Investigation Into Causes of Tax Evasion in Lagos State (A Case Study of Selected SMEs in Ikeja LGA)
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
Tax evasion is the reduction of tax liabilities by not informing the revenue of all relevant facts. Tax evasion is illegal and criminal penalties apply. Hence, if caught evading tax such person will be fined and even imprisoned.
Tax avoidance is the reduction of tax liabilities within the framework of the law. Tax avoidance may not always succeed, but is legal; tax evasion is never legal.
The Difference Between Tax Evasion and Tax Avoidance
Tax avoidance is the legitimate minimizing of taxes, using methods approved by the IRS. Business avoid taxes by taking all legitimate deduction and by sheltering income from taxes by setting up employee retirement plans and other means, all legal and under the internal revenue code or state tax codes.
Tax evasion on the other hand, is the illegal practice of not paying taxes, by not reporting income, reporting expenses, not legally allowed, or by not paying taxes owed. Tax evasion is mostly commonly thought of in relation to income taxes, but tax evasion can be practiced by businesses on state sales taxes and an employment taxes. In fact, tax evasion can be practiced on all the taxes a business owes.
HISTORY OF TAXATION IN NIGERIA
The history of man has shown that man from origin, had to pay tax in one form or the other, in cash or in kind, initially to his chieftain and later on to a form of organized Government. It is also pertinent to note that ever since people started to gather together in groups and provide such services for the community such as defence, taxes had to be raised for such services.
The people of the Niger Area, a terminology used to describe present day Nigeria with its diverse people and culture, were not insulated from such traditional pre-colonial tax system. Taxes in themselves are a compulsory levy imposed by government on either income, expenditure or assets for which the tax payer receives nothing specific in returns.
The history of taxation in Nigeria can be analysed through the following headings:
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine an investigation into causes of tax evasion in Lagos state. FIRS in Lagos state form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to investigation into causes of tax evasion in Lagos State. 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 investigation into causes of tax evasion in Lagos State
Summary
This study was on investigation into causes of tax evasion in Lagos State. Four objectives were raised which included: 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 and to know if many business owners pay tax. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from FIRS, Lagos state. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
The effect of tax evasion on the Lagos State economic cannot be overemphasized. The revenue of government has been greatly affected. The current tax system being used gives room for loopholes, the corrupt tax officials, the lack of adequate data and many more have worsened the situation.
In addition, a reduction in tax rate is even not an optimum solution to the problem, simply because some people would still attempt to evade or avoid taxes no matter the rates of taxes. Therefore, there should be completely overhauled of the Nigeria tax system. The existence of substantial number of tax evaders in Lagos State should be a matter of concern to the policy makers and tax administrators. All the tax laws should be further codified and harmonized.
Recommendation
In the process or cause of writing this research work the following recommendation were made to help the practice of tax evasion and to increase the level of revenue generation in the state.
Enforcement of machinery
Tax enforcement machinery should be strengthening, in order to enhance the collection of revenue to the government and reduce the act of tax evasion.
Creation of public awareness
There should be a continuous education for the citizens. These has to be embarked upon and step has to be taken to convince the tax payers that the money collected in form of taxes are judiciary spent.
Standard Punishment
The level of punishment should also be stricter and the legal provisions for doing this should be clearly stated. Any tax payer or tax authority officials found wanting should be punished appropriately.
Staff Motivation
Workers should be encouraged so that they can put in their maximum services when this is done, there will be increase or solid improvement in revenue collection. Training of workers for knowledge enhancement should be one of such motivational factors.
Supply of social and economic services
Effort of government should not only be directed towards the revenue generation alone but also to the provision of social services like good roads, basic health facilities, environmental sanitation, town halls, street light, water supply e.t.c.
These facilities should be high quality, by doing this, the people’s interest will be geared towards giving their maximum support to the government and as such pay their tax as at when due.
Furthermore, the State Board of Internal Revenue and the revenue collecting officers at the local government must wake up to their duties.
Finally, database for tax administration at all levels of government should be promptly computerized to ensure that the system of information storage processing and retrieval is efficient. Tax clearance should also be presented where an individual wants to transact business with government agencies.
References
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- Adam Smith, (2003). “The Wealth of Nations” Published by Penguin.
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- Adekanola, O.C. (1997). Efficient tax collection and effective tax administration in Nigeria: A paper presented at a seminar organized by the University of Lagos.
- Adesola, S.M. (2003). Income tax law and administration in Nigeria, 3rd Edition, Ibadan College Press.
- Ayua, I.A. (1996). The Nigeria Tax Law, Spectrum Law Publishing.
- Babalola, J. (2009). FIRS targets tax evaders, the Punch, Sunday 22nd February, 2009.
- Duru, N. (2009). How Nigerian Dodge Tax Thisday Online.com Sunday, February 1st 2009.
- Ogundipe, C.O. (2002). Personal Taxation in Nigeria. Lord Path Publisher.
