The Impact of Tax Evasion and Tax Avoidance in Nigeria Economic Development
Chapter One
OBJECTIVE OF THE STUDY
The objectives of this study are as follow
- To analyze the various causes of tax evasion and avoidance
- To identify the factors or problems militating against the tax assessment and collection in Nigeria.
- To identify possible effects of the tax evasion and avoidance on the economic development of the country and Abia state in particular.
- To analyze the effectiveness and flaws of various tax in the country
- To examine ways in which tax evasion and avoidance can be reduce with the new reforms.
- To examine tax reforms in Nigeria.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
In this chapter relevant literature are reviewed. Author’s definitions on taxation, tax evasion and avoidance are also stated. The causes, effects of evasion and avoidance at tax development in a nation will be examined, authors and expects opinion about tax evasion and avoidance and method, their suggestion on how to minimize or eradicate this problem are also mentioned;
WHAT IS TAXATION
Taxation has been given various definitions by different author’s some of these definitions are as follows.
OEKE (1994:254) Defines tax as a payment compulsorily made to individuals, companies, cooperate bodies by the government or governmental agency for the public use.
STEIN (1991:14) defines tax as a means by which the government raises revenue to meet its expenditure. It may also be used as a means of influencing or controlling the economy.
OSITA (2004:1) defines tax as the compulsory levy by government through the various agencies in the income, capital consumption of its subjects.
ONAOLAPO (1988:3) defines taxation generally as hew process or machinery by which communication or group of persons are made to contributes part of their income in some agreed quantum or method for the purpose of the administration and development at the society as a whole.
AGYEI (1983:2) defines taxation as transfer of resource from the private sector in order to accomplish some of the nations economics and social goal.
PRINCIPLES OF TAXATION
These are guiding principles of governing the various tax systems we have today and even in the past.
According to ADAMS SMITH (1996:87), there are major principles of taxation, among these principles of taxation are the following
EQUALITY OF PAYMENT:- This principles state that income earned the same level and with the same responsibility should pay the same amount of money in tax. This also means that people should pay tax according to their ability of pay (PAYE) pay as you earn.
CERTAINTY: This principle holds that the amount of tax to be paid by one tax payer should be made known to him or her and how it is worked out should be clearly explained to him or her.
CONVENIENCE: This means that tax payment should be arranged so as to be convenient to the tax payers.
ECONOMY:– The tax system should be arranged to make it possible to send little amount of money in tax collection. Any system, where by a proportion of the tax money is spent on its collection, is not a good tax system that is to say that the tax authorities should be efficient in their collection of taxes.
SIMPLICITY: The tax system or principle should be simple enough for everybody especially the payer to understand.
FLEXIBILITY: A good tax system must be easily changed. These tax system concerned must be capable of being easily or conveniently adjustly as occasion warrants.
IMPARTIALITY: In this case, there shall not be any partiality in tax assessment. This means that tax officials should not discriminate against tax payer while assessing them for tax payment.
PRODUCTIVITY: In tax principle the amount realized from tax should be sufficient to cover some government expenses. According to ANDY (2001:199), this is otherwise referred or known as the principle of fiscal adequacy.
In his own contribution in the subject under consideration, FALDDUMETA (1877:212-213) agrees with the above principle of equality, there are two nations of equality. These are horizontal equity (i.e.) equal treatment for equal and vertical equality, which is the poor and rich. In the authors view, the principle of equality often envisages a transfer of income from the very rich to the poor. Progressive income tax is devised to achieve such redistribution. It takes a greater proportion of income from the rich than from the poor. The principle of equality or ability to pay reflects a concern fro the poor members of the society.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
It is not out of place that an action pre-supposed planning. Hence, this chapter focuses on planning with respect to method and techniques employed in carryout this study.
Research methodology embrace at the process involved in obtaining and analyzing observation or information relevant to the study. In fact for any star to be reliable and veritable, it must be backed up with data systematically to the end. This chapter sets out to explain the method and rules observed in carrying out the study.
RESEARCH DESIGN
Research design answers the fundamental question of how the study objects will be brought into the scope of the research design are the case study and the survey methods. This study will use study method to investigate the impact of tax avoidance and evasion to the economic development of a nation, Abia state as the case study.
It describes the instrument used in determining information from the responders, the procedure for collecting it. It involves a method of data analysis, collection method and formula. For the purpose of this research exercise, a case study approach is adopted being descriptive and evaluated in nature. The research design comprises a combination of oral interview existing data and structural questionnaire.
SOURCE OF DATA
The Primary Method: Of data collection was used for this study, this was obtained through the use of the questionnaire (a) asking people and putting their responding down.
The Secondary Method;- Was also obtain through the review of relevant literature (a) textbook, journals, articles in newspapers, government gazettes, magazines, lectures notes and information from libraries and also the tax returns at the tax authorities.
DATA COLLECTION TECHNIQUE
The sample percentages were used for the analysis of the information get through the primary sources, mainly the questionnaire; the data generated were converted into percentages.
This enables the research to know the percentage number of responder gave particular responses to each of the question in the numbers. The various responses, frequency of response and their percentage were triturated. This help in sampling the analysis, so that the first glance will be easily understand the information being conveyed.
AREA OF STUDY
This study covers abia state.
POPULATION OF THE STUDY
The population suppose to be made up of the entire taxation individuals and organization in Abia state and since everyone cannot be easily reached the researcher personally served the questionnaire by hand and collected them back through the same means and the total member of questionnaire administrated were 90 (55 for the tax authorities and 45 to tax payers)
The 55 questionnaires where able by the researcher to send were (30 for the tax authorities and 25 to the tax payers), but 55 which represent 61.1% of the 90 questionnaire administered were collected and analyzed.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
DATA PRESENTATION AND RESULT
In this chapter the research presented the result of the analysis of the data collect from various respondent through the questionnaire distributed to them, the data was analyze with the use of the simple percentage technique.
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONs
In this chapter, an attempt is made to discuss the findings of this study, conclusion drawn and recommendation made are hoped to help to reduce, eliminate the problem at tax evasion and avoidance in the state and nation.
SUMMARY OF FINDINGS
Some findings were obtained from the questionnaire and the hypotheses are they the answers to our research question and problem
They are as follows
High tax rate, ignorance on part of tax payers and loopholes in tax are the causes of tax evasion and tax avoidance.
Tax evasion and tax avoidance has a negative effect on the state government revenue.
There has been a difference between expected tax revenue and the amount actually paid by those who evade and avoid tax.
Tere has been much difference the tax office and the registration of business unit.
All the registered companies and enterprises do pay their tax.
Punishments are not given to those companies and individuals that refer to pay their tax.
That poor revenue gotten for development is due to the major effect tax avoidance and tax evasion.
All business in this country are actually registered
Everybody pays their personal income tax monthly
Shortage of road and electricity, built from taxation are due to low revenue following tax evasion and tax avoidance.
Social security required, like employment etc are not provided by the government due to tax evasion and tax avoidance.
There has been effect of tax avoidance and tax evasion on capital formation.
A new reform will reduce tax evasion and tax avoidance in Abia state.
There is a significance difference between the member of register enterprises and the member of registered enterprises that pays tax to the country or state.
CONCLUSION
Tax evasion and tax avoidance in this country, especially Abia state has been a serious problem to the revenue profit of the government to be very low and hence it earn be easily execute. It is not known how much tax lost by “artificial” as opposed or “legitimate” tax avoidance scheme or tax evasion there is little direct evidence that avoidance lead to evasion although the resentment that comes from watching others same tax may cause a decline in tax payer morality.
A proposition which leads to an examination of the tax base and of those item of income tax altogether just as much as those who escape tax through artificial devices causes more increase in the burden on other tax payer. It would be unities to leave this problem without nothing, the commit of the royal commission that the existence of widespread of tax avoid once and tax evasion an evidence that the system has the tax payers and is in need of radical reform.
RECOMMENDATION
In the light of the finding the following recommendation are made although these recommendation are not conclusion but are supplement to the already suggested measures by the federal and state government of Abia state and other tax expect in the state.
Tax aws should be properly implemented by pushing the offenders
The tax law should be moderate because it is not high tax rates that generate income but a moderate rate with full enforcement.
The internal revenue service should require some class of self employed to submit to them statement of fixed period containing details of accuracy of the tax payers returns.
The tax authorities should organize educative program to enlighten the tax payers above the different law guiding the Nigeria tax system why he/she should pay tax and the effect of non-payment of tax.
In order to ensure that he incidence of tax evasion and avoidance is minimum and members of registered enterprises is brought into the tax bracket there should be better co-ordination between the own of government which is responsible for the registration of business unit and internal revenue services.
Government should provide infrastructure facilities like water, good, roads and electricity for those in the rural areas.
The direct bank lodgment system should be put in place for all taxes collection by all ties of government in order to prevent fraud.
A special monitoring unit should be created daily monitoring and collecting examine bank lodgment and bank statement, in order to prevent delays by tax officials in paying gains collected from government revenues, also a tax artificial must be present in the bank to issue receipts on the spot to persons who pay in taxes.
The prospect for a better tax administration in Nigeria will be bright, when the recommendation made are implemented. The setting up of the study group on the review of Nigeria tax system is a step in the right direction which will enable government to establish the designed reflective and efficient tax administration which Nigeria needs.
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