The Impact of Forensic Tax Audits on Revenue Generation in Nigeria: A Case Study of Lagos State Government
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Background of the Study
Tax revenue plays a critical role in funding public services and infrastructure development in Nigeria. However, tax evasion and underreporting have led to significant shortfalls in revenue generation, particularly in states with large and diverse populations like Lagos. Forensic tax audits, which involve detailed examinations of tax records to detect discrepancies, fraud, and non-compliance, have been identified as an effective tool for enhancing tax collection and revenue generation (Ogunniyi & Fagbemi, 2023). Lagos State, being Nigeria’s commercial and economic capital, is particularly vulnerable to tax-related fraud due to the large number of businesses and residents.
Forensic tax audits focus on identifying hidden income, inflating expenses, and underreporting taxes, thereby ensuring that taxpayers fulfill their obligations. These audits are conducted using forensic accounting techniques such as financial statement analysis, data mining, and investigative procedures to track discrepancies and uncover fraudulent activities. Lagos State Government has increasingly turned to forensic tax audits to detect tax evasion and improve compliance, with the goal of increasing revenue generation to fund public projects and services (Ogunniyi & Fagbemi, 2023). However, the effectiveness of these audits in achieving the desired increase in tax revenue has yet to be comprehensively studied.
This study aims to assess the impact of forensic tax audits on revenue generation in Lagos State, evaluating their effectiveness in uncovering tax fraud and improving tax collection efforts.
Statement of the Problem
Lagos State Government faces significant challenges in generating adequate revenue due to widespread tax evasion and fraudulent reporting. Traditional auditing methods have proven ineffective in identifying tax fraud and enforcing compliance among businesses and individuals. Despite the potential benefits of forensic tax audits in detecting fraud, their application has been inconsistent, and the impact on revenue generation has not been fully explored (Ogunniyi & Fagbemi, 2023). This study seeks to evaluate the impact of forensic tax audits on Lagos State’s revenue generation and examine the factors influencing their effectiveness.
Objectives of the Study
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To evaluate the impact of forensic tax audits on revenue generation in Lagos State.
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To assess the effectiveness of forensic tax audits in detecting and preventing tax fraud in Lagos State.
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To identify the challenges faced by Lagos State Government in implementing forensic tax audits for improved revenue generation.
Research Questions
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What impact do forensic tax audits have on revenue generation in Lagos State?
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How effective are forensic tax audits in detecting and preventing tax fraud in Lagos State?
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What challenges does the Lagos State Government face in implementing forensic tax audits?
Research Hypotheses
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Forensic tax audits have a significant impact on revenue generation in Lagos State.
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Forensic tax audits are effective in detecting and preventing tax fraud in Lagos State.
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The Lagos State Government faces significant challenges in implementing forensic tax audits.
Scope and Limitations of the Study
This study will focus on the impact of forensic tax audits on revenue generation in Lagos State. It will assess the effectiveness of forensic audits in detecting tax fraud and the challenges faced in their implementation. The study will be limited to cases within Lagos State from 2015 to 2025. Limitations may include challenges in obtaining detailed tax audit records and potential resistance from businesses or tax authorities in providing access to sensitive information.
Definitions of Terms
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Forensic Tax Audits: Specialized audits focused on examining financial records to detect discrepancies, tax evasion, and fraud, using forensic accounting techniques.
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Tax Fraud: The illegal practice of intentionally falsifying tax records to evade tax payments.
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Revenue Generation: The process of collecting funds through taxes, fees, and other sources to finance government activities and public services.
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Lagos State Government: The administrative body governing Lagos State, responsible for managing public resources, including tax collection and allocation.
