come to understand VAT better and it’s benefit, the economic compliance would be greater and therefore compliance cost would be smaller on the other hand, when the voluntary compliance is great, the VAT administration would be easier and giving the tax structures, the greater revenue yield.
Seminars and workshops so far organized on this issue are narrow in its scope and design. There should be functional VAT offices n every council area to coordinate a vigorous campaign to educate people and seek their cooperation. This will no doubt erode the negative attitude that some of the consumer’s have developed towards, VAT.
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