Definition and scope of value added tax economics essay

Development economics The scope of economic development includes the process and policies by which a nation improves the economic, political, and social well-being of its people. The concept, however, has been in existence in the West for centuries. ModernizationWesternisation, and especially Industrialisation are other terms people have used while discussing economic development.

Definition and scope of value added tax economics essay

This study used consumption cost, Gross Domestic Product, Household cost and international trade values collected from the Central Bank of Nigeria Statistical Bulletin from The results revealed that while consumption tax is a significant determinant of VAT revenue, GDP, Household cost and international trade are not significant determinants of VAT revenue.

In view of our finding and in line with reality, government should intensify efforts to effectively exploit VAT as a source of revenue. Also, efforts should be made to block the leakages in the VAT collection process so as to ensure appropriate remittance to the Treasury.

Furthermore, government should review the VAT rate higher as is obtainable in other countries. Finally, structure should be put in place to prosecute VAT evaders and their accomplices.

Definition and scope of value added tax economics essay

This is a tax on the supply of goods and services which is eventually borne by the final consumer, but collected at each stage of the production and distribution chain.

VAT as a concept was first introduced by France inand has over time been embraced by well over countries. This impressive record in virtually all countries where it was introduced, according to Ajakaiye clearly influenced the decision to introduce VAT in Nigeria in January as a replacement for the existing sales tax.

In this context, it becomes necessary to empirically examine the likely determinants of VAT revenue.


For instance, VAT revenue in the year of its inception was N8. In terms of contributions to total federally collected revenue, VAT accounted for about 4. As much as N VAT has also become an indispensable component of the tax advice and tax reforms in developing countries.

VAT revenue is generated for distribution to the federal, state and local government of Nigeria. Unlike the oil revenue whose market government has no control over, VAT revenue is highly controllable and effective. VAT as an indirect tax, helps to reduce over dependence on oil revenue in Nigeria; assures a sustainable economic growth and development.

Tax revenue and its determinants have elicited considerable interest in public finance theory and empirical studies. Most of these studies used Ordinary Least Square method OLS technique to find the determinants of total tax to GDP ratio and most common exogenous variables used by the studies were share of agriculture sector, share of foreign trade and per capita income.

The other variables tested are monetization, level of education and urbanization in the estimation of tax potential of different developing countries. Recent evidence for Nigeria on this argument is scarce and where available not without methodological gaps.

On this note, this study aims to modestly contribute to the knowledge of value added tax revenue determinants.

Since global oil prices are determined by factors beyond the control of the Nigeria government, uncertainty and unstoppable fluctuations of prices have further worsened the economic situation in Nigeria.

The trade taxes VAT on various imported products is vulnerable to external events because their prices are determined in the world market and tend to be volatile. This has resulted in inadequate tax revenue and continuous existence of budget deficit.

The present tax structure does not raise adequate revenues thereby encouraging domestic borrowing and seeking external finance which are only temporary measures of deficit financing.

Moreover, external funds can no longer be relied on due to donor conditions as a result of the recent global financial meltdown. Furthermore, potential sources for domestic borrowing are few and external grants reduce autonomy and increase political and economic dependence.

The alternatives are therefore to raise money through taxation, curtail desired government expenditure, or continuously revise the tax structure.

This assertion has led a number of economies to conclude that the economic prosperity of a nation depends on its ability to raise revenue.Scope - Definition for English-Language Learners from Merriam Definition of scope written for English Language Learners from the Merriam-Webster Learner's Dictionary with audio pronunciations, usage examples, and count/noncount Definition And Scope Of Value Added Tax Economics Essay Definition And Scope Of Value Added Tax Economics Essay.

Published: 23rd March, Last Edited: 23rd . Value-added taxes around the world commonly exempt or tax at a reduced rate food and other necessities.

3 The same practice is observed for the sales taxes imposed by . Expanded Value-Added Tax (EVAT) from the definition itself is a value added tax that increases in its scope.

It simply means the increase of tax, which is being paid by the people. This is where the government gets the fund for its program for the country.

the definition of this tax’s nature. The Second Directive of April 11, [2], provided further The EC Standards in the Scope of Value Added Tax Jolanta Szoùno-Koguc the form of low value gifts for the purposes of the economic enterprise is not considered to be a form of supply.

VAT is a tax not on the total value of the good being sold, but only on the value added to it by the last seller.

The seller is liable to pay a tax on the net value added by him in the process of production, i.e. gross value minus the value of inputs or commodities purchased from other firms.

Value added tax means a tax on the amount by which the value of an article has been increased at each stage of production. It is a multistage consumption tax imposed on goods and services, which is collected at every stage of production and distribution rather than at the retail stage alone.

Value-added tax - Wikipedia