An Examination of the Impact of Value-Added Tax (VAT) on Business Operations in Nigeria: A Case Study of Shoprite Nigeria
- Project Research
- 1-5 Chapters
- Abstract : Available
- Table of Content: Available
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- NGN 5000
Background of the Study
Value-Added Tax (VAT) is a significant source of revenue for many governments worldwide, including Nigeria. Introduced in 1993, VAT is a consumption tax levied on goods and services at every stage of production or distribution where value is added (Oladele & Adebayo, 2023). In Nigeria, VAT contributes substantially to government revenue, but its implications for businesses have been a subject of concern.
For large retail businesses like Shoprite Nigeria, VAT compliance directly affects operational costs, pricing strategies, and consumer behavior. The government’s recent increase in VAT rates from 5% to 7.5% in 2020 has intensified discussions about its impact on business sustainability and economic growth (Okoro & Chukwu, 2024). Retailers often struggle to balance compliance with maintaining competitive pricing and profitability.
This study examines the impact of VAT on Shoprite Nigeria’s operations, analyzing its influence on pricing, sales, and profitability while exploring strategies for mitigating its adverse effects.
Statement of the Problem
Despite its importance as a revenue source, VAT poses significant challenges to businesses in Nigeria. Retailers face issues such as high compliance costs, administrative burdens, and reduced consumer purchasing power due to increased prices (Ajayi & Yusuf, 2023). Shoprite Nigeria, a leading retail chain, must navigate these challenges while maintaining operational efficiency and profitability.
However, there is limited empirical evidence on how VAT impacts large retailers like Shoprite in terms of their operational and financial performance. This study seeks to address this gap by evaluating the specific effects of VAT on Shoprite Nigeria’s operations and identifying practical solutions for mitigating its impact.
Objectives of the Study
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To evaluate the impact of VAT on the operational costs and pricing strategies of Shoprite Nigeria.
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To examine the effect of VAT on sales volume and consumer purchasing behavior.
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To explore strategies employed by Shoprite Nigeria to mitigate the challenges of VAT compliance.
Research Questions
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How does VAT affect the operational costs and pricing strategies of Shoprite Nigeria?
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What is the effect of VAT on sales volume and consumer purchasing behavior at Shoprite Nigeria?
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What strategies does Shoprite Nigeria use to mitigate VAT-related challenges?
Research Hypotheses
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VAT does not significantly affect the operational costs and pricing strategies of Shoprite Nigeria.
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VAT does not significantly influence sales volume and consumer purchasing behavior at Shoprite Nigeria.
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Strategies employed by Shoprite Nigeria do not significantly mitigate the challenges of VAT compliance.
Scope and Limitations of the Study
The study focuses on the impact of VAT on Shoprite Nigeria’s operations from 2015 to 2024. It explores operational costs, pricing, and sales within the retail sector. The study is limited by the availability of data specific to Shoprite and may not fully capture the experiences of smaller retailers or other industries.
Definitions of Terms
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Value-Added Tax (VAT): A consumption tax levied on goods and services at each stage of production or distribution where value is added.
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Operational Costs: The expenses associated with running a business, including VAT compliance costs.
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Consumer Purchasing Behavior: The buying habits and decisions of consumers influenced by factors such as pricing and taxes.
