ABSTRACT
This Research work attempts to look at the effect of Tax
evasion and avoidance on economy of Nigeria and its capacity to reduce tax
revenue growth (A case study of Lagos State Internal Revenue Service). Tax is a
compulsory levy imposed by government on income individual, firms and
household. It was also find out that an individual tax evader or avoider may
engage in it simply because he is unable to appreciate any benefit that would
accrue to him after payment of such tax. The study made use of secondary data
obtained from Lagos internal revenue service on total revenue from taxation and
total value of tax evasion. Questionnaires were also used to gathered
information on the effect tax administration on tax evasion and avoidance. Data
collected were analyzed using both Ordinary Least Square and Descriptive
statistics (Chi-square) were used to analyze the questionnaire administered to
Lagos state internal revenue service staff. Hypothesis on was tested using OLS
while hypothesis two was tested using Chi-square techniques. Empirical results
shown that increasing tax evasion and avoidance reduce government revenue
growth in Lagos .It was also found that Tax Administration is responsible for
the tax evasion and avoidance in Lagos State. This was due to lack of enforcement
machineries which include, adequate manpower, computers and effective postal
and communication system. Finally, it is therefore recommended that the
government should create awareness in the mind of tax payers about the
importance of taxation in development of national economy and the effects of
tax evasion and avoidance in government revenue growth.
TABLE OF CONTENT
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Pages
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Title page
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Certification
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Dedication
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Acknowledgement
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Abstract
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Table of content
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CHAPTER ONE: INTRODUCTION
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1.1
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Background of the Study
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1.2
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Statement of Problem
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1.3
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Research Questions
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1.4
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Objectives of Study
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1.5
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Research Hypothesis
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1.6
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Significance of the study
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1.7
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Scope of the Study
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1.8
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Limitation of the Study
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CHAPTER TWO: LITERATURE REVIEW
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:2.1
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Introduction
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2.2
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Definition of Tax
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2.3
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Administration of Tax in Nigeria
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2.4
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Federal Board of Inland Revenue
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2.5
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Duties of the Federal Board of Inland Revenue
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2.6
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Technical Committee of Federal Board of Inland Revenue
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2.7
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State Board of Internal Revenue
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2.8
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Composition of Internal Revenue
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:2.9
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Functions of the State Board of Internal Revenue
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2.10
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Local Government Revenue Committee
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2.11
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Functions of the Government Revenue Committee
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2.12
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Forms of Taxes
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2.13
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Characteristics of a Good Tax System
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2.14
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Solutions to the Problem of Taxation
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2.15
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Tax Evasion and Avoidance
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2.16
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Definition of Tax Evasion and Avoidance
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2:.17
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Tax Avoidance Scheme
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2,.18
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Tax Evasion Schemes
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2.19
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Tax Evasion Measures under the Law
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2.20
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Court's Approach to Tax Evasion Scheme
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2.21
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Legislative against Tax Avoidance
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2.22 Specific Anti-Tax Avoidance Provisions
2.23 General Anti-Avoidance Legislation
2.24 Possible Causes of Tax Avoidance and Evasion
CHAPTER THREE: RESEARCH METHODOLOGY
3.1
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Introduction
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3.2
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Research Methodology
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3.3
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Method of Data Collection
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3.4
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Method of Data Analysis
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3.5
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Re-State of Hypotheses
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3.6
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Model Specification
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CHAPTER FOUR DATA PRESENTATION AND ANALYSIS
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4.1 Introduction
4.2 Test of
Hypothesis one /Empirical Result
4.3 Test of
Hypothesis Two/Analysis of Data
CHAPTER FIVE SUMMARY, CONCLUSION AND RECOMMENDATION
5.2 Summary
5.3 Conclusion
5.4 Recommendation
References
Appendix : Regression analysis /Questionnaire
CHAPTER ONE
INTRODUCTION
1.1. BACKGROUND
OF THE STUDY
Nigeria is richly blessed with oil and gas among other
mineral resources, but the over dependence on oil revenue for the economic
development of the country has left much to be deserved. According to Ariyo
(1997) Nigeria's over dependence on oil revenue to the total neglect of other
revenue source was encouraged by the oil boom of 1973/74. This is unsustainable
due to the fluctuation in the oil market which have in most cases plunged the
nation into deficit budgets. It was the view of Popoola (2009) that Nigerian
tax administration and practice be structured towards economic goal achievement
since government budget for the year centres on the oil sector. While decrying
the low productivity of the Nigerian tax system, "deficiencies in the tax
administration and collection system, complex legislations and apathy on the
part of those outside the tax net" were identified as some of the root
causes says Ijewere 1991 and Ndekwu 1991 as cited in (Ariyo 1997). Those
working in the informal sector of Nigerian economy do not see the need to pay
tax whereas they dominate the economy. To them only, civil servants should pay
tax on their earnings and this amount to over flogging the willing horse.
Besides, the activities of the strong union in the formal sector do not even
pave way for a successful tax policy implementation in the formal sector
(Ayodele 2006). Even revenue collection officers seem to be lenient or even
connive with those in the informal sector during enforcement of tax policies.
All this leads to revenue loss. In other to reawaken the consciousness of
Nigerian government and citizens on the effective use of taxation as a
developmental tool, and examine the effect the tax system have so far on the
economy; this research work becomes very relevant. There is no doubt that
taxation must have affected the economic development of Nigeria. Effort shall
therefore be made in this research to see how much Nigeria have been able to
achieve her economic goals with her tax policies and administration. The
administrative role of the Federal, state and local government shall as well be
examined in other to identify the causes of tax evasion and avoidance.
1.2 STATEMENT OF THE PROBLEM:
The first need of any modern government is to generate
enough revenue which is indeed lithe breath of its nostril". Thus taxation
is by far the most significant source of revenue for the government. Nigerians
regard payment of tax as a means whereby government raises revenue on herself
at the expense of their sweat. The issue of Tax evasion and avoidance and its
effect on the Nigerian economy and revenue generation has lately drawn concerns
to many Nigerian. In an attempt to find out how taxation can be used to boost
revenue generation or revive the Nigerian economy, tax evasion and avoidance
were noted to be on the increase in the Nigerian economy. Tax avoidance and tax
evasion are sensitive issues in taxation therefore making the study a very
sensitive one too.
Therefore the above mention problems motivated the
researchers to carry a research work on the effects of tax evasion and
avoidance on Nigeria economy.
1.3 RESEARCH QUESTIONS
The following research questions were formulated by the
researcher in order to arrive at reliable conclusion and provide solutions to
the problems of tax administration, tax evasion and avoidance in Nigeria.
i. Does tax evasion and avoidance really
affect the revenue growth of the government?
ii. What management and organizational approach will decrease
tax evasion level and increase administration autonomy?
iii. Is there any relationship between tax administrators and
tax payers, what influencing factors could produce a high level of tax evasion?
iv. To what
extent does tax evasion and avoidance affect Nigeria economy?
1.4 OBJECTIVES OF THE STUDY
The general objective of this study is to assess the
effect of Tax evasion and avoidance on the Nigerian economy, its role in
expanding the revenue base of the government and the overall economic
development of the country.
Therefore, the objective of this study is to show:
i. To examine how effective the tax
administration machinery is, in reducing tax evasion and avoidance
ii. To determine to what extent tax evasion
and avoidance affect government revenue especially in Lagos State.
iii. To know the extent to which tax evasion
and avoidance affect Nigeria economy?
iv. To examines how the problem of evasion and avoidance in
Nigeria could be solved.
1.5, RESEARCH HYPOTHESES
Hypothesis one
Ho: Tax evasion
does not affect Revenue growth in Lagos State Government.
Hi: Tax evasion
does affect Revenue growth in Lagos State Government.
Hypothesis two
Ho: Tax Administration is not responsible for the
tax evasion and avoidance in Lagos State.
Hi: Tax Administration is responsible for the
tax evasion and avoidance in Lagos State.
1.6 SIGNIFICANCE OF STUDY
The relevance of this study can first be appraised in the
light of its usefulness to the Nigerian nation as a whole.
This study, among other things, will expose the effect of
tax evasion and avoidance on government revenue and economic growth. Concern
over the economy wide effect of Tax is important because of the possibility
that the tax evasion and avoidance may cause government to cut some expenditure
of certain essential services, hence affecting government effectiveness and
efficiency.
Essentially, this research work is intended to expose the
role of Taxation in the economic development of Nigeria, the knowledge of which
therefore makes the research important to policy makers, the Lagos State
Internal Revenue Service (LIRS), Tax administrator, students as well as the
general public who may require information about Taxation and its performance.
1.7 SCOPE OF THE STUDY
This research work covered the effect Tax evasion and
avoidance on the Nigerian economy, its role in expanding the revenue base of
the government and the overall economic development of the country using Lagos
internal Revenue Service as A case study.
1.8 LIMITATION OF THE STUDY
Among the factors limiting and constraining the scope of
this study are:
i.
The inadequacy of
data and relevant literature on the subject;
ii.
Insufficient
financial resources;
iii. The poor response to questionnaires by
respondents and sometimes-outright refusal;
iii.
There is also the
issue of lack of time to carry out a more in-depth study.
However, since these factors were foreseen, proper care
was taken in constructing the questionnaires so that the questions asked were
not so exact or direct is warrant reluctance in their response.
Also, all efforts were made to ensure that correct
information was gathered and adequate provisions were made for errors so that
the authenticity and credibility of the research finding are not several
affected.
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