research work examines the strategies and practice of accounting firms in tax
avoidance (the Nigerian experience) and also why businessmen avoid tax
payments, to what use is taxation to investors and business and how taxation
weaken companies financially. The sample size for the study to select the
respondents, (120) questionnaires were designed and administered while (100)
were returned. The researcher used simple percentage (%) and chi-square (X2)
analyze the data and test of hypothesis. From the analysis of data, it was
discovered that tax avoidance has significant impact on corporate profit, also
corporate tax affect revenue generation of any government. In the light of
these findings, it was concluded that tax with significant impact on revenue
generation and avoidance have resulted to poor infrastructural development of
many nations. Finally, the following recommendations were made amongst others;
government should tighten the various possible loopholes that are capable to
create avenues for tax avoidance, government should make it a point of duty to
check the activities of the accounting firms in connection with tax avoidance.
Background to the Study
Statement of Problems
Objectives of the Study
Statement of Hypothesis(es)
Significance of the Study
Scope of the Study
Limitation of the Study
Definition of Terms
Two: Review of Related
Definition of Strategies and Practices
Concept of Tax Avoidance
Accountant and Tax Avoidance
The Role of Accounting Firms in Profit
Tax Avoidance Schemes used by Accounting
Transfer Pricing Abuse
Evidence of Corporatize Taxes (Empirical
Anti-Avoidance Measure Provisions in Nigeria
Three: Research Method and Design
Description of Population of the Study
Sources of Data Collection
Method of Data Presentation
Method of Data Analysis
Four: Data Presentation, Analysis and Interpretation
4.2 Data Presentation
4.3 Data Analysis
4.4 Hypothesis Testing
Five: Summary of Findings, Conclusion and Recommendations
5.2 Summary of Findings
1.1 Background to the Study
Taxation is the aspect of fiscal policy
of government that deals with the raising of revenue. Christonson & Murphy
(2004, pp.37-38) assert that in economic terms, taxation transfers wealth from
corporate organizations and business to the government of the nation. A fund
generated from taxation has been used by states and their functional equivalent
throughout history to carry out many functions. In buttressing the above opinion
US General Accounting office (2003), notes that most modern government also use
corporate taxes to fund welfare and public service, and these services can
include education system, pensions for the aged, to fund foreign and military aid,
public transportation and to influence macro-economic performance of economy.
In societies with interests in business,
the role of accounting firms in tax avoidance cannot be ruled out. Though in
the past, accounting and auditing services formed the core business for
accounting firms, but today, it is a complete different issue. Sikka &
Hampton (2006), opine that the state guaranteed monopoly of external auditing
has been the making of accounting firms unlike other consultancy business, it
gives them comparatively easy access to company executives and provides an
opening to impress potential clients with zeal about meeting deadlines,
attention to details to the value of surveillance, judgement, control and
related implications of cutting across costs and inefficiencies. In the real
sense, accounting firms have applied their strategies and practices in taxation
in different ways. They have used their expertise skills in ensuring that their
clients costs or expenses are reduced to the lowest minimum.
In the course of carrying out their
roles for their clients, or corporate organizations they are being accused of
growing profit and reducing taxes to the detriment of the state to provide social infrastructure
for the populace.
Commenting on the above view Sikka &
Wilmot (1995, p.184) contend that accounting firms have long been identified as
key players in the “rules avoidance” and have further enhanced their
credentials by developing and marketing a variety of tax avoidance schemes to
enable their audit clients and others report higher profits.
In contemporary entrepreneur culture,
tax avoidance is promoted as a natural inevitable and a desirable pursuit.
Ernest & Young Partner (n.d) claimed that “tax is a cost of doing business.
So naturally good manager will try to manage this cost and the risk associated
part of good corporate government”. (Sikka, 2004, p.189) US senate joint
committee on taxation (2003) and OECD (1996) reported four types of tax
avoidance schemes utilized by accounting firms, to include transfer pricing
abuse, conduct situation (Treaty shopping), routing and potential government
abuse of tax sparing. In the same vein, accounting firms sell tax avoidance
schemes through presence network of law forms, investment advisory firms,
securing opinion letters, non-disclosure agreement etc Sikka (2004, p.192) and
(US joint committee on taxation, 2003).
Tax avoidance occurs when the taxpayer
is exercising his legal right under the tax law, makes the best use of
available reliefs, allowance exemptions etc to pay the least possible tax. And
this is achieved through the services of tax experts who exploit various
loopholes in the tax laws to reduce liability.
Against the backdrop, a country’s
corporate tax system and the strategies and practices of accounting firms in
tax avoidance especially in a democratic setting like (Nigeria) is
often a reflection of its communal values or the values of those in power.
1.2 Statement of Problem
This research work is aimed at
ascertaining if tax has helped in revenue generation in Nigeria. It also
looks on how tax avoidance has significant impact on corporate profit. The
loopholes accounting firms used to avoid tax.
1.3 Research Questions
To enhance the progress and development
of tighten the loopholes accounting firms uses to avoid tax, more effort is
required towards achieving the review of tax law.
This implies that taxation which was
established primary to raise revenue to finance government expenditure can help
to answer the following questions:
Is it that the role of accounting firms
in profit pursuit in corporate organization?
Are there various strategies and
practice of accounting firms used in tax avoidance?
Is that there are various strategies and
practices of accounting firms in selling tax avoidance?
Are there anti-tax avoidance measure
provision in Nigeria?
1.4 Objectives of the Study
The objectives of any research are the
mirror image of the research questions. On this note, the objectives of the
study are stated below:
To find out the role of accounting firms
in profit pursuit of corporate organization.
To find out the various strategies and
practices used by accounting firms in tax avoidance.
To determine the various strategies and
practices used by accounting firms in setting tax avoidance scheme.
To evaluate the anti-tax avoidance
provisions in Nigeria.
1.5 Significance of the Study
The importance of this study cannot be
over-emphasized. The study will be of great importance study and relevance in
the following ways:
It will assist the government in
re-structuring her tax schemes and tighten all the loopholes capable to create avenues
for tax avoidance.
It will assist accounting firms and
other professional bodies associated with tax matters to improve on their strategies
and practice and make public disclosure about such activities.
It will assist those in authority
charged with the responsibility of legislating, executing and interpreting tax
It will enlighten business on the need to
pay taxes out of profit genuinely and support government in discharging their
civil responsibility to the people.
1.6 Statement of Hypotheses
A hypothesis is a tentative answer to a
research question, it is often stated in the form of a relationship between a
dependent and independent variable. It is a conjectural statement of the
relationship between two or more variables.
Ho: Strategies and tactics used
by accounting firms to sell schemes that enables their clients avoid corporate
tax have no impact on their corporate taxes.
Hi: Strategies and tactics
used by accounting firms to sell schemes that enables their clients avoid
corporate tax have impact on their corporate taxes.
Ho: Strategies and
practices of accounting firms in corporate tax avoidance have no significant
impact on corporate profit.
Hi: Strategies and
practices of accounting firms in corporate tax avoidance have significant
impact on corporate profit.
Ho: Strategies and practices of accounting firms
in corporate tax avoidance have no significant relationship with corporate cost
Hi: Strategies and practices of accounting firms
in corporate tax avoidance have significant relationship with corporate cost
1.7 Scope of the Study
This study examines the
strategies and practices of accounting firms in tax avoidance as the Nigerian
experience especially in Lagos and Edo State.
This study will illustrate the role of the accounting firms using strategies
and practices as its impact on organizational performance in Nigeria between 2008 – 2013.
For the course of this
study, the researcher used a sample size of 100 for effective survey.
1.8 Limitation of the Study
The study is faced with some constraints
which may likely affect the generalization of findings, the constraints include
the following below:
Geographical Coverage: Factor that may
likely affect the work is the issue of investigating all accounting firms in
the country. Due to the spread of accounting firms all over major cities in the
country, the researcher could not be able to cover the whole areas. Hence,
emphasis was focused on only Benin City and Lagos which I think could
affect the generalization of result.
Problem of sourcing for material: The
research was faced with problems of getting current materials, textbooks,
journals, seminar papers in relation with this research topic. The University
library are outdated for this research work. In the final analysis most
interviewed and investigated could not give some vital information that would
have acted as ingredients in the work.
1.9 Definition of Terms
Tax: Tax is a financial charge or other
levy imposed on an individual or legal entity by a state or functional
equivalent of a state.
Corporate Tax: This refers to a direct
tax levied by various jurisdictions on the profits of an organization.
OECD: Organization of Economic
Cooperation and Development.
Avoidance: Arranging one’s affairs so as
to pay the accounting firm smallest amount of tax required by law.
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