TAX EVASION AND REVENUE GENERATION IN ENUGU STATE (2009 – 2018)

ABSTRACT

The study focused on the examination of tax evasion and revenue generation in Enugu State from 2009 - 2018. Hypotheses were formulated and tested which adopted the ex post facto research design. The researcher collected data from National Bureau of Statistics, Joint Tax Board and State Board of Internal Revenue. The study reveals that taxation in Nigeria is affected by tax evasion and avoidance, and that tax evasion has an effect on the tax system thereby has a negative effect on the tax revenue of the state. Based on the findings I recommend that government should review the entire tax system to correct the perception and wrong orientation about tax, which has made people ill about tax payment and tax revenue.

TABLE OF CONTENT

TITLE PAGE                                                                                                                          I

FLYER PAGE                                                                                                                        II

DECLARATION                                                                                                                    III

CERTIFICATION                                                                                                                  IV

DEDICATION                                                                                                                        V

ACKNOWLEDGEMENT                                                                                                      VI

TABLE OF CONTENT                                                                                                         VII

ABSTRACT                                                                                                                           IX

CHAPTER ONE: INTRODUCTION                                                                                     1

1.1       BACKGROUND TO THE STUDY                                                                           1

1.2       STATEMENT OF PROBLEM                                                                                   2

1.3       OBJECTIVES OF THESTUDY                                                                                3

1.4       RESEARCH QUESTION                                                                                          3

1.5       RESEARCH HYOPTHSES                                                                                       3

1.6       SIGNIFICANCE OF THE STUDY                                                                           4

1.7       DEFINITION OF TERMS                                                                                         4

1.8       SCOPE OF THE STUDY                                                                                           5

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1       CONCEPTUAL FRAMEWORK                                                                               6

2.1.1    CONCEPT OF TAXATION EVASION                                                                    6

2.1.2    HISTORICAL DEVELOPMENT OF TAXATION IN NIGERIA                                    10

2.1.3    TAXATION LAWS AND REGULATIONS IN NIGERIA                                      10

2.1.4    PRINCIPLES OF TAXATION                                                                                  11

2.1.5    SOURCES OF NIGERIAN TAX LAWS                                                                  13

2.1.6    OBJECTIVES OF TAXATION                                                                                 14

2.1.7    ROLE OF TAXATIONIN ECONOMIC DEVELOPMENT                                     14

2.1.8    EXTENT OF TAX EVASION                                                                                   16

2.1.9    CAUSES OF TAX EVASION                                                                                   17

2.2       THEORITICAL FRAMEWORK                                                                               19

2.2.1    BENEFIT THEORY                                                                                                 18

2.2.2    COST OF SERVICE THEORY                                                                                 19

2.2.3    ABILITY TO PAY THEORY                                                                                    20

2.2.4    SOCIO-POLITICAL THEORY                                                                                 21

2.3       EMPIRICAL REVIEW                                                                                              20

CHAPTER THREE: RESEARCH METHODOLOGY                     

3.1       RESEARCH DESIGN                                                                                                23

3.2       AREA OF THE STUDY                                                                                            24

3.3       POPULATION OF THE STUDY                                                                              25

3.4       SAMPLE SIZE                                                                                                           23

3.4.1 D ATA COLLECTION                                                                                                 24

3.4.2 METHOD OF DATA COLLECTION                                                                          24

3.5  MODEL SPECIFICATION                                                                                              25

3.6  DATA ANALYSIS TECHNIQUES                                                                                25

CHAPTER FOUR: DATA PRESENTATION ANALYSIS AND INTERPRETATION

4.1  DATA PRESENTATION                                                                                                26

4.2  RESEARCH QUESTION ANALYSES BASED ON OBJECTIVE

       AND HYPOTHESES                                                                                                      27

CHAPTER FIVE: SUMMARY AND FINDINGS RECOMMENDATION AND CONCLUSION                                                                                                35

5.1  SUMMARY OF FINDINGS                                                                                            35

5.2  CONCLUSION                                                                                                                 35

5.3  RECOMMENDATIONS                                                                                                  36

5.4  SUGGESTIONS FOR FURTHER STUDIES                                                                 36

REFERENCES APPENDIX

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

Revenue generation in Nigeria state government is principally derived from tax. Meanwhile tax is a compulsory levy imposed by government an individuals and companies for the various legitimate function of the state. Tax is a necessary ingredient for civilization. The Webster Dictionary defines tax as a charge imposed by government on property, individual, companies, or transact ions in order to raise many for public purpose. This definition may not be seen as ultimate, because tax has other objectives than public revenue generation.

The history of direct taxation in Nigeria can be traced back to 1904, when the system of personal taxation was introduced by Lord Lugard in the Northern Nigeria in 1917, the native Ordinance in Nigeria was signed into law. This was extended to the Eastern Nigerian in 1928.

The management the income tax management Act of 1961 was repealed and replaced with Personal Income Tax Act Decree (PITD) No 104 of 1993 (Now Personal Tax Acts). The personal tax act regulates personal income tax in Nigeria.

No one likes to pay taxes, even though tax payment is inevitable for the provision of social reduce their tax liabilities and they try to do this either legally, by tax avoidance or illegally by tax evasion.

The choice of tax could be a direct tone or an indirect tax, and as such the choice of tone was due to financial constraint.

Corporate bodies are changed under companies Income Tax Act (ITA) Cap 60, laws of the Federal Republic of Nigeria 1990 makes provision for the granting of tax relief to pioneer companies.All companies engaged in Petroleum Exploration in Nigeria are change to tax Act of 1990 that charges of tax any capital gains occurring to individuals and corporate bodies whenever they dispose of their assets.

All purchased of chargeable goods and services are expected to pay 5% of the purchase price as tax under the provision of the value added tax of 1993.

Tax evasion is an illegal means of reducing tax liability by making up false returns or by deliberate omission of some sources of income from the returns. This is a crime and therefore attracts penalty from the government

The rising rate of tax evasion has made the performance of the "Nigeria economy to fall, as it is difficult for the government to implement its budget, provide infrastructure and conducive environment for business which will help in improving the performance of the economy in terms of economic growth and development. Government borrows both from the public and international banks to finance its activity thereby accumulating debt.

1.2       Statement of Problem

Every nation needs revenue to carry out its governmental function to its citizens. There has been persistent conflict and scholarly dichotomy on the eventualities and outcomes of tax evasion and avoidance. There have also been the diverse ideologies on the factuality of revenue contribution of tax in Nigeria. It is in a bid to identify and ascertain the actual impact of taxation on the revenue contribution that the need for this work evolved.

Over the years, revenue derived from taxes has been very low making it impossible for government to carry out its expenditure as it is their responsibility. Even in the aspect of budget for the various sectors of the economy, a decrease is seen each year. The prosperity of a°nation depends onavailable resources and revenues. Unreformed tax laws, inefficient legislation, lack of patriotism, poverty, corruption and ineptitude on the side of successive government to pay sufficient attention to the necessity to generate adequate revenue from taxation has been evident in Nigeria. Tax evasion has continued to reduce tax revenue for the government. For the country to meet up with its aspiration of a better economy by 2020, the tax evasion should not be allowed to continue to strangle revenue to the nation.

Therefore this study decides to examine the various ways tax payers evade tax payment, the effect it has on Enugu State revenue generation and subsequently proffer solution so as to minimize tax

Evasion

1.3       Objectives of the Study

Generally, this study seeks to examine the effect of tax evasion on revenue generation in Enugu State. However, it is set to achieve the following specific objectives:

1.     To ascertain the difference between budgeted tax and actual tax

2.     To examine the impact of tax evasion on the tax revenue of Enugu State

3.     To determine the impact of tax revenue on the total revenue generation of Enugu State

1.4       Research Questions

The researcher asked the following question in a bid to examine the problem of the study:

1.     Is there any difference between budgeted tax and actual tax?

2.     Is there any impact of tax Evasion on the tax revenue of Enugu State?

3.     What is the impact of tax Revenue on the total revenue of Enugu State?

1.5       Research Hypotheses

The hypotheses of the study are stated in the null form as follows:

H0₁:    There is no significant difference between budgeted and actual tax revenue in Enugu State.

H0₂:   Tax evasion has no impact on the revenue generation of Enugu State.

H0₃:   Tax revenue has no significant effect on total revenue generation of Enugu State

1.6       Significance of the Study

This study will be of great importance to the following groups:

a)         Government tax officers: The study will help them see the importance of improving taxsystem and collection as well as impact of not collecting taxes on the economy of thecountry.

b)    Citizens:  Findings in the research will help citizens see the value in paying tax.

c)    Students: It gives more avenues for students to go further in the research. It will serve as
a  research   material   for  student  researching  on   fields  such   accounting,   business
administration and other management science.

1.7       Definition of terms

a)    Tax evasion: Minimizing tax liabilities illegally, usually by not disclosing that one is liable
to tax or by giving false information to the authorities. Evasion is liable to severe penalties.

b)    Revenue: Any form of income. Cost and income items that are either charge or credited to
the profit and loss account for an accounting period. An inflow into government account.

c)         Direct tax: This is tax on income of property of a tax payer. The effect of these tax is felt
or borne by the person or organization that pays it.

d)    Tax system: Process of taxation involving set of rules and regulation and procedures with
organs of administration interacting with another to generate fund tax government.

e)    Tax liabilities: The tax of any individual corporation sole and execution of estate of the
decreased person etc.

1.8       Scope of the Study

This study views the tax evasion on revenue generation in Enugu State for a period of 10 years from 2007 to 2016.

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