Vat as a Suitable Alternative to Sales Tax in a Developing economy - a Case Study of Nigeria

Abstract

This research investigated VAT as a suitable alternative to sales tax in a developing economy using Nigeria as a case study. The investigation was necessitated by the overriding influences tax has over the economic and socio-political welfare of the people. In view of. this, the introduction of a new tax system - VAT, and the scrapping of an existing one - sales tax, deserves a critical analysis and revaluation with the view to estimating possible problems . Data for the study were collected from questionnaires and oral interviews conducted from responsible Nigerians from all walks of life. Five hypotheses were set to guide and direct the study. The data was analysed using percentages, and chi-square (X 2 ) statistical test. From the study, it was discovered among other things, that VAT is not a suitable option to sales tax in a developing economy because almost all the inherent problems of developing economy constitute serious impediment to efficient implementation of VAT in a developing economy. That VAT cannot generate mare revenue than sales tax due to high running costs, poor record keeping by the people etc. That given the cost benefit analysis the ease and efficiency of administering sales tax is more than VAT because of lack of qualified manpower, high level of illiteracy etc. That sales tax favours developing economies while VAT favour's . developed economies.