Effects Of Value Added Tax

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Abstract This paper sought to conceptually assess the effects of Value Added Tax (VAT) on government fiscal policy being one of the sources of government revenues and also an important variable in fiscal policies. This is a library study where existing literature on the subject matter were reviewed so as to ascertain the effects of value added tax on government fiscal policy and how it can be improved upon so as to meet the requirements of equity, effectiveness and efficiency on value added tax administration. The paper concluded that value added tax affects Nigerian fiscal policy positively. It was recommended that government should review value added tax threshold and the reduction of exemptions such that the exemptions will be consistent…show more content…
Tax imposition and its collection, mostly depends upon a country’s economic structure, its developmental phase, growth of its service sector, extent to which the country has been industrialized, and its employment level (Qamruz, Okasha, & Muhammad, 2012). Tax enforcement and its collection is based on the efficiency of tax administration that depends upon government system and its policies, principally its fiscal policies, transparency of its processes, legal framework, use of information technology, cooperation of stakeholders, especially the taxpayers, as well as the personnel of the tax…show more content…
The tax is charged on the supply of goods and services, the vendor has the responsibility to collect VAT from the purchasers of goods and services (individuals or companies), on behalf of the Federal Inland Revenue Service (FIRS). The tax is charged and payable on the supply of all goods and services, other than those exempted. The honourable minister of finance may by order of the federal government to publish in Gazette amend the rate of tax chargeable and also modify the list of exempted goods and services. From the perspective of the seller it is a tax on the value added to a product or services while from that of the buyer it is a tax on purchase price. The producer or the service provider remits to the government the difference between the VAT output and VAT input and retains the rest to offset the taxes they have previously paid on the inputs. VAT has become a major source of revenue in Nigeria, its adoption was an important landmark in tax reforms in Nigeria (Ajakaiye,

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