Although tax evasion and avoidance are problems that face every tax system, the nigerian situation seems unique when viewed against the scale of corrupt. To what extent does tax evasion and avoidance affect nigeria economy. An empirical study of tax evasion and tax avoidance. Exploring the causes of the tax evasion and avoidance.
Abdulhamid ellawule, lecturer, department of accounting, federal university, gashua, nigeria. O 2 0 effect of tax avoidance and tax evasion on personal income tax administration in nigeria. Pdf curbing tax evasion and avoidance in personal income tax. This study is about the impact of tax evasion on revenue collection performance in tanzania. Despite its importance, limited scientific research has been undertaken the assessment of tax evasion practices in tanzania. However, little attention has been placed on the issues of tax evasion in nigeria. Pdf tax evasion and avoidance, a problem which seemed to have defied solution, had bedeviled the nigerian tax system right from the colonial times find. Economic development is the development of economic. Multinational companies and tax evasion and tax avoidance. The concept of taxation has been a concern of global significance as it affects every economy irrespective of national differences oboh etal. May 30, 2018 the impact of tax evasion and tax aviodance in nigeria economy. According to richardson 2008, tax evasion as an intentional, illegal and unacceptable behaviour or activities involving a direct violation of tax law to evade the disbursement of tax.
Problems within the tax administration machinery is one of the causes of tax evasion and avoidance in nigeria, such problems arises from the loopholes found in the provision of tax law, and sometimes such problems ranged from tax law, untrained man power, transportation issues and corrupt practices endulged by taxpayers. Impact of etaxation on nigerias revenue and economic growth. Tax has been a powerful instrument of revenue generation in abia state of which tax evasion and avoidance are the major problem that obstructs the maximum collecting of tax. Is the existence of loopholes in the nigerian tax law system an opportunity for tax avoidance.
Tax evasion and governance challeneges in the nigerian. The main objective of this study is to investigate the factors influencing tax avoidance and evasion in nigeria. Because of the great role taxes play in the development of the economy this paper will appraise the concept of tax evasion and tax avoidance in nigeria with the help of some decided cases. Technology tools to tackle tax evasion and tax fraud. The result of tax evasion and avoidance is tax revenue loss which may cause serious damage to the proper performance of the public sector, threatening its capability to finance public expenditure. The scope of this study covered the cause and effects of tax evasion and avoidance on the economy tax board of internal revenue in abia state and is of the view that this will bear good result. Is there any effect of tax evasion and tax avoidance on the nigeria economy.
Effect of tax evasion on economic development of yobe state. Jun 16, 2017 it is the view of many people that the loss of revenue caused by widespread tax evasion and tax avoidance in nigeria is due to inefficient and inept tax administration. The study of the effects of tax evasion and tax revenues. Corruption, tax evasion and tax avoidance indicators. Tax noncompliance is a range of activities that are unfavorable to a governments tax system. Law of taxation, nigeria tax system, law and economics, tax evasion, tax avoidance. This is a serious indictment of the administrative machinery and capacity of the tax authorities in nigeria. G department of accountancy, osun state college of technology, esaoke, nigeria abstract. Tax avoidance is thus considered to be a matter of being sensible. While tax evasion is the willful attempt to defeat or circumvent the tax laws in order to illegally reduce ones tax liability. Tax evasion is illegal and would result in punishment by way of penalty, fines and sometimes prosecution.
It recommends that tax authorities should organize educative programme to enlighten tax payers on the different laws guiding the nigeria tax system, the need for the payment of tax and the effect of nonpayment of tax. Tax evasion is one of the major social problems hindering revenue generation in developing state and eroding the existing welfare in oyo state. The study of the effects of tax evasion and tax revenues on economic stabilities in oecd countries mohsen mehrara, yazdan gudarzi farahani. This research specially focuses on the causes and remedies of tax evasion and avoidance in nigeria. The existence of tax evasion and tax avoidance in nigeria tax. To examine ways in which tax evasion and avoidance can be reduce with the new reforms. Tax evasion and tax avoidance as opine by adebisi and gbegi 9 are one of the main problems of tax system in nigeria and africa and are described as twin devils which cause the difference between actual corresponding author.
The starting point is an incursion into the history of taxation, especially personal taxation in nigeria. Tax avoidance, tax evasion, tax heavens, illicit financial flows and global tax governance are real buzzwords that have come to dominate current international political and financial domains. Tanzania one of the important areas where tax evasion has been reported is customs duties. Lack of good governance and unpatriotic act of tax payer, is the basis for which tax evasion and avoidance activities is perpetrated. Income tax evasion and avoidance their causes and remedies nigeria includes abstract and chapter one, complete project material available income tax evasion and avoidance their causes and remedies nigeria preface revenue generation of our country is mostly based on the income derived from tax, which can either be direct tax or indirect tax. The result of the analysis shows tax evasion has significant effect on the economic development of yobe state and it is a confirmation of okafor research. Its most general use describes noncompliant behaviors with respect to. Generally it involves suppression of facts, falsifying records, fraud or collusion. The impact of tax evasion and tax avoidance in nigeria. Impact of electronic taxation on tax evasion and avoidance a.
Data were collected through documentary analysis, questionnaires and interviews. Eneojo and gabriel 2014 25 in their study taxation and revenue generation. Judicial and legislative approaches to tax evasion and avoidance. The research instrument used in collecting the data was questionnaires and oral. Tax avoidance generates investment distortion in the form of the purchase of assets exempted from tax or undervalued for tax purposes klabel and nwokah, 2009. Why avoidance, evasion and administration are central, not peripheral, concepts in public finance 1426 1. In a study of this nature, a lot of limitations are bound to comeup, the work is limited by finance. Income tax evasion and avoidance their causes and remedies nigeria preface revenue generation of our country is mostly based on the income derived from tax, which can either be direct tax or indirect tax. Pdf tax evasion and avoidance are both phenomena that are probably as old as taxation itself. To establish that there exist tax evasion and avoidance in enugu state.
The study adopted the expost facto research design and. The article establishes that tax evasion and avoidance is a very serious social menace causing a major setback on nigeria. Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions. Causes of tax evasion in nigeria and effects on the. The role of multinational companies in tax evasion and tax. Problems within the tax administration machinery is one of the causes of tax evasion and avoidance in nigeria, such problems arises from the loopholes found in the provision of tax law, and sometimes such problems ranged from tax law, untrained man power, transportation. Tax evading attitude is argued to have an adverse effect on governments socioeconomic and political programs. Effects of tax evasion and avoidance on the nigerian economy. Investigate whether low quality of the service in return for tax affects tax avoidance and evasion in nigeria. Law and economics of taxation, tax avoidance and tax. The impact of tax evasion and tax aviodance in nigeria economy. New national tax policy approval in late december 2008 nigeria hg org. American journal of humanities and social sciences 1.
American journal of humanities and social sciences vo1. It aimed to give a detailed examination of the effect of tax avoidance on the economic growth and development in nigeria. An empirical study of tax evasion and tax avoidance by. This brings about reactions from various sections of the economy. Companies income tax act cap c21 lfn 2004 as amended. The study adopted the expost facto research design and data were obtained from central bank of nigeria statistical bulletin for the period 1999 2012. Tax avoidance is an act of doing everything possible within the confines of the tax law to reduce the tax paid. Therefore, this study examined the factors that are influencing tax evasion and tax avoidance in nigeria. Effects of tax evasion and avoidance tax evasion and tax avoidance has undoubtedly affected adversely the government revenue generation capability and the economy as a whole. Thus, expectations of government are being cut short.
May 19, 2017 the article considers the effects of tax avoidance and tax evasion on nigeria economic development. There is no doubt that revenue due any government will be reduced by the unpatriotic act of tax evaders. Kim 2008 believes that tax evasion is illegal and violation of tax laws, whereas tax avoidance is a legal way of decreasing tax burden. Impact of electronic taxation on tax evasion and avoidance. In other words, tax avoidance is completely lawful because only those means are employed which are legal, while tax evasion is considered as a crime in the whole world, as it resorts to various kinds of deliberate manipulations. The effect of tax evasion and avoidance on nigerias economic. Judicial and legislative approaches to tax evasion and. Tax evasion, tax ethics, nigeria tax system, tax behaviour.
Mar 01, 2018 tax avoidance, tax evasion, tax heavens, illicit financial flows and global tax governance are real buzzwords that have come to dominate current international political and financial domains. Tax evasion as defined by the canadian department of national revenue is the omission or commission of an act knowingly with intent to deceive so that. Tax avoidance, understood as the use of the socalled loopholes in the tax legislation to reduce ones tax payments increasingly tops news charts. This study was designed to identify the effects of tax evasion on government revenue generation in oyo state.
Tax evasion and avoidance have adverse effect on government revenue. Law and economics of taxation, tax avoidance and tax evasion. This government effort, notwithstanding, the problem of tax evasion and avoidance still persists alabi, 2001. An earlier version of this article was published on this site on may 5, 2016, and also in aib insights, vol. What role does education play in the tax compliance decision. Akinyomi and okpala 20 appraise the factors influencing tax avoidance and evasion in nigeria and their findings reveal that taxpayers perception of u.
The ordinary least square regression ols model was used to test the hypothesis. 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. Investigation into the causes of tax evasion edustore. It is an attempt to evade tax liability with the help of unfair means. What are the possible effects of tax evasion and avoidance economics development of the country and abia state in particular 4. This study aimed to assess the extent factors that influence tax evasion a case of temeke municipal council. However, despite the government efforts to bridle the practices of tax evasion and tax avoidance in nigeria, the problem still persists. Project topic on income tax evasion and avoidance their. This study examined the impact of etaxation on nigerias revenue and economic growth. To solve the research problem, both primary and secondary data were collected. Tax evasion has been an issue of concern in the nigerian tax system for decades. To analyze the effectiveness and flaws of various tax in the country.
Apr 29, 2020 note the word avoid in the definition. International tax avoidance and evasion congressional research service summary addressing tax evasion and avoidance through use of tax havens has been the subject of a number of proposals in congress and by the president. Therefore, this study seeks to investigate the effect of tax evasion and avoidance on revenue. What is the ethical view of an average selfemployed nigerian on tax evasion and tax avoidance. Tax evasion and avoidance remains the greatest problems plaguing tax administration in nigeria. To identify possible effects of the tax evasion and avoidance on the economic development of the country and abia state in particular. Given that the purpose of introducing electronic tax system is to improve revenue collection which will in turn improve the countrys economic growth, the study empirically examined how the implementation of etaxation in 2015 has affected tax revenue, federally collected revenue and taxtogdp ratio.
Tax, taxation, tax evasion and avoidance, revenue generation, about author author1, graduate of accounting from umaru musa yaradua university katsina, nigeria. This research project is a very crucial study on the effects on tax evasion and avoidance on nigeria economy. The effect of tax evasion and avoidance on nigerias. Literature revealed that tax avoidance and evasion. This is one of the reasons why the hdi and the educational index of the state are as low as 0. This report draws on the experience of 21 countries in this area, including several developing countries, and highlights their key successes in using these technology tools. This increases the marginal utility of income in that state of the world, which is accomplished by increasing reported income and thus subjecting oneself to a lower penalty in the event this state of the world occurs. For the blacks law dictionary, tax avoidance is the act of taking advantage of legally avoidable tax planning opportunities in order to minimize ones tax liability. This may include tax avoidance, which is tax reduction by legal means, and tax evasion which is the criminal nonpayment of tax liabilities.
Tax avoidance generates investment distortion in the form of the purchase of assets exempted from tax or undervalued for tax purposes klabel andnwokah, 2009. Assessing the extent of its impact on total generated revenue from taxes. Tax evasion and the law in nigeria authority shall serve a demand note on the taxable person, and if payment is still not made within one month from the date of the service of the demand note, the relevant authority may proceed to enforce the payment in line with the provisions of the act1. There are various reasons why anyone would want to evade tax in nigeria. Tax evasion is the illegal evasion of taxes by individuals, corporations, and trusts. The use of the term noncompliance is used differently by different authors. Difference between tax avoidance and tax evasion with. Akinyomi and okpala 20 appraise the factors influencing tax avoidance and evasion in nigeria and their findings reveal that taxpayers perception of u n f a i r n e s s, l o w t r a n s p a r. Evasion, avoidance, and real substitution response 1428 1.
This paper attempts to look at tax evasion and avoidance and the approach of the nigerian courts and legislature. In the following section, some examples of tax cases in nigeria are considered in order to show how mncs and accountants have exploited the ambiguities between tax evasion and tax avoidance for the purpose of furthering their own financial best interests. It is the view of many people that the loss of revenue caused by widespread tax evasion and tax avoidance in nigeria is due to inefficient and inept tax administration. Causes of tax evasion and tax avoidance in nigeria tax evasion according to uadialeet al. This work evaluates the effect of tax avoidance and tax evasion on economic growth and development in nigeria 20062016. Do the loopholes in the tax laws encourage tax evasion and tax avoidance in nigeria.
The article establishes that tax evasion and avoidance is a very serious social menace causing a major setback on nigeria economic development. Attempts are also made to define and distinguish evasion and avoidance while at the same time possible reasons are explored for explaining why people react to evasion and avoidance. Prospects and impacts of electronic taxation in a developing economy like nigeria. International tax avoidance and evasion congressional research service fraud enforcement and recovery act, s. How can tax evasion and tax avoidance by minimized and eliminate in abia state. This has led to a growing attention among policy makers and scholars. Suggesting possible ways of abating of eradicating the practice of tax evasion and avoidance. Impact of etaxation on nigerias revenue and economic. Avoidance takes the form of investment in arts collection, emigration of persons and capital. Effects of tax evasion on government revenue generation in oyo state, nigeria folayan d. Tax deficiency can arise by operation of law when there is a failure to file and the government later determines the tax liability. It examined specific factors for rising tax evasion and establishing mechanism to curb the problem. The federal republic of nigeria, and all the federated units, that is, all the state governments in the country have deployed various measures, which of course, are commendably, for the purpose of making such that, tax evasion and tax avoidance is curtailed, as well as, minimised in nigeria. Corruption, tax evasion and tax avoidance indicators are strongly associated with low revenue.
The problem of tax evasion and tax avoidance in nigeria. Omorogiuwa 1981 has opined that ineffective tax administration is the main factor responsible for large scale tax evasion in nigeria. While the law regard tax avoidance as a legitimate game and tax evasion is seen as immoral and illegal. The effect of tax evasion and avoidance on revenue. May 15, 2019 on the contrary, tax evasion is a practice of reducing tax liability through illegal means, i. Have new tax reforms reduce tax evasion and tax avoidance and tax avoidance in nigeria 6. On the other hand, kay, 1980 opined that tax avoidance takes place when facts of. The effect of tax evasion and avoidance on revenue generation.