Tax Administration

Over the years, taxation has been taken as a veritable source of funding public sector activities as well as bein g an econ omic tool for the management of the con sumption, in vestment, and pr od uction patterns - Tax Administration introduction. In most d eve lopin g countries, the imposition of various forms of taxes has been with out some for ms of feed back on the effectiveness/efficien cy of such taxes. This stud y attempts to appr aise the usefulness of the tax system in Nigeria, usin g Value Added Tax system as a r efer en ce point.

The significance of this stud y i s that it will enable th e government officials, r esear cher s an d econ omic analysts to appr aise an y type of tax, with th e aid of the par ameters used in this stud y. The stud y used th e ability to gener ate revenue and the ability to in fluence th e consumption pattern s as th e measur ement par ameter s and found that VAT has been effective but not efficient.

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The study r ecommended (amon g other s) that tax auth orities sh ould be r ecord/pr oprietar y-con scious su ch th at the cost ( bud get) of the collection machinery and a tar get amount payable to the gover n ment should be cover ed by th e expected r evenu e to be gener ated. . © Emerging Academy Resources KEYWORDS: Appraisal of Nigeria’ s Tax System, Value Added Tax System _________________________________________________________________________________________ INTRODUCTION Tax is a compulsor y payment made on different basis an d r ates by citizens (cor por ate bodies and individuals) to

gover n ment, n on-n egoti ably but obligatorily. This pa yment is not on th e basis of direct exch an ge for the payment for goods and services. It is n on -negotiable because none of th e citizens have any dir ect contribution to the composition of the basis and r ates of payment. Government only classifies the items on which the tax is to be paid, and the categor y of citizens th at should be su bjected to the payment ( Ariwodola, 2005). The decision is h owever, based on the cost of the pr ojects or pr ogrammes go vern ment inten ds to execute, which is th e prin cipal deter min ant of the bud get -size.

Govern ment also judges th e basis, r ates, the categor y of citizen s, and the time period to pa y the tax, on th e dir ection of th e econ omy desired and gover n ment’s perception of the stand ard of living of the citizens. This is wh y tax is defin ed as a tool for go vern ment r evenue and fiscal policy tool for directing the econ omy. Taxes ar e not paid directly on th e basis of exch ange contr act like any oth er payments except su bsidies paid by gover nment. It is paid by an y citizen whether or n ot th e citizen benefits fr om th e gover nment pr ojects and pr ogr ammes fin anced by the taxes (Rosen, 2004).

Con sequently, th e usefulness ( effectiven ess and/or efficiency) of taxes can be measur ed by sever al par ameters, some which are its revenue gener ating capacity and its impact on th e consumption and savings patterns in the econ omy. Even if the totality of tax system cann ot be compr ehensively measur ed, the various types of tax can be su bjected to this measur ement. In Niger ia, ther e ar e at least thr ee types of taxes that ar e commonly applied to qualifying citizens and items. Th ese ar e the Per son al In come Tax, the Company In come Tax, and the Valu e Added Tax. Th e assessment of th ese for ms

of tax ind epend ently or otherwise becomes mor e n ecessar y given the multiplicity of taxes in Nigeria, together with the pr oblems Research Journal in Organizational Psychology and Educational Studies (ISSN: 2276-8475) 1(6):338-344 Appraisal of Tax System In Nigeria (A Case Study of Value Added Tax) 339 of tax evasion and avoidan ce. It is against this backgr ound th at this stud y is initiated. In oth er words, this stu dy is an investigation on th e usefuln ess ( and th e level of usefulness) of the tax system in Nigeria. CONCEPTUAL FRAMEWORK Taxation is one th e oldest econ omic phenomena by which the cost of pr o viding

essential ser vices for th e gener ality of a given set of people within a geogr aphical ar ea, is fund ed. In some countries, taxation is as old as their histor y while in others taxation pr edates their existen ce. In the early days of civilization, biblical an d pr e – biblical d ays, taxes wer e collected to maintain the Kin gs/Qu een s, pr ovide security and fight war s. It could be a direct sur ch ar ge on the citizens of the kingdom or empir e, or tributes paid by “conquerees” to show their u nflinching loyalty to master s/conqu er or s. These for ms of taxes did n ot necessarily depend on richness or the

ability to pay con cept. Th ere was, of course no r ecord of accountability except the ar ch aeological findings about th e Sumerian civilization of mor e than 500 years ago ( Legislative Analyst Office, 2001). Historically, th erefor e, it can be asserted that th e Sumerian empir e coul d be th e first place wher e taxes wer e le vied and accou nts for the utilization made. Oth er than this, se veral empir es and kin gd oms ha ve levied taxes for th e pur poses stated abo ve with out any contr ol or accou nt of utilization. Examples in clud e the Kin gdoms of Isr ael, Jud ah, Babylon, Egypt and the Roman empir e.

The primar y use of taxes to fund war s continu ed to the modern times as could be seen fr om history of countries like Britain and USA. In particular, Britain levied taxes between 1799 and 1816 to fund the Napoleon War, while USA taxed her citizen s to fin ance th e Civil War ( 1861 – 1863). In most cases, this style of taxation was temporar y because the levies were either relaxed or cancelled u pon th e r ealization of the pur pose( s). Economic histor y h as it that per manen cy of taxes was not common until 1874 when Britain mad e in come tax a per manent levy on its citizens. This was followed b y th e USA in 1913.

This means that it took about 50 year s in both Britain and USA to sell th e id ea of regular income tax ( US Department of Treasur y, 2003; Kiyosaki, 1995). In Nigeria, and indeed some parts of Africa, the payment of taxes is not stran ge. This is because, even before independ en ce, taxes wer e collected either by the colonial masters or emirs/chiefs in different names. However, legislation of tax was fir st mad e in 1939 with th e enactment of the Income Tax Ordinan ce of 1939. The second legislation was in 1940 due mainly to the inadequacies and ineffectiveness of the 1939 Or dinan ce. The 1940 Ordin ance specifi ed that both

individ uals and cor por ate or ganizations sh ould be su bjected to tax payment. Ever since, th er e has been on e enactment or th e oth er, as well as amendments. Some of th e most outstanding tax laws ar e the Companies In come Tax Law of 1990, the Personal In come Tax Act of 1990, and the Valu e Added Tax Act 1993 ( as amen ded)( Kiabel & Nwikpasi, 2001 ). Gen er ally, th er e ar e certain conditions against which taxes are jud ged to be efficient or effective. These conditions ar e referr ed to as th e can ons or pr inciples of taxation and in clud e fairn ess, eq uality, equity, convenience, certainty, economy,

flexibility, and pr oductivity. Th er e is, however, no yardstick for each of these conditions mention ed. It is expected that where th e majority of th e tax-paying pu blic su ffer th e same relative amount of pain in payin g th eir taxes, or wher e the majority of the population d o n ot feel th at th ey ar e ch eated by wa y of tax, then th e tax is taken to be good, effective and/or efficient. However, it is ver y difficult to apply these par ameters especially in a countr y like Nigeria because of th e size of the population and th e cost of cond uctin g su ch sur ve y. Altern atively, th e efficien cy of tax system

can be measur ed on the basis of the goals of the tax system. Accor ding to Gbosi (2002, p. 52) there ar e sever al objectives for th e imposition of an y tax. Th ese objectives ar e called econ omic and social goals of taxation. Ther efor e a tax system’ s efficiency could be judged against th ese goals, i. e. whether the goals ar e achieved and th e extent of accomplishin g th ese goals. These goals includ e r evenue gen eration, ability to influ en ce an d contr ol economic beh aviour, tran sfer ability of r esou r ces fr om private to public sector, ability to distribute cost of gover nance, and ability to pr omote economic

gr owth. Comparing th e two measurement appr oach es mention ed above, it would be seen th at gener ation of re venu e and pr oductivity ar e ver y similar an d form th e nucleus of any tax ad ministr ation, and by far the most tan gible assessor of th e efficien cy of an y tax system. This is because policy-Research Journal in Organizational Psychology and Educational Studies (ISSN: 2276-8475) 1(6):338-344 Appraisal of Tax System In Nigeria (A Case Study of Value Added Tax) 340 makers would want to en act tax laws with the pur pose of bein g an unfailin g sour ce of fu nding pu blic activities as well as

achievin g other socio-econ omic motives as specified. It th er efor e believe on the policymakers to emplo y contr ol by comparing the outcome of th e imposition of tax against expectation. And the two most pr omin ent assessment could ther efor e be to examine the revenue gener ated again st budgeted, and the impact of the tax on consumption, pr oduction and disposable income. This paper is aimed at undertakin g the assessment(s). An oth er way of measurin g the efficacy of the system is to evaluate an y of the appr oaches of assessin g the tax burd en. The appr oaches in clude the Expedien ce

appr oach, th e Socio-Political appr oach, the Benefits -Received appr oach, the Cost of Ser vice appr oach, and th e Ability to Pay appr oach ( Handley & Maheswaran, 2008; Laily & van Zijl, 2003; Bhatia, 2006). In most third world countries (Nigeria inclusive), measuring th e effectiveness and the efficien cies of tax especially with regards to the economic and social goals or using the socio-political an d benefits – received appr oach es h as been difficult. Certain r easons account for this difficulty. One is th e pr oblem of r ecor d-keepin g wh er e ther e is in su fficient record of th e amount of

tax levied and paid as a result of corru ption. In this case, government activities seem to be fin anced fr om sources other th an taxation. Therefor e, while the public gr oans under the burd en of taxation, govern ment alleges that th e pu blic h as little contribution to the implementation of public pr ojects and gover n ance, hence should n ot h old gover n ment accountable to the public. Usin g th e ben efit -received appr oach, taxation might be adjud ged to be inefficient since th e tax payer s can h ardly tr ace the taxes paid to an y meaningful pr oject that positively impacts on their welfar e. On the

basis of econ omy, tax system could be judged effective and efficient if th e cost of administering the tax is lower th an the revenue d erived fr om th e imposition. This measur ement is also difficult becau se ther e is an existing tax collection machin er y imbedded in th e civil ser vice whose costs ar e part of the r ecurr ent cost of pu blic administr ation. Fr om th e above, therefor e, certain principles could be u sed for th e appr aisal of the efficiency of tax system, other th an the above factors. Some of th ese other ways of appr aisal is what this stud y concern s itself or has applied in the appraisal of th e

Nigerian tax system. Gen er ally, this study is necessar y becau se it will assess the appr opriaten ess of tax system with refer ence to th e re venue generated in relation to the national income and th e respective tax r ates, as well as the assess the appr opriateness of tax system with r efer en ce to the r evenue gener ated, the consu mption expenditur e and the stand ard tax r ates. These gener al objectives of th e study ar e aimed at appr aising the pr oductivity and econ omic management goals of tax. This becomes expedient based on th e fact that ther e are some in comes that ar e exempted fr om tax, just as ther e is the pr oblem of

evasion and avoidance. In Nigeria, apart fr om the “rich” wh o contr ol about 90 per cent of th e econ omy but are estimated to be between 5 per cent and 10 per cent of th e population and, in most cases pay very little or nothing as tax, ther e ar e also some gover nment officials that earn r espectable incomes but exempted fr om tax. For instance, the Third Schedule of th e Personal In come Tax Act of 1999 pr ovid es that the official emolu ments of th e Pr esid ent of th e Fed eral Repu blic of Nigeria, the Vice Pr esid ent, State Go vern ors and their Deputies, Local Government Chair man, Go vern ment institutions, incomes of

Charitable and Ecclesiastical institutions of a public char acter in so far as such income is not d erived fr om a trad e or business carried on by such institutions, gr atitude payable to a pu blic officer by the gover nment of th e fed er ation or state, and incomes of cooper ative societies r egister ed under the Cocoper ative Societies Decree of 1993, ar e tax exempted. So, if th ese in comes as well as the person al reliefs and allowan ces of oth er taxable persons ar e consid er ed, th e qu estions will then be wheth er enou gh r evenu e is gener ated for the fun ctioning of the pu blic sector, and whether the r elief and allowan ces

reason ably even-out the gap between th e different in come br ackets, so that th e tax system can be said to be eq uitable. Consid er for example, th at in year 20 07, mor e th an N200 billion will be paid to only fed eral legislator s as allowances, excluding their seating allowan ces an d salaries as well as the salaries an d allowances of the Pr esid ent, the Vice Pr esident, the Governors and their Deputies, Ministers, Commissioner s, Special Research Journal in Organizational Psychology and Educational Studies (ISSN: 2276-8475) 1(6):338-344 Appraisal of Tax System In Nigeria (A Case Study of Value Added Tax) 341

Ad visors, etc. Th e exclusion of th ese legitimate in comes fr om tax could seriou sly redu ce th e valu e of tax revenue, but incr ease the consu mption expen ditur e. It ther efor e means that if a tax system is efficient and effective, given th e measures of pr oductivity and fiscal policy goals, the revenues generated as a pr oportion of the nation al in come sh ould be close to or mor e than 100 per cent of th e standard r ate of that tax. For instan ce, if th e effectiven ess of Personal Income Tax System wer e to be judged, th en the tax r evenu e accruing fr om per sonal in come divided by the national

income should be divided by the aver age per sonal income tax r ate su bsisting. The high er the r esulting qu otient or r atio the mor e effective th e tax system is (Ebrill, et al, 2001). The idea is that sin ce tax is paid out of th e total income, the amount of tax gen erated should be equ al to th e tax rate multiplied by th e total in come of the countr y (National Income). Wher e the pr oportion is smaller than the stand ard r ate, it follows that the tax system is n ot pr od uctive and hen ce not effective. On the other hand, if the pr oportion is less than the standard tax rate

where the r even ue gener ated is divided by the total consu mption expenditur e, then the tax system can be said to be inefficient because it has n ot been able to in fluen ce con sumption as it would have been originally intended. This latter measur e is used to appr aise the efficien cy of tax system as an econ omic ( fiscal) tool. RESEARCH METHODOLOGY This resear ch is basically a su r ve y because the entire nation is cover ed on th e particular tax system studied. The tax r evenue con sider ed in this stud y sh all be th e national valu e r ealized b y the govern ment of the feder ation. This means th at any tax system

measur ed in this stud y is a national tax. Nationally levied tax systems in Nigeria includ e the Value Added Tax and the Education Tax. These taxes ha ve gen er ally specified ad ministerin g pr ocedure and common rates for all taxable citizen s and or ganizations. This study sh all appraise the Value Add ed Tax (VAT) system. It is assume d th at VAT can satisfy two of the appraisal tools for testing the efficiency/effectiven ess of a tax system, mor eso as the two out of th e many measur ement tools th at will be used in this study fr om 1994 to 200 4 are the r evenue gener ating tool and their fiscal plannin g

tool. As a su r ve y stu dy, pu blished data on Total Con su mption Expenditur e, Valu e Ad ded Tax revenue and th e GDP will be utilized for th e period specified. And two tests will be conducted n amely: (a) Effectiveness test, u sing th e revenu e gener ating tool, and (b) Efficien cy test, using the fiscal plannin g tool. The objective of these tests is to ascertain the effectiveness and efficiency of Nigerian tax systems, usin g just on e of th e various taxes. This is n ecessar y especially as it will contribute to guiding the gover n ment on th e ch an ces of sustaining the funding of pu blic

sector activities independent of the r evenu e fr om sale of oil and gas, in a period wh er e total privatization and mon etization is the or der of th e d ay. DATA ANALYSIS, DISCUSSION AND FINDINGS Table 1 below sh ows the Value Add ed Tax revenue ( VAT), th e Total Consu mption Expenditur e ( TCE), and Gr oss Domestic Pr oduct ( GDP) of Nigeria fr om 1994 to 2004. Th e scope of th e stud y has been restricted to 1994 becau se VAT became oper ational in 1994 and ther efor e ever y oth er variable has been started in 1994 for unifor mity. Again, 2004 has been chosen as the end of the scope because all

macroecon omic d ata will be r eadily available by th en. Besides, by 2004 th e international prices of oil and gas h ave n ot assumed the unimagin ably high momentum, which means that tax r evenue was still consid er ed rele vant to the functionin g of th e Nigerian pu blic sector. Another r eason for the choice of 2 004 is that by 2004, th e agitation for the r ever sal of th e ind ebtedn ess of Nigeria, which is an indir ect funds -flow for Nigeria, has not gained mu ch notice/gr ou nds. Fin ally, 2004 was ch osen because in for mation about th e r elevant variables for this stud y, after 2004, wer e

adjusted in such a way that some wer e completely but abru ptly excluded, while oth er s assu med differ ent values in the CBN Statistical Bulletin s of 20 05 and 2007. Su ch incon sisten cies can easily nullify the beauty of th e study if the scope was extended to say 2007 (See Centr al Ban k of Nigeria Statistical Bulletin s of 20 04, 2005 and 2007 for VAT< GDP,and TCE). Research Journal in Organizational Psychology and Educational Studies (ISSN: 2276-8475) 1(6):338-344 Appraisal of Tax System In Nigeria (A Case Study of Value Added Tax) 342 Fr om the table 1 below, it would be seen that VAT incr eased by about 2097% fr om

N72. 8 billion in 1994 to N1,595 billion. Consu mption expenditur e incr eased by 629 per cent fr om N776 billion to N5,654 billion just as GDP, which in cr eased by 634 per cent fr om N907. 9 billion to N6,665 billion. Table 1 also shows that within the 11 years of the existence of VAT N726. 8 billion has been r ealized fr om VAT while th e gr oss (i. e. includin g n on-VATable expen ditures) GDP and gr oss Total Consu mption Expenditur e (i. e. includin g n on-VATable expenditu res) wer e N44,543 billion and N36884 billion respectively. Th e net GDP and net TCE, i. e. excluding non-VATables, wer e N12,970.

0 billion and N34,454. 3 billion respectively. Table 1: VAT, Total Consu mption Expenditure ( TCE) and GDP ( N’ bn) Ye a r VAT (N’ b n) GDP at Current Baisc Mkt Prices (N’bn) Adjusted GDP at Current Baisc Mkt Prices (GDPa) (N’bn) Total Consumption Exp. (TCE) (N’bn) Adjusted Total Consumption Exp. (TCEa) (N’bn) 1994 7 . 2 6 9 0 7. 9 3 1 5. 2 7 7 5. 5 6 8 7. 0 1995 2 0 . 8 1 ,9 51 . 9 5 2 9. 4 1 ,6 4 0. 4 15 1 7 . 2 1996 3 1 . 0 2 ,7 87 . 9 6 8 4 2 ,4 7 4. 4 23 3 1 . 3 1997 3 4 . 0 2 ,9 06 . 6 7 5 8. 2 2 ,5 7 2. 9 24 0 1 . 6 1998 3 6 . 9 2 ,8 36 . 8 8 7 9. 6 2 ,9 1 6. 9 27 1 2 . 5 1999 4 7 . 1 3 ,4 40 . 2 10 0 2 .

9 2 ,3 4 2. 1 20 8 9 . 5 2000 5 8 . 5 4 ,8 66 . 3 11 2 1 . 6 2 ,5 9 2. 2 2 . 3 3 1. 9 2001 9 1 . 8 5 ,5 26 . 2 13 3 9 . 0 2 ,5 0 1. 4 42 2 6 . 0 2002 10 3 . 5 6 ,3 98 . 9 16 2 3 . 4 6 ,1 4 8. 7 58 0 5 . 1 2003 13 6 . 4 6 ,2 55 . 5 19 7 2 . 8 5 ,2 6 5. 4 49 7 9 . 6 2004 15 9 . 5 6 ,6 65 . 0 27 4 4 . 7 5 ,6 5 3. 9 53 7 2 . 6 Total 7 2 6 . 8 6 4 4 ,5 4 2 . 5 12 ,9 7 0 . 0 3 6 ,8 8 3 . 8 3 4 ,4 5 4 . 3 Sour ce: CBN (2004) Statistical Bulletin, Vol. 15, Dec. , pp. 199 – 202/253, 254, 270 – 272. Comput ation of Eff ectiveness and Efficiency Rat es of VAT System (a) Tax Effectiveness Rate = Standard VAT Rate

VAT/GDP = 0. 05 726. 8/44542. 5 = 33% Adjusted Tax Effectiven ess Rate = Standard VAT Rate VAT/Adjusted GDP = 0. 05 726. 8 12970. 8 = 1. 12% (b) Tax Efficiency Rate = Standard VAT Rate VAT TCE = 0. 05 726. 8 36883. 8 = 39. 4% Adjusted Tax Efficien cy Rate = Standard VAT Rate VAT Adjusted TCE = 0. 05 726. 8 34454. 3 = 42% Applyin g our concept of effectiven ess and efficiency tests of tax systems, especially the VAT s ystem in Nigeria, with th e data in Table 1, the following findin gs was made: (a) That th e Valu e Added Tax system was neither effective in gen eratin g revenue for public sector activities,

nor was it efficient in dir ectin g th e consu mption patter n of the economy, when appraised with th e gr oss values. (b) These assertions ar e based on the fact that th e VAT-GDP-Standard VAT Rate was ju st about 33 per cent. (c) Similarly, the VAT-TCE-Standard Vat Rate was also ver y low within th e 11 year s studied sin ce it is just about 39 per cent. (d) This mean s that the system could n ot gener ate 5 per cent of both th e Research Journal in Organizational Psychology and Educational Studies (ISSN: 2276-8475) 1(6):338-344 Appraisal of Tax System In Nigeria (A Case Study of Value Added Tax) 343

National Income ( GDP) or in fluen ce up to 5 percent of the Total Consu mption. However, it mu st be warn ed h er e th at both the GDP and th e TCE contained n on – VATables. In order to be mor e realistic in appr aisal, we h ave taken on e mor e step of adju sting the GDP and TCP by netting off the n on -VATable components. In the case of GDP, prices in curr ed on Agricultur e (Cr ops), Livestocks, For estr y, Fishing, Crude Petr oleum and Natur al Gas, Pu blic Ad ministr ation, Education, Health and by Private Non-Pr ofit Or ganization s h ave been netted off in conson ance with the Sch ed ule 3

of the VAT Act ( as amend ed). Sch edule 3 of the Act states that the followin g goods ar e exempted fr om VAT: (i) Medical and ph ar maceutical pr odu cts (ii) Basic food items (iii) Books and edu cational materials (iv) Baby pr oducts ( v) Agricultur al equipments and pr oducts, and veterinary medi cin e ( vi) Fertilizer s ( vii) Agricultur al ch emicals ( viii) Exported good s (like Crude Petr oleum and Natural Gas) On th e other hand adju sted TCP has been taken as Private Consumption E xpenditur e since it is assu med th at Govern ment Consu mption Expenditur e at Curr ent Prices is n on -VATable.

Based on th e above-adjusted GDP an d TCE, the effectiveness and efficien cy r atios wer e 112 per cent and 42 per cent respectively. This means th at after adjusting the national income ( GDP at curr ent basic prices) of the non -VATable expenditu res, VAT system could be adjud ged as ver y effective since it pr oduced mor e than the expected. But, the some cannot be said of th e efficiency sin ce it can only in fluence about 42% of the private consu mption expenditur e for the 11 year s in questions. The implication of this second r esult is that the imposition of VAT for th e pur pose of in flu en cing the spending

pattern s of citizen s was not achieved. It follows ther efor e th at either the VAT char ged on consumption wer e n ot r emitted or accounted for by r elevant a uthorities, or that the con sumption Expen ditur e still contained some non-VATable compon ents, or th at th er e ar e some mor e power ful variables that can in fluence the size, direction and patter n of con sumption expenditur e. Th e effect of these options is the same, n amely an und erstatement of th e VAT r ealized or the over statement of th e denominator (th e TCE), su ch that the r atio will be small. This also tend s to suggest

that the VAT rate should be incr eased or th e collection machiner y sh ould be enhanced/intensi fied. SUMMARY AND CONCLUDING REMARKS This study concerned itself with th e measur ement of the Nigerian tax systems using Valu e Add ed Tax system as an example. The stud y identified thr ee gr ou ps of par ameter s th at can be used to measur e the effectiveness and efficiency of an y tax system. The stud y also highlighted some of the difficulties that can con fr ont th e appr aisal of an y tax system. Consequ ent upon the difficulties, it identified two measur ement tools namely the r evenu e

gener ating capability ( also called th e effectiveness test or r atio) and th e fiscal policy ability ( efficien cy test or r atio) of th e tax system. Our an alysis r evealed that th e VAT system in Nigeria has been effective in gen er atin g mor e than expected r evenue but n ot efficient in directing or in fluen cin g th e consu mption expenditur e of the Nigerian citizens. Th e study makes this con clusion based on th e fact th at th e effectiven ess r atin g was 112 per cent while the efficien cy r atio was about 42 per cent. Based on th ese findin gs, we con clud e that VAT h as been able to h ar monize the man y

consumption and pr odu ction taxes that pr eceded VAT. It has also achie ved th e major aim of institutin g tax especially in th e Third World namely th e gener ation of pu blic sector r evenue. To a gr eat extent, VAT h as been a veritable sour ce of revenue to some states of the Fed er al Repu blic of Nigeria where industrial activities ar e ver y low. Th e allocation of VAT r evenu e as part of fed er ally allocated r evenue is indispensable to these states. One perceives that in th e event of a global thr eat to revenue fr om oil and gas, especially with the d ebt -fr ee postur e of Nigeria, VAT r ate could be

incr eased so th at allocatable re venu e will incr ease. The alter native might be th e justification for the red uction of the VATexempt list. We also conclu de th at VAT has n ot been impactful on th e consumption pattern of Nigeria. Th e essence of the imposition of Research Journal in Organizational Psychology and Educational Studies (ISSN: 2276-8475) 1(6):338-344 Appraisal of Tax System In Nigeria (A Case Study of Value Added Tax) 344 tax is to direct con sumption ( both industrial and non-indu strial). The higher the tax on con sumer – pr oducts the lower the con sumption of th ese pr oducts since the

prices of th ese items will become higher. But, this pr ocess can be dampened if the countr y is mor e of a consu mer nation th an pr oduction. This is the status of Nigeria where th e consu mption will continue to gr ow irrespective of the imposition of taxes. This study con fir ms this position with the con clusion that VAT system is not efficient. This is an other way of assertin g that althou gh the tax-base of VAT is expanding, inefficiency in the system h as resulted in low VAT revenue. This means that efforts should be made to impr ove th e collection and accou ntin g machin er y of VAT in order

to make it mor e efficient. We also con clud e that effectively, th er e could ha ve been un auth orized exemptions (waivers) th at h as resulted in the small VAT revenue compar ed with th e adju sted TCE. This itself is a pr oof of the rate of poor attention paid to tax r evenue becau se of the over -r elian ce on sale of oil and gas. Relevant tax auth orities h ave not con sider ed the of VAT it (an d by extension gen er al taxes), else it would be clear th at is possible that the cost of administering VAT, or the Nigerian tax systems, may be high er than the revenue r ealized, hen ce n ot econ omical.

In the light of the abo ve th erefor e, we make the followin g recommend ation s: 1) That r elevant tax authorities like Fed eral Inland Revenu e Ser vices (FIRS) in Nigeria sh ould be r ecord-and pr oprietor y-con scious, such that the annu al budget of th e authorities should be funded fr om the tax r evenu es they collect while a target amount is paid to gover nment. 2) That there sh ould be a r en ewed vigor in gener ating inter nal re venue (sometimes called non-oil reven ue) especially taxes e. g. VAT. This way, the economy will n ot su ffer undue sh ock fr om swin gs in oil and gas prices. 3) That ther e should n ot be any mor e

discrimination in who pays VAT and for how mu ch sin ce VAT is a flat tax. 4) That efforts should be mad e to tran sfor m Nigeria fr om an almost totally consu mer -nation so that econ omic policies on patterning consumption expenditur es can be effective. 5) That ther e will be n o n eed to increase the r ate ch ar ged as VAT on items with a view to incr easin g the revenu e gener ated, in stead the tax base should be expand ed to r edu ce the exemptions. REFERENCES Ariwodola, J. T. (20 05) Per sonal Taxation in Nigeria In cludin g Capital Gain s Tax and Capital Tr ansfer Tax. Lagos: Jaja Pu blishin g Ltd. , pp.

12 – 17. Bhatia, B. L. (20 06) Public Finan ce. New Delhi: Vikas Pu blishin g House PVT. Ltd. , pp. 43 – 71. Ebrill, K. M. ; Bodin, J. & Summer s, V. (2001). Th e Modern VAT. Washin gton D. C. : IMF, pp. 11 – 151. Gbosi, A. N. (2002). Contemporar y Issues in Nigeria’ s Pu blic Finance an d Fiscal Policy, Abalaliki: Pack Pu blisher s, pp. 2 2-68 Han dley, J. C. & Mah eswar an, K (2008). A Measur e of th ee Efficacy of The Astr alian ImputationTax System. Economic Report, Mar ch, Vol. 84,:82-94 Kiabel, B. D. & Nwikpasi, N. N. (2001). Selected Aspects of Nigeria Taxes. Owerri: Sprin gfield Pu blisher s Ltd. , pp.

204 – 216. Kiyosaki, R. T. (1995). Rich Dad Poor Dad. New Yor k: Warn er Books Inc. , pp. 121 – 135. Legislative Analyst Office (2 001) California’ s Tax System: A Primer. http/www. lao:ca. go v/2001/fax_ primer/0101_ tax primer -chapter 1 html, p. 4. Laily, M & van Zijl, T. (2003). Capital Gains Tax and Capital Asset Pricin g Model. Accou nting and Fin ance,Vol. 43, pp. 187 -21 0 Rosen, H. S. (2004). Pu blic Finan ce. Boston: Ir win McGr aw-Hill In c. , pp. 3 28-355. US Department of Tr easur y (2003). Eliminatin g th e Divid end Tax to Str en ghten The Econ omy. A Pr ess Release, Washington DC. , April 8, p. 7.

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