Title: PROHIBITION OF SALE OF ALCOHOL AND INCLUSION OF VAT RECEIPTS IN SHARIA COMPLIANT STATES IN NORTHERN NIGERIA – A CONTRAST IN POLICY, VALUES AND LOGICAL DISSONANCE

Authors: Aruomah Obinwanne Kenechukwu (Ph.D), Onwuka Onwuka Okwara (Ph.D), Effe-Nnamdi Ann Chinenye, Onyekachi Eke (Ph.D) and Roseline Chinasa Agbaraevoh

Abstract: This study examines the attitudes and perceptions of stakeholders towards Value-Added Tax (VAT) administration and the equity principle in the context of alcohol sales profit sharing in Nigeria, with a focus on Sharia-compliant states. The objectives of the study are to examine stakeholders’ attitudes towards VAT administration, investigate the moral implications of sharing profits from alcohol sales, and explore potential solutions to the moral dilemma. Six hypotheses were tested using a quantitative cross-sectional survey design, with a structured questionnaire administered to 34 stakeholders, including academics, international businessmen, and investors. The data were analyzed using descriptive statistics, correlation analysis, regression analysis (OLS), and t-tests. The findings indicate that stakeholders have a negative perception of the current VAT administration system in Nigeria, with a mean score of 3.21 (SD = 1.02) on a 5-point Likert scale, indicating a moderate level of dissatisfaction (H1 accepted). A significant positive correlation (r = 0.612, p < 0.01) was found between stakeholders’ attitudes towards VAT administration and their perception of the equity principle, suggesting that stakeholders who perceive VAT administration as unfair also tend to perceive the equity principle as unfair (H2 accepted). Stakeholders believe that sharing profits from alcohol sales among states that operate under Sharia law or Islamic law is morally wrong, with a mean score of 3.50 (SD = 1.20) on a 5-point Likert scale (H3 accepted). The study also finds a significant difference (t = 2.512, p < 0.05) in the moral implications of sharing profits from alcohol sales between stakeholders from Sharia states (mean = 3.50, SD = 1.20) and non-Sharia states (mean = 2.85, SD = 1.15), indicating that stakeholders from Sharia states are more likely to perceive sharing profits from alcohol sales as morally wrong (H4 accepted). Stakeholders support a derivation-based approach to VAT revenue distribution as a potential solution to the moral dilemma, with a mean score of 3.80 (SD = 1.10) on a 5-point Likert scale (H5 accepted). Finally, a significant positive correlation (r = 0.351, p < 0.05) was found between stakeholders’ support for a constitutional amendment and their perception of the current VAT administration system, suggesting that stakeholders who support a constitutional amendment tend to perceive the current VAT administration system as unfair (H6 accepted). After pragmatic research, the study concludes that the current VAT administration system in Nigeria is inequitable and morally questionable, particularly in the context of Sharia-compliant states. The study recommends that the Nigerian government consider implementing a derivation-based approach to VAT revenue distribution and amending the constitution to provide clarity on VAT revenue distribution. Stakeholders should engage in dialogue to address the moral implications of sharing profits from alcohol sales.

Keywords: VAT administration, equity principle, Sharia law, moral implications, derivation-based approach, Nigeria.

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