TABLE OF CONTENTS
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
1.2 STATEMENT
OF THE PROBLEM
1.3 OBJECTIVE
OF THE STUDY
1.4 RESEARCH
QUESTION
1.5 STATEMENT
OF HYPOTHESES
1.6 SIGNIFICANCE
OF THE STUDY
1.7 SCOPE
OF THE STUDY
1.8 LIMITATION
OF THE STUDY
1.9 DEFINITION
OF TERMS
CHAPTER TWO
2.0 REVIEW
OF RELATED LITERATURE
2.1 INTRODUCTION
2.2 WHAT
IS TAXATION
2.3 PRINCIPLES
OF TAXATION
2.4 TYPES
OF TAX
2.5 BRIEF
HISTORY OF TAX IN NIGERIA
2.6 TAX
ADMINSTRATION IN NIGERIA
2.7 TAX
LEGISLATION IN NIGERIA
2.8 REASONS
FOR IMPOSITION OF TAX
2.9 FUNCTIONS
OF TAXATION
2.10 EFFECTS
OF TAXATION
2.11 TAX
AVOIDANCE AND EVASION
2.11.1
TAX AVOIDANCE: Means
legally reducing one’s tax liability and it’s
2.12 CAUSES
OF TAX AVOIDANCE AND EVASION
2.13 EFFECT
OF TAX EVASION AND TAX AVOIDANCE ON THE ECONOMY
2.14 METHOD
OF TAX AVOIDANCE AND EVASION
2.15 DIFFERENCES
BETWEEN TAX EVASION AND TAX AVOIDANCE
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 RESEARCH
DESIGN
3.2 SOURCE
OF DATA
3.3 DATA
COLLECTION TECHNIQUE
3.4 AREA
OF STUDY
3.5 POPULATION
OF THE STUDY
3.6 SAMPLING
PROCEDURE AND SAMPLE SIZE DETERMINATION
3.7 RELIABILITY
TEST
3.8 VALIDITY
TEST
3.9 TECHINIQUE
FOR DATA ANALYSIS
3.9.1 DEGREE OF FREEDOM (DF)
3.9.2 DECISION RULE
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.0 INTRODUCTION
4.1 DATA
PRESENTATION AND RESULT
4.2 ANALYSIS
OF QUESTIONS
4.3 TESTING
OF HYPOTHESIS
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 SUMMARY OF FINDINGS
5.2 CONCLUSION
5.3 RECOMMENDATION
BIBLIOGRAPHY
APPENDIX: QUESTIONNAIRE
CHAPTER
ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Tax
is a financial issue and its payment is a civil duty. It is the imposition of a
financial burden for the government on individual firm and companies. In
general based, the word tax means any contribution imposed by the government
upon individual and companies for the use of government to provide facilities
or services as rendered by the state. It is not a voluntary payment or donation
but an enforced contribution made on the pronouncement or directive of
legislative authorities.
Osita
(2004:1) stated that taxation may be defined as the compulsory levy by the
government through her various agencies on the income of an employee, capital or
on other subjects such as salaries, business profits, interest, dividends,
commission regularities, rent etc.
However,
It could be said that there are three main methods of financial economic
expedition opened to meet developing countries. These are:-
(a)
LOANS
(b)
GRANT
(c)
TAX AND OTHER CURRENT RECEIPT
Out
Of these sources, tax is perhaps the most important since the level of
government expenditure is to a great extent dependent on the ability of the tax
system to generate the required revenue at the disposal of the government.
In
spite of this benefit from tax most people still indulge in tax evasion and
avoidance. Attempt to avoid some portion of liability or not to pay tax will
affect the revenue of the government that is the reason why the government
frowns at the issue of tax evasion and avoidance by using her authorities to
enforce compliance.
ARONOMOLE
and OLUWALAYODE (2006:39). Define tax avoidance as legal ways by which a tax
payer reduces in tax liabilities. Tax
evasion is a deliberate on the part of the tax payers to reduce their tax
liabilities through illegal means or an attempt not to pay tax due.
The
distinction between this tax avoidance and tax evasion is that tax avoidance is
not considered a criminal offence where as tax evasion is a criminal offence.
According
to ANYAELE (1990:225) a tax may be defined as a compulsory contribution imposed
by a government authority on goods, individual and co-operate bodies
irrespective of the exact amount of services rendered to the tax payer in
return and not imposed as a penalty for our legal offence. Both direct and
indirect taxes are collected for the government inform of income tax, excise
duty, import and export duties. Purchase and sales taxes and so on help the
government to generate a lot of revenue for the smooth running of government’s
administration.
Moreover,
there are two elements in every form of taxation and these are the BASE AND
RATE. The tax base is the object which is taxed or a measure of the private
sector income or wealth that can be taxed, while the tax rate is the percentage
of the measured amount taken off from the tax base. In this case the money
realized from it is used to provide social services, so that everybody both the
rich and poor will have equal chances of making use of them. These services
include provision of good pipe borne water, electricity, good roads, hospital,
schools etc.
Most
people in Nigeria nurse the habit of evading or avoiding tax payment i.e. they
always avoid paying their taxes. With this state of affairs, the various tiers
of government in the country don’t usually generate enough revenue that could
enable them to effectively execute all the developmental projects highlighted
in their budgets.
Alas,
it has to be pointed out that the successive Nigeria governments have not made
adequate and sincere efforts toward informing the tax dodger or evader on the
need for them to pay the taxes. All attentions have been directed on the
revenue from oil sector while taxes on agricultural produce, which supposed to
be generating a lot of revenue to the country, are deliberately over looked.
Due
to the immensely felt impact of taxes on development of our immediate
community, the researcher wishes to look into the problems of paying tax by the
public citizens, such problems are Tax evasion and tax avoidance by the public,
Poor system of tax collection and lastly the Inability of the government to
prosecute tax avoidance.
1.2
STATEMENT OF THE PROBLEM
It
has been noted that taxation practice in Nigeria has come to play a significant
role as a major source of revenue to the federal government by way of imposing
tax on her citizens directly or indirectly. The act of evading and avoiding tax
by most registered companies and some individuals has however affected the
revenue base of the government especially in providing essential services to
the populace. People naturally prefer to reduce their tax liabilities by
deliberately overstating their expenses and make false entries and fictions in
their books of account.
Thus,
their act however, causes tremendous reduction in the revenue accruable to the
government which eventually shrinks revenue to the treasure of government. The
inability of the revenue board to collect substantial amount of money from tax
is as a result of evasion and avoidance of tax. This research work examines the
problems facing the revenue department in collecting taxes and levies under
their jurisdiction with a view to indentifying possibilities at minimizing or
even eradicating tax evasion and avoidance.
1.3
OBJECTIVE OF THE STUDY
The
objectives of this study are as follow
1. To
analyze the various causes of tax evasion and avoidance
2.
To identify the factors or problems
militating against the tax assessment and collection in Nigeria.
3. To
identify possible effects of the tax evasion and avoidance on the economic
development of the country and Ogbomosho south local government in particular.
4. To
analyze the effectiveness and flaws of various tax in the country
5. To
examine ways in which tax evasion and avoidance can be reduce with the new
reforms.
6. To examine tax reforms in Nigeria
1.4
RESEARCH QUESTION
For
this research work to be effective, the researcher has being able to draft out
the following questions:
1. What are
the causes of tax evasion and avoidance?
2. What are
the factors or problems militating against the tax assessment and collection in
Nigeria?
3. What are
the possible effects of tax evasion and avoidance on the economy development of
the country and Ogbomosho local government in particular?
4. Are tax
laws in the country effective?
5. Has new
tax reform reduce tax evasion and tax avoidance in Nigeria ?
6. Do the
loopholes in the tax laws encourage tax evasion and tax avoidance in Nigeria?
1.5
STATEMENT OF HYPOTHESES
To
aid the research work the following hypotheses have been postulated. The null
hypothesis is denoted by “Ho” while the alternative hypotheses is
denoted by “H1”
1. H0: There
is no significant difference between the expected tax revenue and the amount
actually paid by those who evade and avoid tax
H1: There
is a significant difference between expected tax revenue and the amount
actually paid by those who evade and avoid tax
2.
H0: There is no significant
difference between the number of people who are due to pay personal income tax
and those that actually pay tax
H1: There
is a significant difference between number of people who are due to pay
personal income tax and those that actually pay tax.
3. H0: There
is no significant difference between numbers of registered enterprises that pay
tax in the country
H1: There
is a significance difference between numbers of registered enterprises that pay
tax in the country or state
1.6
SIGNIFICANCE OF THE STUDY
This
research work would be relevant to various tax authorities; the Federal Board
of Inland Revenue, Local Government revenue committee as well as their tax
officials who are responsible to collect tax on individual or corporate bodies.
It gives them insight on how to improve the tax administration.
The
research would also help the professional bodies like the Chartered Institute of
taxation of Nigeria and the institute of chartered accountants of Nigeria as
well as their members to see the areas of deficiency in the collections and
call for improvement in tax revenue.
This
research would also be relevant to the future researchers and the students of
accounting, economics, business administration and other social and management
sciences as well as the legislative body which can also benefit immensely from
this research because it will form basis of tax policy formation, implementation
and administration.
1.7
SCOPE OF THE STUDY
Since
no single research can validly cover all areas of the topic, the researcher
tends to limit the strength of the work done within the scope of how tax payers’
performances are influenced by the choice of the tax system. The study will
focus primarily on Ogbomosho south local government in precise to enable the
researcher carryout an extensive investigation on the subject matter within the
chosen host community.
1.8
LIMITATION OF THE STUDY
It
is not always unusual for researchers to encounter some difficulties in the course
executing their primary assignment. However, in this research, the researcher
was saddled with the following challenges:
·
FINANCE: This
is always a major limitation in a study of this nature, since the individual
may not have enough money to carry out all the necessary procedures that are
due to be fully observed.
·
LACK OF DATA: There
are areas where data are considered unavailable and which the researcher cannot
lay hand on because the relevant information is sometimes termed confidential
by the officials and unavailable to the outsiders.
·
LACK OF CO-OPERATION:- By
some of the respondents whom the questionnaires were been administered to. Some
felt reluctant to supply vibrant answers to some questions supplied in the
questionnaire.
1.9
DEFINITION OF TERMS
In
order to aid understanding of this research work by the user/reader, special
terms used in this study are:
TAX:
This
is a compulsory contribution imposed by government on individuals and corporate
bodies for the use of government to provide facilities or service to her
citizens.
TAX
EVASION: This is the attitude adopted by tax payers to
deliberately misrepresent the true state of their affairs to the tax
authorities or include dishonest tax report such as declaring less income,
profit or gains to escape tax liability (wholly or partially) by breaking the
law.
TAX
AVOIDANCE: This is a legal way by which a tax
payer reduces his tax liabilities.
TAX
LIABILITY: This is the amount that is borne by
the tax payer
PAYE
(PAY AS YOU EARN): This type of tax is based on the
earnings of the tax payer.
CAPITAL
GAIN TAX: This is the type of tax that is based on the gain
realized from the sale of capital goods.
CORPORATE
TAX: This is the type of tax that is based on the
profit recorded within a company of corporate bodies
CASINO
REVENUE: This is the amount of the levy paid by people who
operate at public places been rented to gamblers or for other amusements.
TAX
LAWS: These are acts decree or regulations guiding the
assessment and collection of taxes in the country.
STATE
INLAND REVENUE: The body responsible for the
collection of tax at state level.
FEDERAL
INLAND REVENUE: The body responsible for the
collection of tax at federal level
REVENUE:
Amount
of money realized by an individual or group or company
PERSONAL
INCOME TAX DECREE 1993: The law guiding the assessment
and collection of personal income tax
COMPANY
INCOME TAX ACT 1990: The law regulating the assessment and
collection of tax of corporate bodies.
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