IMPACT OF INDIRECT TAX IN GOVERNMENT EXPENDITURES INDIRECT TAX AND GOVERNMENT EXPENDITURES IN NIGERIA

ABSTRACT

The broad objective of this study is to investigate the Impact of Indirect Taxes on Government Expenditures in Nigeria.

Data was collected and analyzed using panel based regression. Macro-economic variables which include Customs and Excise Duties, VAT, and Stamp Duties were collected for the study. And in analyzing the data gathered the ordinary least square(OLS) statistical technique was used.

The findings provided that VAT and Stamp Duties are significantly related to Government expenditure on Health Care and  Government Expenditure on Remuneration of Pensioners respectively. Customs and Excise Duties show the insignificant relationship with Government Expenditure on Road Construction. It is recommended that Government should ensure proper revenue from Indirect Tax in order to enhance spendings on public utilities and Government should optimize the revenue generated from VAT in order to increase the expenditure on health care services for a citenzry.

 TABLE OF CONTENTS

CHAPTER ONE: INTRODUCTION

1.1       Background of the Study       -           -           -           -           -           -          

1.2       Statement of Research Problem          -           -           -           -           -          

1.3       Research Objectives    -           -           -           -           -           -           -                      

1.4       Research Hypotheses -           -           -           -           -           -           -          

1.5       Scope of the Study     -           -           -           -           -           -           -          

1.6       Significance of the Study       -           -           -           -           -           -          

1.7       Methodological Limitation of the Study        -           -           -           -          

CHAPTER TWO: LITERATURE REVIEW

2.1       Introduction    -           -           -           -           -           -           -           -          

2.2       Financing Government Expenditures             -           -           -           -           

2.3       Efficiency Concerns   -           -           -           -           -           -           -           

2.4       Fairness Concerns       -           -           -           -           -           -           -           

2.5       Indirect Tax Reform in Developing Countries           -           -           -           

2.6       Efficiency Problems    -           -           -           -           -           -           -           

2.7       Empirical Review        -           -           -           -           -           -           -           

CHAPTER THREE: METHODOLOGY

3.1       Introduction    -           -           -           -           -           -           -           -           

3.2       Research Design         -           -           -           -           -           -           -           

3.3       Population and Sample of the Study -           -           -           -           -           

3.4       Sources of Data          -           -           -           -           -           -           -           

3.5       Model Specification and Data Analysis Method       -           -           -           

3.6       Operationalization of variable             -           -           -           -           -           

CHAPTER FOUR: DATA PRESENATION AND ANALYSES

4.1       Introduction    -           -           -           -           -           -           -           -           

4.2       Descriptive Statistics  -           -           -           -           -           -           -           

4.3       Correlation Analysis   -           -           -           -           -           -           -           

4.4       Regression Analysis    -           -           -           -           -           -           -           

4.5       Test of Hypotheses     -           -           -           -           -           -           -           

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1       Introduction    -           -           -           -           -           -           -           -           

5.2       Summary of Findings             -           -           -           -           -           -           -           

5.3       Conclusion      -           -           -           -           -           -           -           -           

5.4       Contribution to Knowledge    -           -           -           -           -           -           

5.5       Recommendation        -           -           -           -           -           -           -           

BIBLIOGRAPHY    -           -           -           -           -           -           -           -           

APPENDIX   -           -           -           -           -           -           -           -           -           

INTRODUCTION

Back    BACKGROUND OF THE STUDY

Indirect taxes and duties have affected global trade and business on a daily basis more than any other taxes. As such, developments in VAT, excise and customs duties are shaping the global tax landscape for businesses and tax authorities alike. Although the economies in many countries are slowly recovering from the global financial crisis, growth rates have not yet reached their levels before the crisis. In addition, as a result of heavy support and stimulus of their economies, many countries are massively indebted. Governments, therefore, are still looking carefully at the composition of their tax revenues and at ways to increase them. As countries seek growth, indirect taxes continue to play an important tax policy role.

Being a developing country, the role of government in Nigeria is still vital to build up infrastructures to provide social services and to alleviate the abject poverty. Such a challenging role of the government demands the growing necessity of government expenditure generally and development expenditure particularly. Unfortunately, resources mobilization is very low compelling the government to depend on oil revenue, Emran and Stiglitz, (2005).

ssTax is an important tool of government in planning and redistribution of income in a society. Of the two types of taxation, direct and indirect, the latter is incidental to a transaction involving the expenditure rather than the receipt of money by the tax payer while direct tax falls on income. Indirect taxation is defined as taxation imposed upon others than the person who is intended to bear the final burden (Carrera, 2010). Indirect taxes are imposed on spending to buy goods and services. They are paid to government by producers (firms) but the consumers bear the burden of the taxes because the taxes are included in the goods and services bought by consumers (Carrera, 2010).

Indirect taxes are often significantly less visible to those who bear them compare to direct taxes.  Nevertheless, in general it does not have a direct impact on their profit and loss account, except in the case of exempt or partly exempt traders.  In effect traders receive VAT on sales, and pay it on purchases, as agents for (respectively) the government and the final consumer Emran, and Stiglitz,(2005).  That is not to say that it has no economic effect on their business; its incidence will affect their purchasing decisions and those of their customers, but not always in readily identifiable ways, they will also bear administrative costs.

By contrast, in the case of the final consumer, who arguably bears the bulk of the burden of the tax, VAT has more direct impact, but is not necessarily all that visible.  Some purchases will involve an invoice on which VAT is separately identified.  However, many will not; and even in cases where the VAT is separately identified in this way, the advertised price, on which the consumer makes the decision to purchase, will usually, be VAT-inclusive Scarlett, (2011).

Other indirect taxes may be even less visible than VAT.  The ultimate purchaser of tobacco, alcohol or road fuel will have no idea of the amount of excise duty effectively included in the price, except from external sources unrelated to any documentation used in the transaction. Perhaps many would be surprised to know, for example, that excise duty and VAT together can account for some 70 per cent of the price of petrol Okonjo-Iweala, (2012).  Even the determined enquirer may not find it entirely straightforward to establish how much excise duty has been paid on the product he or she purchases because the charge may be by reference to price, to quantity (sometimes using different units from those applying in retail sales) or to a combination of both.  In the case of alcohol the charge may be by reference to the quantity of alcohol, the quantity of the product or a combination of both.

From the governments’ point of view, taxes are the most important sources to finance their expenditures and so they try to collect as much taxes as possible. However, achieving this target is not easy as it seems. Governments have only two options which are levying on direct taxes or indirect taxes Ahmad, and Nicholas (1991). Relying only on one of these types of taxes is not efficient, because both tax types have its advantages and disadvantages in the real world, so governments have to find an optimal tax structure by balancing direct and indirect taxes to reach maximum revenue of taxes. 

The  importance  of  taxation  in  the  activities  of  any  government  cannot