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THE IMPACT OF ONLINE VALUE ADDED TAX ON E-COMMERCE IN NIGERIA

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

In many developing countries, such as Nigeria, value added tax (VAT) has become a substantial source of revenue. VAT has been implemented in the Republic of Benin, C├┤te d’Ivoire, Guinea, Kenya, Madagascar, Mauritius, the Republic of Niger, Senegal, and Togo in Sub-Saharan Africa. According to the statistics, VAT has become a considerable contributor to governments’ total tax revenue in these countries. The Value Added Tax Decree was adopted in 1993 and implemented in 1994 (Ajakaiye 2000). The Value Added Tax (VAT) is an optimal form of taxation in the Nigerian tax system, and it has significantly aided resource mobilization and capital formation.

This has a big and favorable impact on Nigerian income mobilization; he also has a strong association with consumption.

A tax is a financial burden or other privilege placed by a State or the functional equivalent of a State on a taxpayer (natural or legal person), with non-payment, fraud, or resistance to collection penalized by: law Many administrative units also levy taxes. Taxes can be direct or indirect, and they can be paid in cash or in the form of work. The money earned by the tax authorities determines the taxation of any economy and the growth of the government’s economic policies. The federal treasury in Nigeria has the legal authority to levy taxes on citizens and legal persons in the public sector.

Tax authorities now have complete power over the assessment, collection, and registration of taxes. The tax administration in the country has improved as a result of the favorable atmosphere created by (Section 8 (q) of the FIRS Establishment Law 2007).

The use of communication technologies, primarily the Internet, to buy, sell, and market goods and services to clients or end-users is referred to as e-commerce. The Internet has produced a fundamental shift in national economies that were formerly isolated from one another due to impediments to cross-border commerce and investment, distance, time zones, and language, and differences in government rules, culture, and ethnic trade systems.

E-commerce creates a fair playing field in the global economy for both large and small businesses, as well as allowing businesses and regional communities to participate in social, economic, and cultural networks without difficulty across international borders (Mary-Anne, 1998).

When remitting client revenues to providers of goods or services acquired, all large organizations suffer administrative fees. Taxes are no exception. The quantity of resources collected from the people through taxes is always larger than the amount that the government can use. One of the key aims of Nigeria’s National Tax Policy (NTP) is to eliminate bottlenecks and leaks in the country’s tax system.

STATEMENT OF THE PROBLEM

As companies and customers participate in an increasingly virtual or electronic economy and reap the rewards, new patterns of business contact are emerging. New technologies have enabled people to pay for goods and services over the Internet, obviating the need to manage actual money in many circumstances. However, the emergence of electronic commerce as a result of the Internet’s expansion has resulted in a slew of legal and socioeconomic issues. The problem, despite its promises, is that the Internet lacks the clear and established geographical transit lines that characterize traditional physical commerce of products and services. We should strive to provide an outline of the legal framework in this aspect. Nigeria is developing into an information technology and information technology-based economy, but its laws are not yet well suited to this change. Laws should be proportional to the legal progress of electronic commerce and consumer protection, not just relevant to electronic commerce advancements. Given the aforementioned issues with online or online commerce, the gains generated by this electronic trade are not represented in our income statements until they are taxed. Electronic commerce is a broad term that refers to business activities involving the processing and transaction of digital data, such as text, sound, and visual pictures, that ultimately result in a value exchange in telecommunications networks. It is broadly defined as the purchase and sale of goods and services over electronic systems such as the Internet and other computer networks. The products are sold, advertised, sold, paid for, and delivered via the Internet using the services of a website. Electronic commerce minimizes the expenses of marketing, customer support, and the strain of managing infrastructure by analyzing its relevance, allowing more funds to be allocated to profit-making initiatives. E-commerce has transformed the fundamentals of commerce and provided several benefits to both individuals and businesses. Every day, an increasing number of goods and services are purchased and sold online. Indeed, certain goods and services are purchased and sold digitally online with no actual or material counterpart. VAT is one of the mechanisms used by Nigeria’s federal government to generate more revenue. Most well-known Nigerians and interest organizations, on the other hand, have spoken out against its implementation. VAT appears to be causing some issues. The influence of VAT on revenue generation in Nigeria, as well as its impact on Nigeria’s economic growth, will be examined in this document.

 RESEARCH QUESTIONS

The goal of this research project is to address the following research question.

1. What effect does VAT have on e-commerce?

OBJECTIVE OF THE STUDY

The goal of this research project is to address the following research question.

1. What effect does VAT have on e-commerce?

STATEMENT OF HYPOTHESIS:

For the sake of this study, the following assumptions are established that will be tested.

HO1: E-commerce is unaffected by online VAT.

SIGNIFICANCE OF THE STUDY:

The findings of the study will aid the government in formulating V.A.T. policies. It will also assist to diversify the country’s revenue base, making it less reliant on oil exports.

  1. This study will inform financial industry stakeholders and the general public about the relationship between exchange rate fluctuations and value added tax, as well as how both affect Nigerian E-commerce.
  2. This study will add to the body of knowledge in the domain of the impact of personality traits on academic achievement in students, thereby forming the empirical literature for future research in the field.

SCOPE/LIMITATIONS OF THE STUDY

The relationship between exchange rate volatility and value added tax, as well as how the two affect E-commerce in Nigeria, will be explored in this study.

LIMITATION OF STUDY

Financial constraints – A lack of funds impedes the researcher’s efficiency in locating relevant materials, literature, or information, as well as in the data gathering procedure (internet, questionnaire and interview).

Time constraint: The researcher will be working on this subject while also doing other academic tasks. As a result, the amount of time spent on research will be reduced.

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