Investigation Into the Causes of Tax Evasion

Investigation Into the Causes of Tax Evasion

CHAPTER ONE

Objectives of the study

The following are the aims and objectives of this study

To examine the major causes of tax evasion in Nigeria.
To examine the relationship between tax evasion penalty and tax evasion in Nigeria.
To examine the relationship between high tax rate and tax evasion in Nigeria.
To know if many business owners pay tax.

CHAPTER TWO

REVIEW OF RELATED LITERATURE

Introduction

Traditionally, there seems to have been an assumption that with a basic level of assistance to taxpayers, together with an enforcement programme, tax compliance could be maintained at satisfactory levels. However there seems to have been a shift in attitude towards treating the taxpayer as a passive donor who simply has to be billed for taxes due to being recognized as a customer, sometimes requiring particular forms of assistance and support. The primary purpose of taxation is to benefit rather than punish citizens, this would seem to be an appropriate policy. No doubt, sanctions will always have to exist to support tax administration, but there are important questions as to the extent they are needed and the enthusiasm with which they should be enforced. The more modern approach to tax compliance has benefited from many contributions from different disciplines. There is a range of factors that might influence taxpayer‟s behavior and the roles of individuals in the society and accepted norms of behaviour have also shown to have a strong influence (Wenzel,2001). Individuals are not simply independent selfish utility maximisers (though this might be partly true), but, they also interact with other human beings in ways which depend on different attitudes, beliefs, norms and rules. It also means that as taxpayers they can normally be expected to act as responsible citizens, that is, in normal circumstances, they should conform to reasonable obligations of the tax system without the need for rigorous application of enforcement activity. 12 This chapter starts with the history of taxation in Nigeria, followed by the factors affecting tax compliance and equally look at the social approach in understanding compliance as well as the attitude and motivational postures towards tax.

Conceptual review

History of Taxation in Nigeria

Direct taxation has been in existence in Nigeria before the advent of the British rule in 1861: particularly in the North where there was an efficient and stable administration based on Islamic system (Abdulrazaq, 1993). There were various forms of taxes in the Northern Nigeria in 1861, such as the “Zakat” ( a tax levied on muslims for charitable, religious and educational purposes ), “Kurdin Kasa” (an agricultural tax), and “Jangali” (a cattle tax levied on livestock). In the South Western Area, there were various forms of taxes such as “Isakole” (tax levied on land used by local communities who are normally expected to pay “tribute tax” to the local chief), “Owo-ori” (tax paid by every individual in the community to the government) The Eastern Area of Nigeria is said to be premised on the republican nature of the Igbos. The following are some of the form of taxes in this area: “egbu-nkwu” (tax imposed before palm oil is harvested, it is compulsory and there can be no harvest without it), community effort (tax on members of each community for specific purpose, it is also applicable in the Western Area of Nigeria).

CHAPTER THREE

RESEARCH METHODOLOGY

Research design

The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to investigate into the causes of tax evasion

Sources of data collection

Data were collected from two main sources namely:

Primary source and Secondary source

Primary source:

These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.

Secondary source:

These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.

CHAPTER FOUR

PRESENTATION ANALYSIS INTERPRETATION OF DATA

Introduction

Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

Introduction

It is important to ascertain that the objective of this study was on an investigation into the causes of tax evasion.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of tax evasion in Nigeria.

Summary

Tax evasion and avoidance is a very serious social menace that is causing a major setback on Nigeria economic development. From all indications it is now clear that if government engages in overhauling the tax administrative machineries, the problems of tax evasion and avoidance will be reduced to the barest minimum. It is also important for the federal government to put in place stiff penalty for corrupt tax officials and made frantic efforts aimed at putting in place adequate enforcement for defaulters. Such penalties and enforcement will help generate more revenue to the coffers of the government. It is hoped that if the measures prescribed in this study are implemented, it will go some way in reducing the problem of tax evasion and avoidance to reasonable dimensions.

Conclusion

Recommendation

For the federal Governments to meet her revenue targets it would be appropriate to take a look at the factors responsible for the incidence of tax evasion and avoidance since a check on these factors will go a long way in reducing if not eradicating the problem. Base on this background, the following recommendations are made:

Government should embark upon other means of publicity such as radio messages, television advertisements, post bills as well as the use of town criers to inform taxpayers of changes in tax legislation and need for compliance.
The tax authorities should properly review and evaluate the assessment and collection procedures so as to encourage compliance by the taxpayers. The usual practice of reprinting parts of the tax laws and sending same to the taxpayers expecting that they would understand is not encouraging since these laws are written in legal jargons or terms that are not easily understood. Moreover, tax forms should be made easy to understand. Vast improvement can be made by improving the design of the forms.
Suitable personnel should be recruited and Revenue personnel generally trained and retrained to cope with the demands of the job.

Reference

Ayua, I.A. (1999) The Nigerian Tax Law, Ibadan Spectrum Law {Publishing
Ariwodola, J.A. (1998) personal Income Taxation in Nigeria including Capital Gains Tax, Lagos, JAA Nigeria.
Aguolu, Osita (1999) Taxation and Tax Management in Nigeria, Enugu, Meridian Associates.
Farayole, G. O (1987) Guide to Nigerian Taxes Lagos All Crowns Nig. Ltd. Personal Income Tax Decree No. 104,1993.
Sosanya, S.O.A. (1981) Taxation Reform in Nigeria Toby, R.(1983) The Theory and Practice of Income Tax Macmillan Press Ltd See CIR v Duke of Westminster (1930) TC.490
Alm, J. and J. Martinez- Vazquez, (2001) ” Societal Institutions and Tax Evasion in Developing and Transition Countries” . A paper prepared for a public Finance in Developing and Transitional Countries Conference; Georgia State University.
Asada, D. (2005) The administration of personal income tax in Nigeria: Some problem areas. Working paper, University of Jos.
Eboziegbe, M.O. (2007) “Tax Evasion Hinders Local Governments.” The Saturday Tribune, October: 13.

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