The Impact of Tax Evasion on Government Revenue in Nigeria: A Case Study of Lagos State Government
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Background of the Study
Tax evasion, the illegal practice of not paying taxes owed, poses a significant threat to the economic stability and development of many nations, including Nigeria. Lagos State, often regarded as the economic hub of Nigeria, relies heavily on internally generated revenue (IGR) to fund its public services and infrastructure projects. Despite its robust tax base, the state faces challenges in maximizing revenue due to widespread tax evasion among individuals and businesses (Adewale & Okeke, 2024).
Tax evasion undermines government efforts to provide essential services, resulting in budget deficits and delayed development projects. Studies have shown that in Lagos State, factors such as weak enforcement, corruption, and lack of trust in government institutions contribute to high rates of tax evasion (Oluwatoyin & Adegbite, 2023). Addressing this issue is critical for enhancing revenue mobilization and achieving sustainable economic growth.
This study explores the extent to which tax evasion affects government revenue in Lagos State, focusing on its implications for public service delivery and infrastructure development.
Statement of the Problem
Lagos State generates a significant portion of its revenue through taxes, yet the potential remains largely untapped due to the pervasive issue of tax evasion. The state’s inability to enforce tax compliance effectively results in substantial revenue losses, estimated to run into billions annually (Uche & Emeka, 2023). This shortfall limits the government’s capacity to fund critical projects, exacerbating socio-economic challenges such as poor infrastructure and inadequate healthcare services.
This study addresses the pressing issue of tax evasion in Lagos State, seeking to quantify its impact on government revenue and identify strategies for improving tax compliance.
Objectives of the Study
- To assess the impact of tax evasion on government revenue in Lagos State.
- To identify the factors contributing to tax evasion in Lagos State.
- To propose measures for reducing tax evasion and enhancing revenue collection.
Research Questions
- What is the impact of tax evasion on government revenue in Lagos State?
- What factors contribute to tax evasion in Lagos State?
- What measures can reduce tax evasion and improve revenue collection in Lagos State?
Research Hypotheses
- Tax evasion significantly reduces government revenue in Lagos State.
- Socio-economic factors such as corruption and weak enforcement contribute to tax evasion in Lagos State.
- Effective measures to reduce tax evasion significantly enhance government revenue in Lagos State.
Scope and Limitations of the Study
The study focuses on the impact of tax evasion on Lagos State Government revenue from 2023 to 2025. Limitations include reliance on secondary data and potential challenges in accessing accurate financial records.
Definitions of Terms
- Tax Evasion: The illegal act of avoiding tax payment by misreporting income or transactions.
- Government Revenue: Income generated by the government through taxes, levies, and other sources.
- Lagos State Government: The governing body responsible for the administration of Lagos State, Nigeria.
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