EFFECTS OF VALUE ADDED TAX ON SMALL MEDIUM ENTERPRISES IN NIGERIA
- Project Research
- 1-5 Chapters
- Quantitative
- Simple Percentage
- Abstract : Available
- Table of Content: Available
- Reference Style: Available
- Recommended for : Student Researchers
- NGN 5000
Background of the Study
For a long time, small and medium-sized businesses have been seen as a source of financial development and improvement. As a result of this growing recognition, the World Bank Group has made small and medium-sized firms (SMEs) a major component of its methodology for promoting economic growth, employment, and poverty reduction (Ayifagari, 2007). In 2004, the World Bank Group committed a total of $2.4 billion to small and medium-sized businesses (SMEs) (World Bank, 2001).
In countries where entrepreneurs have a level playing field, economic progress and advancement have become near equivalences to small and medium scale firms (SMEs). SMEs have been characterized as crucial enablers of more complete globalization and growth, as well as a key contributor to financial and social prosperity (Omodero, 2019). According to the OECD (2016) data mentioned in (Omodero, 2019) research, SMEs are the most common type of business in the OECD region, accounting for about 99 percent of all businesses. They are the primary source of employment, accounting for around 70% of all occupations on average, and are significant contributors to value creation, contributing for 50% to 60% of all value generated on average. IFC (2010), referenced in the (Omodero, 2019) research, agrees, claiming that SMEs provide up to 45 percent of total employment and 33 percent of GDP in emerging economies. According to the Small and Medium Enterprises Development Agency of Nigeria (2017) and the National Bureau of Statistics (2017), there were 77,069,519 (Seventy Seven Million, Sixty Nine Thousand, Five Hundred and Nineteen) Micro, Small, and Medium Scale Enterprises in Nigeria as of 2019, employing over 93 percent of the total labor force and contributing 68.47 percent to the Gross Domestic Product (Akhor et al, 2019). (GDP). According to the International Finance Corporation (IFC), 96 percent of firms are small and medium-sized enterprises (SMEs), compared to 53 percent in the United States and 65 percent in Europe (IFC, 2018). (Bazgan et al, 2018). The International Council for Small Business (ICSB) confirms this by stating that MSMEs account for more than 90% of all businesses and account for an average of 50% of GDP in any economy. Given these international recognitions of the importance of SMEs in any economy, including Nigeria's, one would question why Nigerian SMEs struggle to thrive and attain these global goals. The payment of VAT, which is a form of tax on consumables, is one key element that adds to SMEs' struggles in Nigeria (Bazgan et al, 2018).
VAT (Value Added Tax) is an indirect tax placed on all goods and services made or delivered in a nation, with the exception of supply and services that are VAT exempt. VAT is a tax levied on the number of products and services that the end consumer finally receives, and it is collected at each stage of the manufacturing and delivery process. It means that VAT is a consumption tax collected from those who only have a little taxing incidence, allowing those who pay VAT to avoid bearing the full expense of the charge (Oyedokun, 2016). VAT was established in Nigeria with the introduction of the Value Added Tax Act (VATA) 1993, as defined in No. 102 of the VATA 1993, to replace the sales tax, which was then backed by Federal Government Decree No. 7 of 1986. Nigeria's VAT rate has stayed at 5% since its inception in 1993, making it one of the lowest in the world. President Obasanjo's government proposed increasing the VAT from 5% to 10%, however the plan was rejected by the late President Yar'Adua's administration owing to strong public opposition. One of the key changes in Nigerian VAT management is Section 34 of the Finance Act of 2020, which increased the VAT rate from 5% to 7.5 percent. The Finance Bill of 2019 was signed into law by President Buhari on January 13, 2020, and the Finance Act of 2020 took effect on February 1, 2020. (Oyedokun, 2016).
By expanding the list of basic food products that are VAT-free, the new Finance Act 2020 has enhanced the goods and services that are VAT-exempt. Seasonings (honey), dough, mueslis, caterers use oil, gastronomy parsleys, fish, wheat and thickening, and berries are among the other products on the VAT-free list of essential food goods (fresh or dried). Animal protein sources, milk, nuts, throbs, tubers, saline, spuds, H2O, and locally made sterile bath sheets, swabs, or wipes are also on the list. Microfinance bank services, kindergarten instruction, and various levels of schooling are among the additional services free from VAT under the new Finance Act 2020. Businesses having a turnover of less than N25 million are excluded from paying VAT under Section 38 of the Finance Act 2020. (Akande, 2019).
However, this study examines the effects of value added tax on small medium enterprises in Nigeria, with a focus on the state of Cross Rivers.
Related Project Materials
DESIGN AND IMPLEMENTATION OF A MOBILE CHAT SYSTEM
ABSTRACT
Based on the analysis of finding, I will come up with a proposed system design called Mobile multi-chat, this w...
INFLUENCE OF VISUAL AIDS ON EFFECTIVE TEACHING AND LEARNING OF SOCIAL STUDIES
ABSTRACT
This research work is designed to investigate “The influence of visual aids on effective teaching and lea...
The influence of teacher reflective practice on early childhood education assessment methods in Fagge Local Government Area, Kano State
Background of the Study
Reflective practice among teachers is a vital component in the continuous improvement of assessmen...
An Evaluation of the Effectiveness of Pain Management Strategies for Elderly Patients in Taraba State
Background of the Study
Pain in elderly patients is a significant healthcare challenge, particularly...
THE IMPACT OF CORPORATE GOVERNANCE POLICIES ON BUSINESS PERFORMANCE
This study aims to assess the impact of corporate governance policies on business performance. Objectives include identifying the key corporate gov...
An Assessment of IT Service Management Frameworks and Business Continuity: A Case Study of Hospitals in Yobe State
Background of the Study
Healthcare institutions rely heavily on IT service management (ITSM) frameworks to ensure effici...
The Role of Environmental Policies in Reducing Climate Change-Related Health Risks in Zamfara State
Background of the Study
Environmental policies are crucial tools for mitigating the adverse effects of cl...
An Examination of POS Terminal Upgrade Programs on Improving Transaction Speed in Banking: A Case Study of Wema Bank
Background of the Study
Efficient transaction processing is critical for retail banking success, and POS systems serve as a...
The Impact of Local Government Leadership on Rural Infrastructure Development in Wukari East Local Government Area, Taraba State
Background of the Study
Rural infrastructure development is a critical aspect of fostering socio-econom...
The Effect of Public Sector Accounting Standards on Revenue Generation in Takum LGA, Taraba State
Background of the Study
Revenue generation is essential for the sustainability of public services and infrastructure development. Public...
