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VAT has imitated relationship in daily life, and even it can happen everywhere, every day which has effect on people’s daily life. According to Statement of Standard Accounting Practice (SSAP, 1993) which states that “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”. This study, the assessment of the effect of Value Added Tax on consumption Behaviour was undertaken to examine the influence of VAT on consumers’ pattern of consumption. The study examined five wards in Maiduguri and adopted the descriptive method of data analysis. The data were collected through primary and secondary methods. The data collected through the questionnaire was analyzed using the SPSS. The study found out that there is low awareness of VAT among the residents especially in the rural area. It further finds out that VAT payers in these areas do not understand the impact of VAT on their daily purchase. However, VAT decreases the purchasing power of these households. The study recommended an awareness campaign in these areas and inclusion on the knowledge of VAT in the academic curriculum.


Title page

Approval page




Table of content



1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study





3.1 Research Design

3.2 Source of Data

3.3 Population of the Study

3.4 Sample Size

3.5 Methods of Data Collection

3.6 Method of Data Analysis



4.1 Introductions

4.2 Data analysis


5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation




1.1 Background of the Study

Governments, all over the world needs funds to effectively administer and control their economic activities and one of the sources of revenue is taxation. Taxation can be variously defined. Fundamentally, it is a compulsory levy on income since the decision to pay tax is not that of the tax payers. Taxation is the process or machinery by which communities or group of persons are made to contribute in some agreed quantum and method for the purpose of the administration and development of the society (Igbonyi, 2008). According to Amaechina (1998:9), “taxation has been defined as a levy which a government imposes on the income of the citizens or corporation in a state for which the government gives no direct benefit to the taxpayer” or “a non-punitive but yet a compulsory levy by government on the properties and income of individual and corporation”. In the present dispensation of Nigerian economy, taxation has always been a means by which communities are provided with common facilities such as access roads, religious facilities, security, amongst others from time immemorial (Obadimi, 1994). The existence of taxation in Nigeria is linked with the era of the colonial master in the early 20th century.  The introduction became necessary as a result of the enormous tasks facing the government. Now, under current Nigeria law, taxation is enforced by the tiers of government that is Local, State and Federal government. The tasks have to do with how government can control its economic activities and how government can achieve the desired level of price inflation and deflation and how to control supply of money. In Nigeria, tax system has undergone significant changes in recent times. The tax laws are being reviewed with the aim of repelling obsolete provisions and simplifying the main ones. Modern and well regulated taxation system in Nigeria started in 1940 with the introduction of direct taxation ordinance No. 29 (CAP 54) of the year. Before the 1940 ordinance, income tax has first been introduced in northern Nigeria in 1904 by Lord Lugard. It was known as community tax; several changes were made to the community tax. The idea of introducing VAT in Nigeria came from the study group set up by the Federal Government in 1991 to review the entire tax system. VAT was proposed and a committee was set up to carry out feasibility studies on its implementation. In January, 1993, the then government agreed to introduce VAT by the middle of the year. It was later shifted to 1st September, 1993 by which time the relevant legislation would have been made and proper ground work done. The actual implementation however, did not commence until January 1994 after the promulgation of the Value Added Tax Decree No. 102 of 1993.  Valued Added Tax (VAT) is a tax charged on consumption of goods and locally or imported into the country. From the buyer’s perspective, it is a tax on the purchase price, while the seller views it as a tax only on the value added to a product, material or services (Tabansi, 2001). Maurice Laure, joint director of the French Tax Authority was the first to introduced VAT on April 10, 1954, although a German Industrialist Wilhelm Van Siemens proposed the concept in 1918. It was initially directed at large business, but later extended over time to include all business sectors. In France, it is the most important source of state finance accounting for nearly 50% of state revenue (Thacker, 2009).  VAT became operational in Nigeria on the 1st of January 1994 (Noko 2006). Though Nigeria joined the league of countries operating VAT not too long, she has very unique features in the operation of the policy. It is charged at a flat rate of 5% on some items of goods and services. As a reminder, one needs to know that VAT is not levied directly on your profits, as the case of some other forms of taxation, this is to say that it isn’t a direct form of taxation. As the name implied, it is a tax on the value added to goods and services. In the production stages of a product, value have been added, therefore VAT is charged on the amount of value to the goods and services provided, and this is the reason VAT is payable on the goods and services ‘consumed’ by any ‘person’. Consumed means used up in this context and ‘any person’ means whether you are as an individual, business, government.

1.2 Statement of the Problem

The world over, a significant attention has been given to value added tax (VAT) in terms of reforms and restructuring. Perhaps, this has been owing to its sizeable contributions to government revenue, growth and development of many economies (Owolabi & Okwu, 2011). As a veritable source of government revenue, many countries have shifted and a few others are considering a shift toward a higher indirect taxation. Since VAT increases consumption expenditure, it is expected to influence the behavioural pattern of consumers. The word consumption is inherent in the concept of VAT. As Plunkett (2008) affirmed, VAT generally applies to goods bought for consumption within a given country. In fact, as termed by Ghatak (2003), VAT is regarded as consumption-based taxes. Similarly, the European Commission (2000,) defines this tax as ‘a general consumption tax, which is directly proportional to the price of goods and services. And it is through the prices of goods and services that VAT is a burden for the end consumer as Sopkova and Spisiakova (2007) noted. Abed further advance that the tax burden of VAT falls mainly on consumption. This implies that VAT changes price and consumption behaviour of the consumer. Thus, price effects of VAT and the attendant consumers‟ consumption behaviour is an issue of relevance to countries and their VAT policy. It is on this premise that this study was undertaken to assess the effect of Value Added Tax on consumption behavior.

1.3 Objective of the Study

The main objective of this study is to carefully examine the effects of VAT on the consumption behavior of the final consumers. Specifically, the following are the objectives of this study:

⦁ to assess the effect of VAT on consumption behavior of goods and services; 

⦁ to assess if there is change in consumption pattern after implementation of VAT; 

⦁ To measure the significance level of the effect of VAT on consumption pattern of households in Maiduguri and to evaluate VAT encouraging saving scheme.

⦁ Research Questions

⦁ What is the effect of VAT on the consumption behavior of goods and services?

⦁ Is there a significant change in the consumption pattern of households in Maiduguri?

⦁ What is the significant level of effect on the consumption pattern of households in Maiduguri?

1.5 Research Hypotheses

H0: There is no significant change in the consumption pattern of households in Maiduguri as a result of VAT implementation.

H1: There is a significant change in the consumption pattern of households in Maiduguri as a result of VAT implementation.

H0: The level of effect VAT on consumption pattern of households in Maiduguri is not significant.

H0: The level of effect VAT on consumption pattern of households in Maiduguri is not significant.

1.6 Significance 

The study is important in such that it will serve as a reliable source for the understanding of the basics of value added tax in the Nigerian context. Also, it will serve as an academic bank for academic scholars and knowledge-thirsty individuals where the impacts of value added tax can be referenced particularly as it affects the consumption style of household.

1.8 Scope of Study

This study, “the Assessment of the effect of VAT on the consumption behavior” is an academic tool to create awareness on impact of VAT. The study is restricted to the VAT amongst other forms of taxation. Also, the case study is limited to household in Maiduguri where five wards were selected. This restriction is based on the time frame of this study and the availability of relevant and relating information. However, the study can be extended to other states.

1.9Definition of Terms

VAT – Value Added Tax

Vatable Goods. -those goods that are vat able

Vatable Person —any registered person or organization with the FIRS authorized to collect vat and remit same.

Tax Evasion — a deliberate attempt made with the aim of not paying tax at all.

Tax Avoidance: An attempt to reduce the amount of payable.

VAT RATE: the rate chargeable on a VATable goods or services.

Tax: This is a compulsory levy imposed by government on the income of corporate organizations as well as on income of individuals.

Consumption Behavior: is the study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services, including the consumer’s emotional, mental and behavioural responses that precede or follow these activities.

1.10 Organization of the Study Scope 

This study is organized in five chapters. The first chapter lays the background to the study as well as stating the problem of study and the hypotheses for testing. The second chapter is structured to give the study a literature review. This review is divide into the theoretical framework, Empirical framework and the conceptual framework. Chapter three deals with research methodology including the research design, sampling method, Data collection and the research instruments employed. Chapter four seek to analyze the result, it is also made up of detailed analysis of data collected and presentation of information with the aid of quantitative and statistical models. The fifth chapter covers the summary, conclusion and recommendation.

This material content is developed to serve as a GUIDE for students to conduct academic research

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