The year 1991 was a watershed in the tax administration of Nigeria. in that year, the professor Edozien- led study group on the review of the Nigerian tax system first identified the need to transform the out model sales tax that was then administered by the state government.

Within the year (1991), a parallel study group on indirect taxation led by Dr. Sylvester Ugoh was given the responsibility to study the feasibility of introducing value added tax in Nigeria as an improvement on the existing sales tax.

After making series of empirical studies and research tours both within and outside the country, the group recommended in November 1991 that the value added tax should be introduced in Nigeria after two years of preparatory work.

As a follow up, by 1992 the Emmanuel Ijewere led modified value added tax (MVAT) committee was setup up undertake preliminary work for the introduction of the new tax.

The committee was later to work in close collaboration with the Federal Inland Revenue Service (FIRS) in 1993 for the latter to take over the administration of the new tax, which was scheduled to come on stream by September 1993.

Having taken a decision to implement VAT, the government was faced with the need to answer the important suitable way to administer the tax. Nigeria was at this crossroad by December 1993 when the new tax was about to start.

There are many possibilities in taking the crucial decision pf where to place the administration of VAT. The main possibilities include:

The organization that administers custom and excise duties.

The organization that administers internal indirect taxes if separated from income tax.

The income tax administration and

In rare cases, a separate outfit.

While it is difficult to prescribe general guidelines as to which of this organization is best equipped to administer VAT, the experience of different countries all over the world today is quite a good pool to prescribe some guidelines in the area.

Due to the importance of shared information between the company income tax and value added tax coupled with the peculiarity of the Nigerian geographical terrain for a wider and comprehensive coverage, the federal government deemed it wise to vest the administration of VAT on the Federal Inland Revenue Service.

The effectiveness of VAT administration in Nigeria by the federal inland revenue service over these years have generated a lot of interesting technical issues which have formed the basis of this research activity.




During the nationwide Value Added Tax census carried out by the federal republic of Nigeria in the first quarter of 1997, it was observed that a large percentage of businesses trading on Vatable goods and services did not register with the Federal Land Revenue (FBIR) as stipulated in section 8(1) of VAT decree 102 of 1993.this in turn affected the revenue base of the nation.


To bring to a focus, certain questions needed to be shed and solutions proffered. Such questions need to be asked and solutions proffered. Such questions include:

Has Value added tax yielded the highest revenue among federal government taxes in Edo state?

Is the value added tax more effective when compared with defunct sales tax?

Has value added tax helped harmonize the tax system thereby causing a reduction of inert taxes and tax rates within its few years of inception?

Has value added tax variance between budgeted and actual revenue for each year since inception been favorable?

To which degree has specific policies on VAT been effective considering the performance variable?


The following are the objectives of this study:

To ascertain whether VAT has the highest revenue yield among federal Government taxes in Edo state;

To ascertain whether VAT when compared with the defunct sales tax is more effective;

To find out if VAT has helped harmonize the tax system and causing the reduction of inert taxes and tax rate within its few years of operation.

To ascertain whether VAT variance between budgeted and actual revenue for each year since its inception has been favorable;

To distill the performance variable and identifying the degree to which specific policies have been effective.


The following hypothesis directs the thrust of this study:

Value Added Tax has the highest revenue yield among Federal Government taxes in Edo state.

Value Added Tax when compared with the defunct sales tax in terms of revenue bases more effective.

Value Added Tax has helped harmonize the tax system and causing the reduction of inert taxes and tax rates within few years of operations.

Value added tax variance between budgets and actual revenue for each year since its inception has been favorable.

Specific polices on value added tax has been very effective considering the performance variables.

1.6          SCOPE OF THE STUDY

The study concentrated efforts on the technical requirements of VAT in Nigeria. Its application is limited to Edo state in Nigeria, between the periods of 2000 to 2004.

Data and information applied in the study were those generated theoretically, based on the experience of the researcher and literature survey.


The importance of Value Added Tax cannot be over emphasized, especially now that the government is trying to find an alternative source of revenue other than oil. Value added tax therefore becomes a necessary fiscal tool for employment generation, resource allocation, stimulation of economic growth and development.

Value added tax with the capacity of taxing a large number of people speedily, inescapable and painlessly will provide invaluable assistance to the federal, state and local government and other concerned authorities in reducing the tax evasion and avoidance.

The study will contribute added meaning to existing information in the area of tax measure in Nigeria. This study will contribute added meaning to existing information in the area of tax measures in Nigeria.

Finally, the study will find immediate practical application for consultant, organization etc., desiring to improve methods of decision making in the area of Value Added Tax measures.


In the course of collecting data for this study, the problems encountered by the researcher are similar to the general problems of field research based on the administration of questionnaires. The subject was easily assessable but the major problem was the difficulty of getting some tax payers to respond to the questionnaires until their fears were allayed that the study is for pure academic purpose and that it will not be a basis to impose more tax on them. The other subjects that relate with the inspector of taxes and auditors also posed a problem.

Call Now Button