ABSTRACT
This
research investigated the effect of tax evasion on Nigeria’s tertiary
educational system (a case study of University of Lagos, Akoka-Lagos). Relevant
past literatures relating to the study were reviewed. Descriptive survey
research design was used. The total sample size for this study comprised of one hundred and eighty (180) tax payers who
were selected from the nine (9) faculties in University of Lagos, Akoka. Twenty
(20) staff were selected from each of the nine faculties. A simple random
sampling technique was used to select the sample. A questionnaire was
administered to the selected respondents by the researcher for the collection
of data. The data collected was analyzed statistically using descriptive
statistics such as tables, frequency and percentage while Chi-square (X2)
statistical technique was used to test the formulated hypotheses at 0.05 level
of significance. Findings revealed that companies
evade tax due to lack of good tax enforcement agency in Nigeria and failures to
ensure appropriate penalty on companies that evade tax does encourage such acts
to be repeated. Secondly, that government
policies do eliminate the problem of tax evasion. Finally,
that there is significant effect of tax evasion on the funding of Nigeria’s
higher institutions. It was therefore recommended among others
that good tax enforcement agency should be instituted or put
in place in Nigeria in order to reduce the incidence of tax evasion by
companies as well as individuals; enforcement of appropriate penalty on companies
that evade tax should be undertaken by the appropriate tax agency or authority
in order to discourage such acts from being repeated as well as serve as a
warning or lesson to others; and also there should be adequate funding of
Nigeria’s higher institutions by the
government in order to increase the provision of infrastructures and standard
of education in higher institutions.
TABLE OF CONTENTS
Title Page i
Certification ii
Approval Page iii
Dedication iv
Acknowledgement v
Abstract vi
Table of Contents vii
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of
the Problem 4
1.3 Objectives of the Study 5
1.4 Research
Questions 5
1.5 Research Hypotheses 5
1.6 Scope of the
Study 6
1.7 Significance of the Study 6
1.8 Limitation of
Study 7
1.9 Definition of
Terms 7
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction 9
2.2
Concept of Taxation 9
2.3 Principles of Taxation 11
2.4 Types of Tax 12
2.5 Education Tax 13
2.6 History of TETFUND 14
2.7 Nature of Taxation 18
2.8 Reasons for Imposition of Tax 20
2.9. Effects of
Taxation 22
2.10 Tax Evasion 23
2.11 Causes of Tax Evasion 25
2.12. Tax Evasion and Rule of Law 27
CHAPTER
THREE: RESEARCH METHODOLOGY
3.1 Introduction 29
3.2 Research Design 29
3.3 Population of the Study 30
3.4 Sample Size And Sampling Technique 30
3.5 Research Instrument 30
3.6 Validity And Reliability Of Research
Instrument 31
3.7 Administration And Collection Of Data 31
3.8 Procedure For Data Analysis 32
CHAPTER
FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1 Introduction 33
4.2 Analysis
of the Respondents’ Bio-Data 33
4.3
Analysis of the Research Questions 36
4.4 Testing
of the Hypotheses 42
4.5 Summary
of Findings 48
CHAPTER
FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 50
5.2 Conclusion 52
5.3 Recommendations
52
5.4 Suggestion for Further Studies 53
References 54
Appendix 56
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
In many nations of the world, education has
been universally acknowledged as an instrument for national development. The
term educational system generally refers to public schooling, not private
schooling and more commonly to kindergarten through high school programs.
Schools or school districts are typically the smallest recognized form of
“education system” while federal level of education is the largest form of
“education system”. States are also considered to have education systems.
Simply put, an educational system comprises everything that goes into educating
public school students at federal, state or community levels.
Nigeria’s education system operates on 9-3-4
system (primary school for 6 years, junior secondary school for 3 years, senior
secondary school for 3 years, and university first degree for 4 years).
Tertiary education as a sub-set of any country’s educational system comprises
of universities, polytechnics and colleges of education. Universities are
established to carryout tripartite roles of teaching, researching and community
services thereby contributing meaningfully to social and economic development
of the nation. They are supposed to impact high level skills to reasonable
proportion of workforce, developing intellectual abilities of individuals and
engaging in training of competent and responsible professionals needed
virtually in all aspects of human endeavour. Polytechnics play a vital role in
the educational, scientific and technological progress of Nigeria. They are
established to train and produce the technical manpower necessary for the
execution of the Nation’s development plans, goals and strategies. The colleges
of education are the “train-the-trainers” colleges established to train and
equip teachers for their esteemed functions.
Education, being an indispensable tool in
nation building, is a process of systematic training and instruction designed
to transmit knowledge and acquisition of skills, potentials and abilities which
will enable an individual contribute effectively to the growth and development
of his society and nation. Education involves all round development of an
individual physically, socially, morally, intellectually, and mentally (Osakwe,
2006). Education is the process of facilitating learning or the acquisition of
knowledge, skills, values, beliefs and habits.
Tax is a civic contribution imposed by the
government on her subjects (individual and corporate bodies) with a view to
financing its responsibilities of ensuring public welfare, socially,
economically and politically (Kiable and Nwankwo, 2009).
An education tax 2% of profit is imposed on
all companies incorporated in Nigeria. This tax is viewed as a social
obligation placed on all companies in ensuring that they contribute their own
quota in developing educational facilities in the country. When the federal
government of Nigeria announced the establishment of the Education Trust Fund
(E.T.F) through the Education Tax, decree no 7 of 1993 before it later
metamorphosed into Tertiary Education Trust Fund (TETFUND), because basic
education is already taken care of by Universal Basic Education (UBE), the
whole idea was to create an intermediary agency to manage the two percent of
all assessable profit of companies registered in Nigeria on its behalf as a
special intervention fund for the education sector.
Tertiary Education Trust Fund (TETFUND), by
virtue of the provisions establishing it, is meant to complement other grants
by federal and state governments, specifically for the provision or maintenance
of essential physical infrastructures for teaching and learning, including the
provision of instructional materials, and equipment, research and publication,
academic staff training and development and any other need which, in the
opinion of the Board of Trustees, is deemed critical and essential for the
improvement and maintenance of standards in the higher educational
institutions.
A number of challenges were said to have
hindered effective administration of tax in Nigeria. A major challenge,
however, is known as a tax evasion. Tax evasion is described as an intentional
illegal behavior involving a direct violation of tax laws to avoid payment of
tax. The phenomenon of tax evasion is found in all countries. Indeed, no matter
the measure put in place, some companies incorporated in Nigeria still maneuver
their way and break government’s rules and regulations and evade tax. The
practice of maneuvering educational tax law is considered illegal and thus
needs to be checked and addressed by relevant tax authorities.
Tax evasion arises in a situation where a tax
payer or corporate body arranges his financial affairs in a way that would make
him pay the least possible amount of tax by infringing the legal rules (Feld
and Frey 2002). It can be accomplished through a deliberate act of omission or
commission which may include understating income, documenting fictitious
transaction, overcastting expenses, failure to submit returns and more.
Government however needs to address the issue
of tax evasion in order to bring an enhancement in government revenues, through
Tertiary Education Trust Fund (TETFUND) for the continuous improvement and
maintenance of standards in the higher educational institutions in Nigeria.
1.2 Statement of the Problem
Tax evasion has resulted in the loss of
revenue that is due to the government, thus, leading to inadequate revenue
being generated from Tertiary Education Trust Fund (TETFUND). The available
revenue is however inadequate for the government to use in fulfilling its
expenditure obligation which comprises the provision of facilities and
improvement of standard of education in Nigeria higher institutions. Hence, the
government depends solely on the revenue gotten from the exportation of crude
petroleum oil in order to generate revenue to enable it fulfill its expenditure
obligation on higher institutions in Nigeria. However, university education in
Nigeria now faced the challenges of inadequate finance, brain-drain, lack
of provision and maintenance of
essential physical infrastructures for teaching and learning, etc. that will
bring about quality educational output in Nigerian higher institutions.
This public outcry on the various challenges
faced by university education in Nigeria which has been identified above such
as inadequate finance, brain-drain, lack of
provision and maintenance of essential physical infrastructures for teaching
and learning, etc. could be traced to loss of revenue due to the government
through the avenues of tax evasion by companies in Nigeria. Therefore, the
researcher intends to carry out an investigation on the effect of tax evasion
on Nigeria’s tertiary educational system (a case study of University of Lagos,
Akoka-Lagos).
1.3 Objectives of the Study
The main objective of this study is to
examine the effect of tax evasion on Nigeria’s tertiary educational system (a
case study of University of Lagos, Akoka-Lagos).
In achieving the main objective of this
study, the specific objectives could be stated specifically as follows;
1.
To find
out the reasons why companies evade tax.
2.
To find
out if government policies can eliminate the avenues of tax evasion.
3.
To
determine the effect of tax evasion on Nigeria’s higher institutions.
1.4 Research Questions
Based on the objectives stated earlier, the following research questions
will be asked:
1.
Why do
companies evade tax?
2.
Can
government policies eliminate the avenues of tax evasion?
3.
What is
the effect of tax evasion on the funding of Nigeria’s higher institutions?
1.5 Research Hypotheses
1.
Government
policies do not eliminate the problem of tax evasion.
2.
There is
no significant effect of tax evasion on the funding of Nigeria’s higher
institutions.
1.6 Scope of the Study
This study will take a critical look into the
effect of tax evasion on Nigeria’s Tertiary educational system. The researcher
shall be concentrating on tertiary institutions in Nigeria, a case study of
University of Lagos, Akoka Lagos. Specifically it looked into the effect of tax
evasion on Nigeria’s Tertiary educational system and taking into consideration
Education tax and TETFUND. The researcher concentrated on all the faculties in
University of Lagos, Akoka-Lagos.
1.7 Significance of
the Study
The research is expected to:
v help the government to formulate policies
that will be useful in eliminating the problem of tax evasion in our tax
collection process so as to effectively fund education in the country.
v help government to know the reasons why many
companies in Nigeria evade educational tax.
v help the tax authority to be able to assess,
make possible decisions and to find positive means of collecting the
appropriate educational tax for the development and adequate financing of our
educational sector.
1.8 limitation of Study
Due to limited time factor and financial
constraint, the research work will be limited to Nigeria’s Tertiary educational
system, a case study of University of Lagos, Akoka - Lagos. In view of that,
all the staff in all the nine (9) faculties in University of Lagos, Akoka –
Lagos were selected randomly.
Also, the researcher encountered a challenge
when administering the questionnaire to the staff in their various
faculties. The challenge was that some
of the staff were not willing to respond
to the questionnaire because of their limited time. To overcome this challenge,
the researcher explained to them carefully the objectives of the research as
well as assuring them that their responses shall be treated with high level of
confidentiality and used solely for academic purpose. With this, the staff were so happy to respond to the questionnaire
by supplying the appropriate data.
1.9 Definition of Terms
Education: This is the process of acquiring general knowledge,
developing the powers of reasoning and judgement and generally of preparing
oneself or others intellectually for mature life.
Educational system: This refers to public schooling, not
private schooling and commonly to kindergarten through high school programs. An
education system comprises everything that goes into educating public school
students at federal, state or community levels.
Tertiary education: This is referred to as third stage, third
level, and post-secondary education, is the educational level following the
completion of a school providing a secondary education.
Tax: This refers to charges imposed by government on individuals, companies
or transactions in order to raise money for public purpose and control the use
or production of certain items on the public interest.
Educational tax: This can be defined as the tax which shall
be at the rate of two percentage (2%) profits, and shall be charged on the
assessable profit of a company registered in Nigeria (in the decree referred to
as a “company”).
Tax evasion: This is said to be a deliberate and willful practice of
not disclosing full taxable income in order to pay less tax. This behavior is
portrayed as a criminal act of violating the provision of tax laws which will
eventually lead to a reduction in total government revenue.
Click “DOWNLOAD NOW” below to get the complete Projects
FOR QUICK HELP CHAT WITH US NOW!
+(234) 0814 780 1594
Login To Comment