EFFECT OF TAX EVASION AND AVOIDANCE ON REVENUE GENERATION IN NIGERIA
- Project Research
- 1-5 Chapters
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- Reference Style: APA
- Recommended for : Student Researchers
- NGN 5000
BACKGROUND OF THE STUDY
Tax is one of the main source of Government Revenue. It is a strong social and economic tool of the government in regulating the economy and maintaining health social like of the citizens. Tax can be defined as a compulsory payment by individual and companies to the state to enable her attain the National goals objectives. Tax is a non-punitive but compulsory levy by the Government on properties and income of individuals and corporations within the territory. The money raise there of constitutes part of source of finance for general government expenditure in the economy. According to Aguei (1983:276) tax is the transfer of resources from the private to the public sector in order to accomplish some of the Nation’s Economic and Social Goals. It is levy imposed by the government on the income profit or wealth of an individual, partnership and corporate organization. Tax is therefore the system whereby individual are assessed and the final collection of the money for and on behalf of the government. It is a machinery through which Income Earner is obliged to pay a fraction of his income to the government.
There are various type of Taxation which could be classed under two main headings: direct and indirect tax. These two types of tax may be distinguished in terms of the possibility of shifting the tax burden. However, taxes according to Economist is classified whether the tax is proportional, progressive or regressive. The importance of taxation in Nigeria arises out of the important roles, which the government in the light of numerous imperfections and short coming that often beset the economy has to play in order to ensure greater economic development, transformation and growth. Other objective of taxation include influencing economic activities in the country, to bridge the gap between the rich and the poor, to curtail consumption of undesirable and harmful goods and services to combat inflation, to encourage investment to protect infant industries and as well as correct the country’s balance of payment.
However, this phenomenon is not restricted to any part of the world. In New Zealand, the loss of revenue resulting from tax evasion and avoidance is a problem that has been described as “Reaching epidemic proportions”. The unfortunate aspect of this phenomenon is that the rate of this happening in the developing countries is always higher than what is obtained in developed countries.
According to Onoginwa “Personal Income Tax Evasion is generally over 50% in Nigeria compared to about 14% in U.K.” both rich and the poor embrace this chronic problem in the state with literate population and professionals in the state been the big avoiders. Whereas evaders can be found among payer and trader, having carefully examined the above trend of events, the researcher then decides to carry out evasion study to unmask the impact of tax evasion and avoidance on personal income of Board of Internal Revenue in Nigeria with a view of finding solution to them.
1.2 STATEMENT OF THE PROBLEM
Tax has been a powerful instrument of revenue generation in Nigeria of which tax evasion and avoidance are the major problem that obstructs the maximum collecting of tax. Highly technical problems besieging the Board of Internal Revenue in the state such as lack of encouragement by the government to tax payer, poor tax administration, unforced penalties on the tax defaulters which make tax law seemed to be useless and most importantly, logistics and zeal to enforce tax payer.
Therefore inefficiency of taxation system in the state deprive the government the ability to produce the citizen with the basic necessities of life.
Since the problem has been identified, the researcher considers it necessary to survey as much as possible to find solution for solving these problems of tax evasion and avoidance in Nigeria and Nigeria in general.
1.3 OBJECTIVE OF THE STUDY
The broad objective of this study is to find out why people evade and avoid tax and suggest ways of minimizing the practices in Nigeria. The broad objective is broken down to the following specific objective:
- To establish the existence of tax evasion and avoidance on the revenue generated in Nigeria.
- To examine relationship between tax rates, tax evasion and tax avoidance.
- To proffer solution to the problem of tax evasion and avoidance.
- To investigate why people evade and avoid tax.
- To determine the effect of tax evasion and avoidance on the revenue generated in Nigeria.
1.4 RESEARCH QUESTIONS
In the course of this study, the following research questions shall be examined:
- Is the existence of loopholes in the Nigerian tax law system an opportunity for tax avoidance?
- Is there any effect of tax evasion and tax avoidance on the Nigeria economy?
- How can tax evasion and tax avoidance by minimized and eliminate in Nigeria?
1.5 THE SIGNIFICANCE OF THE STUDY
This work is importance in many respects. It is therefore, intended that a successful completion of this project help in reducing and even eliminates the problems associated with taxation. Therefore the significance of this study are as follows:
It will help to inform the tax payers of the numbers of benefits gained by paying tax.
The project will as well highlight on the importance of high efficiency and effectiveness required of tax officials.
The study will also be of immense benefit to the government by alerting them on the war against tax evasion and avoidance and impose the necessary penalty on any offender.
The study will help to suggest ways of removing inherent bottleneck in taxation.
Finally, the study is useful to individual, tax authority and government in general.
1.6 SCOPE OF THE STUDY
The scope of this study covered the cause and effects of Tax Evasion and Avoidance on the economy, Tax Board of Internal Revenue in Abuja, Nigeria and is of the view that this will bear good result.
1.7 LIMITATION OF THE STUDY
In a study of this nature, a lot of limitations are bound to come-up, the work is limited by finance. The researcher visited the the Federal Inland Revenue Service (FIRS), Wuse, Abuja for the necessary data. This is money consuming hence might have hindered the effectiveness of carrying out the research.
LITERATURE: Due to the lack of the relevant books in the school library, the researcher had to travel to many other institutions to gather the necessary textbooks, journals, publications etc for the research work.
TIME: The researcher faced the research problem of inadequate time.
DATA COLLECTION: Access to data collection was not an easy task. However,
1.8 DEFINITIONS OF TERMS
Below are the meanings of the following concepts as applicable to the study;
TAX ASSESSMENT: This is the process of ascertaining the amount of tax for which an individual or company is liable to pay.
TAX COLLECTION: This is the process of receiving or gathering taxes from tax payer.
TAX DELINQUENCY: This refers to the failure to pay a tax obligating on the date it is due.
TAX DRIVE: This means raid carried out by tax officials aimed at collecting tax revenue due to government from tax payer.
TAX EVASION: This is a willful and deliberate violation by a tax payer to escape a legal tax obligation by failing to report a source of income or seeks to reduce his tax liability by understating a source of income to the Tax Authority.
TAX AVOIDANCE: This is a situation by which a tax payer take advantage of the weakness or loopholes in the tax system in order to pay less tax than he ought to have paid.
TAX RELIEFS: These are allowance to a tax payer on his circumstance prevailing in the preceding year of assessment such as personal allowance, children allowance, relatives and dependent allowances etc.
TAX LIABILITY: This is the total amount of tax an individual or company is supposed to pay.
TAX PAYABLE: It is any amount of tax an individual should actually pay. It is also tax liability less any tax credit or withholding tax.
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