INTRODUCTON

1.1     BACKGROUND OF STUDY

Value added tax is a concept in Nigeria introduction in January 1994.It antecedent contract to 1987 when structural adjustment programme [SAP]was introduced in the country.

The architects of (SAP) which include the world bank and international monetary fund (IMF) had advised on total review of tax system in the country as a panacea for economic recovery.

The federal military government responded by setting up several committee in succession, which culminated in the introduction of VAT in 1994 through decree 102 promulgated in 1993.

Prior to the introduction of vat, sales tax had been in operation. Following recommendation from the committee, sales tax was abolished and VAT introduced as its replacement.

The economic blue print behind SAP was generally to a tract more revenue for government. Specifically VAT apart from halting wide deficit in government account resulting from government expenditure running steadily ahead of revenue, also intend to:

·         Reduce the country dependence oil revenue.

·         Bring in a lot of money because by the incidence on the consumer who hardly know that he is paying the tax

·         Provide incentive for export and therefore enhance balance of payment position

·         Maintain even tax incidence across various stages of production

·         Shift taxation toward consumption rather saving advocate of VAT had argued among other thing that the new system was desirable in economy because it will curb consumption of luxury and socially undesirable goods and services. It was advocated furthers that VAT would eliminate the multiplicity of tax in the country.

Moreover, it was argued that it will make room for more saving and subsequent investment since it, minimize consumption. VAT also was intended to promote export and discourage import because export will be given tax exemption while import will be taxed heavily.