IMPACTS OF VALUE ADDED TAX REFORMS ON ECONOMIC GROWTH IN NIGERIA
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Background of the study
Regular rulers and local regulation enforcement merchants acquired money from their citizens in order to support development programs in their communities in the eighteenth century, and the Nigeria tax device may be traced back to that time. However, the first records of modern taxation date from 1904, when personal income tax was introduced in Nigeria as a neighborhood tax. When the Southern and Northern Protectorates merged in 1914, the Native Revenue Ordinance of 1917 was switched from northern to southern in 1918 and 1927 (Oriakhi & Rolle, 2014). Since then, the tax regime has continuously expanded, with several initiatives to modernize, expand, reform, and improve the method, structure, and sanctions inherent in Nigeria's taxing apparatus. In addition, the Nigerian government has undertaken a number of tax revisions since 1986. The tax reforms aim to: (i) improve public carrier delivery, (ii) increase non-oil tax revenue, (iii) continue to review tax laws to reduce the incidence of tax evasion and avoidance, (iv) improve tax administration to make it more responsive, reliable, skilled, and tax payer friendly, and (v) bridge the gap between the public and private sector (Federal Inland Revenue Handbook, 2012). The establishment of two learns more groups predated the tax reform of the 1990s. One study group looked at direct taxation, while the other looked at indirect taxation. The adoption of value added tax (VAT) in the year 1993 was a significant result of the 2nd study team. VAT signaled a move from a tax on foreign exchange-related activities to a consumption-based tax (Oriakhi & Rolle, 2014). Previously, the VAT contribution of the federal, kingdom, and local governments was 20 percent, 50 percent, and 30 percent, respectively (Ogbonna & Ebimobowei, 2011). For this reason, by 1995, the sharing components had been altered in favor of the central authority (Central government, 35%; State government, 40% and Local government 25%). Sub-national government agitation prompted each subsequent reform of VAT, resulting in a 15 percent, 50 percent, and 25 percent sharing scheme for the central, state, and local governments, respectively (Oriakhi & Rolle, 2014). The tax reform of 2004 was the result of suggestions provided by the research crew (2002). The National Economic Empowerment and Development Strategies included this tax reform (NEEDs). Essentially, the research team advised that Nigeria implement a national tax policy that is primarily focused on national development. President Goodluck Ebele Jonathan introduced the countrywide tax policy record on April 7, 2012.
1.2 Statement of the problem
Multiple factors have hampered tax administration in Nigeria, including insufficient and unreliable data, a lack of administrative capacity, a scarcity of expert manpower, corrupt tax officials, a high incidence of tax avoidance and evasion, complicated tax codes, and the hydra-headed monster of multiple taxation (Herbert, Nwaorgu & Nwaiwu, 2017). Since 1991, the Nigerian government has implemented a number of tax reforms. Prior to tax reforms, tax administration was characterized by inefficiencies, such as flaws in the tax administration and collection system, complex legislation, and apathy on the part of individuals outside the tax nets. The difference between the two; According to one study, there is a poor association between tax reforms and production (Feng & Eko, 2014; Asaolu, Olabisi, Akinbode & Alebiosu, 2018). The second stream found evidence of a non-linear outcome (inverse U-shaped relationship) of tax reforms on economic growth (Adeyemi & Disu, 2018; Okeke, Mbonu &Amahalu, 2018; Omondi, 2019), while the third stream found evidence of a non-linear outcome (inverse U-shaped relationship) of tax reforms on economic growth (Adeyemi & Disu, 2018; Bonmwa & Ogboru, 2017; Olaoye & Ayeni, 2019). These disparate empirical results can also be explained by differences in target populations in terms of country, sector, company, and economic periods, as well as the application of various methodological procedures and variations in study variable measurement, resulting in a gap that this study attempts to fill. In order to fill a gap in the literature, the structured variable of this study will be productivity (variable gap), whereas previous research has concentrated on economic boom or progress. This research was again extended to 2019, as previous projects had ended in 2018, bridging the currency difference. This study therefore examines the effect of Tax Reforms on Nigerian economic growth.
1.3 Objective of the study
Specifically, this study aim to examine whether Value Added Tax reform has a significant impact on economic growth of Nigeria.
1.4 Research hypotheses
The following hypotheses are tested in this study:
HA: Value Added Tax reform has a significant impact on economic growth of Nigeria
H0: Value Added Tax reform has no significant impact on economic growth of Nigeria
1.6 Significance of the study
This study shall be of immense benefit to the government and policy makers because it will expose to them the impact VAT reform has on the government, economic growth and development and the life of its citizenry. This study will also add to existing literature on this study area and shall serve as a bench mark to students, scholars and researchers who may wish to carry out further research on this topic or similar area in the future.
1.7 Scope of the study
This study focuses on examining the impact of Value Added Tax reform on GDP per Capita of Nigeria. This study shall be delimited to a period of 16years (2004-2019). Data for the study will be obtained mainly from secondary sources, the statistical data based and Bulletin of the Central Bank of Nigeria (CBN), the Federal Inland Revenue Services (FIRS), National Bureau of Statistics, and World Bank Publications. The Gross Domestic Product (GDP) per Capita will be used to quantify economic growth over a sixteen-year period.
1.8 DEFINITION OF TERMS
Tax: A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law
Value Added Tax: This is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. If the ultimate consumer is a business that collects and pays to the government VAT on its products or services, it can reclaim the tax paid.
Revenue: is one of the most important activities any business can engage in. It is defined as a process by which a company plans how to market and sell its products or services, in order to generate income
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