iBusiness, 2013, 5, 126-135
Published Online December 2013 (http://www.scirp.org/journal/ib)
Open Access IB
Public Perception and Attitude towards Value Added Tax
(VAT) in Nigeria
Adesina Olugoke Oladipupo, Famous Prince Izedonmi
Department of Accounting, University of Benin, Benin City, Nigeria.
Email: sinaoladipupo@yahoo.com, sina.oladipupo@uniben.edu
Received July 16th, 2013; revised August 15th, 2013; accepted September 13th, 2013
Copyright © 2013 Adesina Olugoke Oladipupo, Famous Prince Izedonmi. This is an open access article distributed under the Crea-
tive Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the
original work is properly cited.
This study assesses the level of tax education, particularly the level of understanding of VAT law amongst three catego-
ries of taxpayers in Nigeria. The data for the study were collected by means of structured questionnaires administered to
the responden ts. The analysis o f resu lts showed that most o f the re sponden ts have poor knowledg e of VAT law in Nige-
ria, irrespective of their level of literacy, and that there was no significant difference in the amount of knowledge of
VAT law amongst the three groups of respondents used for the study. A suggestion was made of an aggressive and
widespread public education on VAT matters that could involve an integration of tax education into the curricula of
education in our institutions of higher learning and general public enlightenment through media, and organized work-
shops for specif ic groups.
Keywords: VAT; VATable Goods; Tax Education
1. Introduction
Public attitude towards tax matters has often been nega-
tive. In the early times, taxation was to a large extent
considered as an instrument of oppression wield ed b y the
ruling class over the subjects. Reference [1] observed
that the power to impose tax belongs to the government,
and could only be cu rtailed by expr ess constitutio nal pro-
visions. But as the Government has an inherent right to
impose tax on citizens, the citizens also have an inal-
ienable right over their property and would not like to
part with such to government, which is often seen as an
inanimate, detached and remote entity. It is the constitu-
tional duty of the citizens to pay any tax that might be
imposed by Government.
However, no citizen would like to pay any tax volun-
tarily and that is why Government usually enacts law to
back it up. A typical tax law would specify the purpose
of the tax, the mode of its administration, scope, offences
and associated penalties relating to the tax matters. The
essence of the tax law is to assist taxpayers and tax ad-
ministrators to know what the tax is all about, how it
works, who is responsible for its administration as well
as the offenders relating to tax matters and associated
penalties etc.
Every citizen is required to be conversant with the tax
laws in operation. Such knowledge or awareness has the
tendency to promote voluntary tax compliance amongst
the citizenry. Even for those that operate trans-border
transactions, they are equally expected to know, unders-
tand and comply with other relevant tax laws of foreign
countries, as they affect their business operations. The
mere fact that somebody has been educated does not im-
ply that he/she may have sufficient knowledge in tax
matters. This may even be true for professionals as well
as laymen. Sometimes citizens are trapped by the ele-
gance of this assumption. Therefore, the following ques-
tions provide a clear focus for our current study. Do
businessmen or professionals or even the laymen really
know and understand various tax laws in operations?
How much of the tax laws do they know? And does the
knowledge of tax laws vary from one group of taxpayers
to another? Does general education guarantee taxpayers’
understanding of tax laws? Does the taxpayers’ knowl-
edge of tax laws influence their activities? How can the
differences in taxpayers’ knowledge of tax laws help in
the planning and implementation of tax laws?
It is in an attempt to provide empirical answers to the
above questions and other related issues that this study
Public Perception and Attitude towards Value Added Tax (VAT) in Nigeria 127
was undertaken. To wards this en d, the focus o f this study
is on the recently promulgated tax laws in Nigeria, par-
ticularly the Value Added Tax (VAT), which came into
operation in1993.
The objectives of this study are:
1) To assess the level of awareness and understanding
of VAT by businessmen, professionals and laymen.
2) To assess the relative impacts of VAT on the VAT
payers and the economy.
3) To identify the problems confronting the admini-
stration of VAT from the perspective of the respondents.
The two hypotheses formulated for testing in this
study are stated below:
1) That there are differences in the knowledge of VAT
amongst the businessmen, professionals and laymen.
2) That there is positive relationship between the level
of formal education of a taxpayer and his level of
knowledge of VAT law.
2. Theoretical Framework and Review of
Much has been written on Value Added Tax (VAT) since
its inception in tax administration worldwide. As per the
conceptual meaning of VAT, opinions differ. Reference
[2] regards VAT as “a tax levied at each stage of
production on the first value added”. Reference [3] on
the other hand considers VAT as a multi-stage consum-
ption tax levied on the difference between a firm’s sales
and the value of its purchased inputs used in producing
goods”. But the most widely accepted but wooly
definition is the one provided by the United Kingdom
Statement of Standard Accounting Practice (SSAP)
Number 5, which states “VAT is a tax on the supply of
goods and services, which is eventually borne by the
final consumer but collected at each stages of the
production and distribution chain” [4].
From these definitions, it is evident that the classical
VAT is a consumption tax, its incidence is on the final
consumers and it is a multi-state collection tax. The
original form of VAT started in Germany in 1919. In
1937, France introduced a form of VAT known as pro-
duction tax, which has helped replaced with producer’s
income-based tax in 1948 and consumption tax in 1954.
The French VAT system became a condition precedent
of becoming a member of European Economic Com-
munity (EEC) under the treaty of Rome in 1957. The
European community unanimously adopted VAT in 1967
following the reports of the Neumark and Jansen Com-
mittees. Nigeria also adopted VAT in 1993. Many other
countries have come to replace sales tax with VAT for
certain reasons. VAT is more comprehensive and well
equipped for taxing, more equipped to ensure voluntary
compliance for its multi-stage collection and credit
mechanism through the use of invoices, it also provides a
well-defined audit-trail for tax authorities and thus it is
easier to integrate VAT with income tax audit.
VAT has some characteristics, which include neutrali-
ty, equity, and regressive nature. VAT is neutral to for-
eign trade; individual or household choices; individual or
household savings and consumption decisions; forms of
business ownership; mode of financing and the choice
amongst inputs except where the supplies are VAT ex-
empt or zero-rated. The argument on the equity of VAT
based on the Hobbies theory of equity, which states that
the people should pay tax based on what they withdraw
from society’s resources, as measured by consumption,
rather than what they contribute to such resources, as
measured by income [5]. The equity of VAT is therefor e
based on the fact that it is a consumption tax. The re-
gress ive character istics of VAT has been argued tha t it is
only in a short run period; say a year that VAT is
regressive. However, on life cycle concept VAT burden
tends to even out in the long run.
The strategic policy decisions in establishing VAT
systems have attracted of tax scholars such as [6].
According to him some of these strategic policy deci-
sions range from the desirability of VAT adoption or
otherwise, the form of VAT system to adopt, coverage of
VAT system, the government department to be res-
ponsible for VAT administration. On the desirability of
VAT, two groups exist. Th ere are those countries, which
adopted it on a mandatory platform either because it was
a condition precedent to becoming a member of a re-
gional grouping, like EEC or because of the linkage with
the colonial French master, as Cote d’Ivoire and Senegal.
Then there are other countries, which were merely per-
suaded to adopt VAT systems as a means of enhancing
their revenue-base by such in ternational bodies as World
Bank, International Monetary Fund (IMF). Examples of
which is Nigeria. VAT system has not in any way been
attractive in some other countries particularly those with
strong pure federation. In these countries, sales tax was
doing very well and that each component state is
seriously guarding its revenue-base as well as its relative
independence more jealously. Examples of such coun-
tries include United States of America and Canada. Three
methods for calculating VAT have been identified. These
are the credit method (the Japanese model) and the
addition and subtraction meth ods respectively. The cred it
method is the most popular even though it does not
define value added. The attractions include easy policing
and affordability of good audit trail due to the use of
VAT verification has two forms, namely the room (or
office) verification and the field verification. The aim of
VAT verification is to promote enforcement of tax laws
while VAT audit aims at minimizing tax evasion. VAT
audit could be simple or in-depth audit. However, an
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Public Perception and Attitude towards Value Added Tax (VAT) in Nigeria
effective VAT audit requires planning, audit strategies
and audit programme, and audit checklist. It has been
suggested that VAT audit system should be integrated
with the income tax audit; an effective tax audit system
enhances the lev el of the tax co mpliance. VAT investiga-
tion is usually upon the susp icion of criminal tax fraud or
tax evasion. Tax fraud has three elements, namely, the
action, the consequences and accountability. There are
numerous acts, which could amount to tax fraud. These
include failure to register, unreported sales or purchases,
misuse or use without right of a taxpayer’s invoice; and
exaggerated refund claims. Others are omission of self-
delivers; incorrect description or classification of goods
in a multiple rates system, falsification of books, records
and other documents and presentation of score as if they
are genuine; failure to show or submit books, records an d
other documents, to failure to pay tax already withheld
etc. Any of these categories of persons could be liable for
criminal tax fraud: VAT payers, a representative of a
firm (such as the director, secretary or a manager) an
authorized person (proxy), and an employee of the tax-
payer. Penalties exist for various offences of VAT laws.
These range from payment of fine (either of specific sum
of money or a certain percentage of amounts of tax lost
to the governments as a result of the acts of tax evasion)
to imprisonment [7].
3. An Overview of VAT Law in Nigeria
VAT was introduced in Nigeria in 1993 to replace the
then existing sales tax. Some Unity Party of Nigeria’s
(UPN) controlled states as a means of enhancing their
revenue base to carry out their free education introduced
sales tax in Nigeria in 1980-1981 and free health services
programmes. Attempt at forestalling State Governments
from legislating on tax matters proved abortive at the
Lagos State then argued that only income taxation was in
the exclusive legislature list and as such any state could
legislate on sales, purchase and consumption taxes. This
bold move of Lagos State Government prompted many
other states in Nigeria to join. Hence by 1986 many
states in Nigeria had adopted sales tax through their
various states edicts.
The widespread adoption of sales tax by many states
lacked harmonious structure with attendant negative
implications on inflow of foreign-investment and distri-
bution of industries in Nigeria. The Federal Government
came up with Sales Tax Decree Number Seven of 1986
to harmonize the sales tax structure while leaving the
implementation in the hands of the states on the basis of
residence. In spite of the opposition by the states on the
unconstitutionality o f the Federal Government action , the
latter did not stop in that by 1991 a study group was set
up to review the entire tax system in Nigeria. The study
group proposed VAT but suggested a modified Value
Added Tax (MVAT) for Nigeria. Sales Tax was finally
replaced in 1993 with VAT after promulgation of re-
levant legislation. Some of the reasons adduced for the
replacement of sales tax with VAT include: that sales tax
base was too narrow as the Sales Tax Decree targeted
only locally manufactured goods and that VAT was
capable of yielding high reven ue compared to sales tax.
The VAT Decree came into force on 1st December
1993. The Decree was divided into six parts containing
43 sections and three schedules. Part one consisted of six
sections, all devoted to definitions of terms. Section five
provides guideline on the determination of the values of
taxable goods and services, whether supplied for money
consideration or non-monetary consideration or imported.
Part two considered the Administration and Management
of VAT. The Federal Board of Inland Revenue (FBIR) is
responsible for the assessment and collection of VAT,
registration of taxable persons and for accounting for
VAT proceeds [8]. Issue of returns, remittances, recovery
and refund of VAT is the subject of part three. It is the
duty of the taxable person to take adequate records and
accounts of all transactions, and to render returns of all
goods and services purchased or supplied during the
month on or before the 14th day of the following month.
Part four provides for the Value Added Technical Com-
mittee. Sections 17 to 20 specified the composition,
functions, proceedings and staffing of the committee,
which is to provide technical, professional and advisory
services on VAT matters to the Board.
Part five provided a list of offences and penalties
associated with VAT. The offences range from furnish-
ing false documents with a fine of twice the amount
under declared if convicted to failure to submit returns to
the Board with a fine N5,000 for every month of default.
The last part considered miscellaneous issues such as
powers of Secretary or Minister of Finance to vary sche-
dules and tax rate, inspection by an authorized officer,
distribution of revenue amongst the tiers of government
Reference [9] considered the perception of Nigerian
businessmen on Value A dded Tax (VAT). The study w as
carried out in city of Calabar, Cross River State, Nigeria.
The types of business covered include distribution, con-
sultancy services, manufacturing, importation, warehous-
ing and advertising. Analysis of the data obtained from
questionnaire administration showed that about 66.7
percent of the businessmen involved in the study claimed
to be aware of VAT, although their knowledge is rather
shallow. Only about 2.2 percent of the sampled bus iness-
men registered for VAT. This probably could amount to
high degree of incidence of VAT evasion and the con-
comitant loss of VAT revenue to government. Quite very
few (about 1.7%) of businessmen under study have ever
attended business workshops/seminars where informa-
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Public Perception and Attitude towards Value Added Tax (VAT) in Nigeria 129
tion and matters about VAT were being discussed. It was
concluded that most businessmen in Nigeria are not well
educated about VAT matters. VAT was considered as
disincentive to most businessmen under study. They
argued that most VATable products attract higher prices
(because of VAT inclusion) and this is responsible for
low sales compared to non-VATable products.
Reference [10] studied the impact of VAT on the
economy. It was observed that VAT has the tendency to
boost the revenue generating capacity of the economy
and thus help the Nigerian economy to be less dependent
on petroleum resources. Although VAT has the tendency
of increasing the prices of goods and services that arc
VATable, if the VAT proceeds are channeled to the
provision of social infrastructure, the welfare of the
citizenry would improve.
Reference [11] examined the administration of Value
Added Tax (VAT) in the manufacturing industry in
Nigeria. The objectives of the study were to determine
the level of compliance and the effects of VAT on the
internal operations of the manufacturing organizations.
The data for the study were obtained from Bendel Feeds
and Flour Mills, Ewu, Edo State. The results of the
analysis showed that the company maintained high
degree of compliance with the stipulation of VAT Decree.
The study revealed that the VAT violates the tax canon
of equity. It was argued that the imposition of flat rate of
5% on all organizations is unfair. It was claimed that
companies that manufacture products, which are harmful
to health such as cigarettes, tobacco and liquor, should be
taxed at a higher rate. The flat rate of VAT makes the
incidence of burden to be heavier on small companies
that are striving to survive compared to the big and
successful ones. The major shortcoming of this study is
that it is limited in scope as it was limited to only one
manufacturing company. We believe that the results
could be more interesting if more manufacturing com-
panies across diverse geo-political zones in the country
are involved in the study.
Reference [12] examined the problems and prospects
of VAT in Nigeria. Questionnaires were administered to
the general public, suppliers of VATable goods and
services and VAT Directorate of the Federal Inland
Revenue Services. The results of the study revealed that
majority of the respondents are not aware of VAT and
had wrong notion about it. Many did not know VATable
goods and services, as the lists are not commonly avail-
able. Many small-scale business owners have the habit of
not keeping proper books of accounts while some me-
dium-scale business are guilty of under invoicing. Some
other problems identified by the study include late remit-
tance of VAT collected, ineffective VAT collection sys-
tem, poor coverage, fraud and unstable sharing formula.
The study disclosed that VAT has really helped to
increase the non-oil revenue locally generated by govern-
ment. It was concluded that much has to be done in the
area of publicity to raise the level of awareness of the
public to the desired level.
Reference [13] looked at the understanding of the
professional men about provisions and operations of the
VAT law in Nigeria. Questionnaires were administered
on professional men like Accountants, Lawyers, Medical
Doctors, Engineers, Architects and Bankers, to determine
how much they know about VAT law. The results of the
study showed that most professional men participated in
the study claimed that they are aware of VAT law and
VAT operation in Nigeria. However, deeper probe into
how much of the VAT law they know showed that most
of them have shallow knowledge of VAT law. Many
have not even seen a copy of VAT law before let alone
reading and understanding what the law says in detail.
The few accountants (25%) and lawyers (15%) who
demonstrated knowledge of VAT law to some extent
happened to be those who practice as tax management
consultants. The rest who had no course to deal with
VAT law in general have no detailed knowledge of it.
Thus, it is practically difficult for them to assess the
adequacy or otherwise of the law.
Reference [14] carried out a similar study in 1999. She
examined the perception of the tax consultants on the
adequacy or otherwise of VAT law in Nigeria. Question-
naires were administered to tax consultants in eigh t cities
in Nigeria, namely, Ibadan, Benin City, Akure, Asaba,
Kaduna, Kano, Calabar and Enugu. One of the major
objectives of the study was to compare the legal expec-
tations of VAT with what actually obtains in practice.
Majority of the tax consultants used for the study (78%)
claimed to have read VAT Decree. About 98% of those
who claimed to have read VAT decree also said that they
understood it. As a test of their knowledge and under-
standing of VAT they were demanded to outline the
contents, the striking issues, and loopholes (if any) in the
VAT decree. Unfortunately, over 80% of those who
claimed to understand VAT decree could not outline the
contents and neither were they able to identify any
striking issues nor any loopholes.
Reference [15] examined the impacts of VAT on buy-
ing behaviour of consumers of VATable goods in super-
markets in Benin City. The study aimed at determining
whether imposition of VAT on goods and services in-
fluence the choice of consumers, whether VAT affects
consumer’s taste and preference, for VATable super-
market goods. Two sets of questionnaires were admin-
istered separately to selected consumers of supermarket
goods and owners of supermarkets in Benin City. The
data obtained were analyzed and the results showed that
most of the consumers of supermarket goods are not
aware whether they purchased VATable goods or not.
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Public Perception and Attitude towards Value Added Tax (VAT) in Nigeria
The implication of this is that imposition of VAT on
those supermarket goods has no negative effects on con-
sumers’ choices as well as their taste and preference. The
owners of supermarkets observed that the imposition of
VAT makes the costs of VATable supermarket goods
more expensive than non-VATable ones and thereby
makes sales of VATable supermarket goods less. Owners
of supermarkets observed that customers must have
resorted to buying those goods th at they used to buy fro m
the supermarkets before imposition outside the super-
markets. The implication of this is that consumers are
likely prone to buy fake and adulterated goods outside
supermarkets because of their cheapness. However, this
point cannot be substantiated, as the fact that goods sold
in supermarkets need not be superior to similar ones sold
outside the supermarkets. This has necessitated the de-
sign of an on-going detailed study on the analysis of
sales of VATable goods in supermarkets before and after
the introduction of VAT in Nigeria (in progress). It is
expected the results of this study will throw more light
on the impact of VAT on consumers’ behaviour in
Reference [16] examined value added tax (VAT) and
economic growth of Ni geria. Using time series data on the
gross domestic product (GDP), VAT revenue, total tax
revenue and total (Federal Government) revenue from
1994 to 2008, the results showed that VAT revenue ac-
counted for about 95% significant variations in GDP in
Nigeria. It was observed that VAT revenue was more
stable than GDP during the period but no causality existed
between the GDP and VAT revenue. It was the recom-
mended that all administrative loopholes in the manage-
ment of VAT matters in Nigeria should be addressed to
enable VAT revenue to continuing to contribute signifi-
cantly to the economic growth in Nigeria.
In another related study on the impact of VAT on
revenue generation in Nigeria, it was observed that VAT
has statisti cally signi ficant effect on revenue generation i n
Nigeria. Honest dedication of all agents of VAT for col-
lection and payment improvement in the collection of
VAT by government were then advocated [17]. Realizing
the significant contribution of VAT on the economic
growth in Nigeria, it was recommended that government
should sensitize the people to enable it increase the tax
rate so as to enlarge its annual revenue for economic de-
velopment [18].
From the foregoing, it is evident th at VAT contributes
significantly to the total revenue collectable by govern-
ments in Nigeria. In spite of this, there are still prob lems
associated with VAT payment by the public. Should Ni-
gerian government decide to increase VAT rate to enlarge
her revenue base because of t he effect of VAT revenue on
government total revenue? How would the public react?
To be able to preempt what would be the public reaction
on such a proposed public policy, it is important to know
what is the current public perception and attitude to
VAT system in Nigeria. This is the rationale behind this
4. Materials and Methods
All taxpayers in Nigeria constitute the target population
for this study. However, for comparative analysis we
decided to structure the taxpayers into groups, namely,
general businessmen, the professionals and others, which
we referred to in this study as laymen. The fieldwork for
the study was carried out in cities selected from the three
geo-political zones in Nigeria to ensure adequate repre-
sentation of samples to be collected. These are Benin
City, Warri, Lagos, Ibadan in the Southwest, Enugu, Aba,
and Port Harcourt in the Southeast, and Kaduna and
Kano in the North. Using stratified random sampling
technique one hundred (100) questionnaires were admin-
istered to each of the three categories of taxpayer or
strata mentioned above in each city. Thus, a total of three
hundred (300) taxpayers were sampled in each city to
give a total of 2700 taxpayers, which participated in the
Each questionnaire administered consisted of four
different sections. The first section elicits general infor-
mation about the respondents. Such information includes
the sex, age, marital status, educational status, occupation
and income of the respondents. The second section
dwells on the awareness of VAT law amongst taxpayers
while the third section considers their understanding of
VAT’s operation. The last section presents an oppor-
tunity for the respondents to consider the impacts of
VAT on taxpayers in particular and Nigerian economy in
The data obtained from the study were analyzed using
descriptive statistical techniques such as the frequency
distributions and measures of central tendency. Two
hypotheses were formulated for the study. The first
hypothesis states that there are differences in the knowl-
edge of VAT amongst the businessmen, professionals
and laymen. This hypothesis was tested using chi-square
analysis. The second hypothesis states that there is
positive relationship between the level of formal edu-
cation of a taxpayer and his level of knowledge of VAT
law. The hypothesis was tested using the Spearman rank
correlation analysis. The results o f these hypotheses test-
ing are indicated in appropriate sub-section below.
5. Results and Discussion
Out of the total of 2700 taxpayers engaged in the study
only 1467 taxpayers responded to our questionnaires.
This represents slig htly above 54% of the taxpayers. The
breakdown o f the 1467 taxpayers that participated in this
study is presented in Table 1.
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Public Perception and Attitude towards Value Added Tax (VAT) in Nigeria 131
Table 1. Sex distribution of respondents.
Males Females Total
Group No. % No. % No. %
Professionals 225 22 198 42 423 29
Businessmen 486 49 90 19 576 39
Laymen 288 29 180 39 468 32
Total 999 100 468 100 1,467100
Source: Authors (2013).
We observed that many Businessmen (39%) parti-
cipated in the study compared to the Professional (29%)
an d Lay men (3 2%). Simi lar ly, more males (999 male s or
68%) responded to our study than women (468 females
or 32%). All the respondents were Nigerians. They be-
longed to different ethnic groups such as Yoruba, Hausa,
Igbo, Bini, Urhobo, Afemai, and Isoko. The average age
of the Professional group was 31 years. About 63% of
these people were married while 37% were single. The
professionals included Engineers, University Lecturers,
Teachers, Accountants, Bankers, Medical Doctors and
Nurses. By virtue of their background they are highly
certificated people. The second group included men and
women operating their personal businesses. The average
age of the people in this group was 40 years. Majo rity of
these people were married (about 60%). Most of them
possessed primary or secondary school cer tificates (78%)
while the rest possessed either non-degree post-secon-
dary school certificates (about 10%) or degree post-sec-
ondary school certificates (about 2%). The third group
consisted the laymen, majority of who are into public
service (70%) and about 12% were unemployed. Ma-
jority of them had post-secondary school (non-degree)
certificates (39%) while the rest either had secondary
school certificates (29%) or first-degree certificates (19%)
or post-graduate certificates (13%). No stark illiterate
person educationally participated in the study.
6. Awareness of VAT and VAT Law
The major assumption of this is that tax compliance
depends on the taxpayers’ awareness, knowledge and
understanding of the applicable tax law. In this study,
attempt was made to ascertain th e veracity of this assum-
ption. Table 2 shows the variation in the proportion of
respondents who claim to be awared of general issues
related to VAT, VAT law, and its operation in Nigeria
end those who do claim not to be aware.
From the above it is evident that about 79% (1152)
respondents claimed that they are aware of VAT while
21% (315) indicated ignorance or simply refused to
respond. More of Businessmen indicated awareness than
the Professional and Laymen. More of laymen indicated
lack of awareness relative to other groups. However,
only 2% of the professional men, 15% of the business-
men and 6% of the laymen, could provide correct de-
finitive meaning of %’AT. They simply described VAT
as a consumption tax payable on goods and services,
which were used to replace tax in 1994 (See Table 3).
Majorities of the respondents have wrong knowledge
of what VAT is all about. Table 4 summarizes the
various ways the respondents have described VAT
We observed that most of the respondents (44%) did
not know VAT more than simply Value Added Tax.
Similarly, small proportion of the professional men
(28%), Businessmen (17%) and Laymen (17%) agreed th at
Table 2. Awareness of VAT, VAT law and its operation in
Aware Not aware
Group No. % No. %
Professional 360 31 63 20
Businessmen 468 41 108 34
Laymen 324 28 144 46
Total 1152 100 315 100
Source: Authors (2013).
Table 3. Respondents’ knowledgeability of VAT.
Aware Not aware
Group No. % No. %
Professional 9 2 414 98
Businessmen 90 15 486 85
Laymen 27 6 441 94
Source: Authors (2013).
Table 4. Some ways taxpayers describe d VAT.
S/No.Incorrect responses
1 It is tax charged on consumer products 207 15
2 It is tax paid on goods 162 12
It is tax paid for consuming luxury goods 99 7
4 It is tax on value, which the supplier adds to
goods and services before selling them 216 16
5 It is tax paid for the services
received from public utilities 72 6
6 It is simply value added tax 585 44
Total 1341100
Source: Authors (2013).
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Public Perception and Attitude towards Value Added Tax (VAT) in Nigeria
they know the various forms of VAT in practice.
However, no one of the respondents could give correct
forms of VAT in practice, namely, the consumption, the
income and the gross product types of VAT. In fact only
insignificant proportion of the professional men (6%),
Businessmen (2%) and laymen (almost 6%)could iden-
tified Modified Value Added Tax (MVAT) as the form
of VAT which is being implemented in Nigeria. Attempt
to know whether the respondents really understood the
basic difference(s) between sales tax and VAT showed
that 1143 respondents (78%) did not know the differ-
ences between the sales tax paid and VAT. Table 5
presents what they considered as basic differences.
Although many of the respondents claimed to know
VAT law in Nigeria, only 3% of the professional men
could identify the name of the VAT law as VAT Decree
Number 103 of 1993. About 48% of professional men,
50% businessmen and about 33% of the laymen cor-
rectively identified th e agency responsible for th e admin-
istration of VAT in Nigeria as the Federal Board of
Inland Revenue; others referred to the State Government,
Federal Government or simply indicated that they did not
know. Not many of the respondents (Professional men
6%, Businessmen 2%, and laymen 8%) have seen a copy
of VAT Decree before, either from their friends, Li-
braries, Newspapers, or personal readings whether in the
quest to know tax position or personal inquiry or busi-
ness demanded or professional examination requirement.
7. Taxpayers Understanding of VAT Law
We observed that the same professional men (6%) claimed
Table 5. Taxpayers’ perceived differences between Sales
Tax and VAT.
S/No. Responses No. %
I VAT is chargeable on goods bought while sales
tax is chargeable on goods sold 774 68
2 VAT is charged on many goods while sales tax
is charged on certain fair luxurious goods 135 12
3 VAT can easily be offset while
sales tax is not off Settable 9 8
4 VAT is on consumption and utility while sales
tax is on transfer of goods/services 63 6
5 It is easier to collect VAT on
imported goods than sales Tax 36 3
6 VAT is levied on all restricted
companies such as hotels 27 2
7 VAT allows tax refund while
sales tax does allow tax Refund 18 1
Total 1143100
Source: Authors (2013).
to have seen a copy of VAT Decree also claim to have
read and understood it. Only 3% of these professional
men could talk about the co ntent of the VAT Decree. To
determine how much of the VAT law was known by
taxpayers, we decided to ask some specific questions.
Only few respondents (Professional men 3%; business
4% and laymen 2%) could somehow describe who
VATable person is. None of the respondents in any of the
three groups could identify the exact number of cate-
gories of V Arable goods and services, which are 11 and
24 respectively. However, they were able to identify
some of the VATable goods such as electronics, ciga-
rettes, wine, manufactured and assembled goods, raw
materials for industries, spare parts, Supermarket goods,
motor vehicles, heavy equipment and tractors, including
materials and office machines etc. Some of the com-
monly VATable services identified by respondents in-
cluding banking services and hotel services. We ob-
served that most taxpayers did no t know that commercial
vehicle spare parts are VAT exempt.
Some respondents (professional men 34%, business-
men 27% and laymen 30%) are aware that some goods
and services are VAT exempt. All the goods mentioned
as VAT exempt by taxpayers are actually so, except that
some of the services which the taxpayers considered as
VAT exempt are not really so. For instance the taxpayers
considered water and electricity supply, banking services
and legal services as VAT exempt. This is not correct
particularly banking service. It is only the services rend-
ered by the Community Banks, People’s Bank and
mortgage institutions that are VAT exempt but not
commercial banking services. There were some services
mentioned by the respondents like barbing and housewife
services, which are not included in the list of VAT
exempt services. The fact that these services were not
included in the list of VAT exempt services shows the
exhaustiveness of the list.
Further enquiry showed that only 34% of the pro-
fessional men, 24% of the businessmen and 28% of the
laymen knew the application VAT rate (5%). We further
explored the understanding of the taxpayers, on other
VAT related concepts such as input tax, output tax, tax
credit, tax refund and who is a registered person and his
responsibilities. We observed that most of the taxpayers
were not familiar with these concepts. They could readily
identify the responsibilities of a registered person. Few of
the respondents (professional men 27%, businessmen,
22% and laymen 21%) were aware of some of the VAT
related offences and their penalties. Some of the com-
monly mentioned VAT offences are furnishing of false
documents and claims, evasion, failure to issue tax in-
voice, failure to register and obstructing VAT inspectors
from carrying out their duties.
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Public Perception and Attitude towards Value Added Tax (VAT) in Nigeria 133
8. Tax Payer’s Assessment of Impacts of
About 28% of the professional men, 39% of the busi-
nessmen and 43% of laymen knew that they purchased
VATable goods or subscribed to VATable services.
Others were not sure. Beside 4% of the businessmen,
other respondents were not in the habit of keeping re-
cords of VAT they paid and hence it was not easy for
them to determine the proportion of VAT in their total
tax payment in a year.
The respondents were asked to consider the adequacy
of flat VAT rate of 5%, the equity in VAT distribution,
as well as impacts of VAT on individuals, business
organizations and Nigerian economy. Not many of them
could speak confidently on the adequacy or otherwise of
the current rate of 5%. For those who considered it as
inadequate (professional men 19%, businessmen 46%
and laymen 5%), they argued that the rate was too high
and that it failed to differentiate between classes and
income groups. They suggested that VAT rate should
vary from the income group and that the range of VAT
exempt goods and services should be expended. We also
observed that many of the taxpayers could not rightly
identify the correct distribution formula for VAT proc-
eeds (See Tab le 1 ). It was difficult for the respondents to
comment on the adequacy of the distribution formula.
However, respondents could identify some impacts of
VAT since its inception. The taxpayers could agree as to
the gains of VAT to individuals and business organiza-
tions except the nation as a whole. The only indirect gain
of VAT to individuals, which they identified, is the
possibility of discouraging the consumption of harmful
goods. But this point is arguable of course. The business
organizations seem to make no gain or loss, as they could
offset whatever they pay as input VAT against output
VAT. But the nation seems to be gaining from VAT in
terms of the increase in revenue. This view is evidenced
by the revenue received by the Federal Government since
inception of VAT as indicated in Table 2.
Some of the negative consequences of VAT on indivi-
duals, business organizations, and Nigerian economy as
considered by the respondents are summarized below. To
the individuals, VAT helps to redu ce their disposable in-
come and consequently reducing their volume of con-
sumption of goods and services. Some of the negative
consequences of VAT to the business organizations as
recognized by the respondents are as follows:
1) The increase in the cost of doing business in Nigeria
(i.e. increase in cost of production or sales);
2) Reduction in volume of sales;
3) Burden of rendering VAT returns: increase in re-
cord keeping activ ities and their associated costs;
4) Reduction in net operating income; and
5) Incidence of multiple taxation.
It was claimed that. VAT had increased the general
cost of li ving in Nigeria.
Finally, we examined what problems the respondents
considered to be confronting the operation of the VAT
system in Nigeria. Some of the problems of VAT system
in Nigeria as outlined by the respondents are detailed
a) Human Problems
Some of the human problems bedeviling the VAT
system in Nigeria include the following:
1) Failure of the VATable persons to register for VAT;
2) Dishonesty on the part of the registered person
either by delaying remittance or failing to remit VAT
proceeds collected; and
3) Possible diversions of VAT proceeds and inability
to give proper account of what VAT proceeds have been
used for.
b) Technical Problems
Some of the technical problems raised by the tax-
payers include evidence of poor VAT collection, lack of
enforcement and follow-up system by the administrators.
c) Logistic Problems
The respondents agreed that the failure of the Govern-
ment and its relevant tax authority to adequately publi-
cize VAT Decree are responsible for its poor understand-
ing by the taxpayers.
The respondents however identified the roles they
expect individuals, Non-Governmental Organizations
(NGOs), tax authority and government to play in solving
the problems. Some of these roles are considered below.
Individual taxpayers are expected to increase their
knowledge on tax education, imbibe the culture of tax
records keeping, and learn to comply with VAT Decree
etc. The NGOs could join governments in serious en-
lightenment campaigns on tax law and tax matters. They
could help to ensure strict compliance with VAT Decree
in their transactions; register and keep adequate neces-
sary VAT records, and ensure prompt remittance of VAT
proceeds. The Governments could help in ameliorating
VAT association problems by doing the following things:
1) Employ competent and adequate staff to man the
VAT section;
2) Educate the public on tax law and tax matters;
3) Provide attractive tax relief to individual taxpa yer;
4) Be more dutiful and aggressive in tax collective an d
5) Enforce strict compliance with VAT legislation
amongst the VAT reg i st ered persons;
6) Enforce prompt remittance of VAT proceeds by
VAT registered persons;
7) Set up VAT monitoring team who will be go ing out
on a regular basis to carry out on-the-field-assessment of
compliance with the law.
The governments are also expected to embark on
Open Access IB
Public Perception and Attitude towards Value Added Tax (VAT) in Nigeria
public tax education in general and VAT enlightenment
campaigns in particular. The Governments should ensure
that however VAT proceeds, what collected from the
VATable persons should be judiciously utilized so that
the public commitment and loyalty to tax payment could
be enhanced.
The observance of constitutional duties of tax com-
pliance by citizens is predicated to the extent of their
awareness and understating of tax laws. From our study,
we observed as follows:
1) That the majority of Nigerian taxable persons is
quite aware of the operations and knew that VAT law
exists but many have never seen a copy nor talk, read and
understand it. This is perhaps responsible for the dif-
ficulty of understanding the technical concepts contained
in VAT law;
2) There is no remarkable difference in the knowledge
of VAT law by the businessmen and professional men
from those of laymen. We could conclude that the pre-
sent form of general education does not guarantee tax
education. Most of the professional men in this study
could not demonstrate better understanding of the VAT
law than Businessmen and laymen;
3) That poor understanding of various tax laws by
taxpayers could be responsible for the high magnitude of
their non-compliance.
Various suggestions were made on how to improve the
level of awareness and general understanding of the
taxpayers on any new tax law. The roles of the indi-
viduals, business organizations, NGO’s and Government
in improving the general tax education amongst the
citizens in Nigeria were considered.
In conclusion, we believe, it follows that inclusion of
tax education into our national education curricular, par-
ticularly from the secondary school level to the higher
institutions of learning, will help greatly to improve the
citizens’ general understanding of various tax laws and
matters. The legal drafting of the tax laws should be
made less technical, having in mind the level of under-
standing of the taxpayers. Attempts should be made to
popularize tax laws as soon as they come out and from
time to time, efforts should be made to make copies of
various tax laws readily available to members of the pub-
lic. The need to promote the habit of keeping tax records
by various taxpayers, including the individual, cannot be
overemphasized. Currently, individual taxpayers do not
keep their tax records and hence might not even know
what proportion of their total tax is made up of VAT.
Tax education could inculcate this habit of taxpayers, as
it would increase the magnitude of voluntary tax com-
pliance, decrease the incident of various tax offences
inadvertently committed by individual taxpayers, and
consequently enhance the revenue generation capability
of taxation.
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Open Access IB
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