Law of taxation, nigeria tax system, law and economics, tax evasion, tax avoidance. The problem of tax evasion and tax avoidance in nigeria. The impact of tax evasion and tax avoidance in nigeria economy chapter one history of development in nigeria their so many form of taxation dating back of the days of our great ground father whose by communities dated themselves through communal labour to prosecute community projects. An analysis of tax evasion in romania at the present time from the economic, social and political point of view with proposals for improving the fight against tax evasion. Effect of tax evasion on economic development of yobe. One of the effects of tax evasion and avoidance is that, it discouraged bribery, corruption and waste of resources.
The research instrument used in collecting the data was questionnaires and oral interview. Tax evasion is one of the major social problems hindering revenue generation in developing state and eroding the existing welfare in oyo state. Tax avoidance is an act of doing everything possible within the confines of the tax law to reduce the tax paid. An empirical study of tax evasion and tax avoidance by.
It is in light of the foregoing that the various tax regimes provide for the punishment of tax evasions in nigeria. The impacts of tax evasion and avoidance to the economy of nigeria cannot be overemphasized. In contrast, tax avoidance is the legal use of tax laws to reduce ones tax burden. And this practice has affected the nigerian economy negatively. Electronic taxation was introduced to ensure efficiency and justice in collecting tax. Tax evasion and avoidance have adverse effect on government revenue. Causes of tax evasion and tax avoidance in nigeria tax evasion according to uadialeet al. In fact, in 2014, pakistan, together with the philippines and vietnam, accounted for more than three quarters of all illicit cigarettes consumed in asia. Tax avoidance and tax evasion what is the difference. The effects of tax evasion and avoidance on the nigerian economy abstract this research project is a very crucial study on the effects on tax evasion and avoidance on nigeria economy. Tax evasion, tax avoidance and tax expenditures in developing. The role of multinational companies in tax evasion and tax.
To solve the research problem, both primary and secondary data were collected. But your business can avoid paying taxes, and your tax preparer can help you do that. This brings about reactions from various sections of the economy. This effects of tax aversion and avoidance has been so severe in nigeria, given the fact that, nigerians are reluctant in carrying out their civic responsibilities of paying their taxes. This practice informed the need for tax audit, to ensure tax payers file in accurate information regarding their income and expenses. In most cases, when a citizen being apprehended by tax collectors, he will be forced to give bribe in order to be freed by the tax agents. Tax avoidance, capital flight and poverty in nigeria. Tax avoidance generates investment distortion in the form of the purchase of assets exempted from tax or undervalued for tax purposes klabel and nwokah, 2009. The effects of tax evasion and avoidance on the nigerian economy includes abstract and chapter one, complete project material available the effects of tax evasion and avoidance on the nigerian economy abstract this research project is a very crucial study on the effects on tax evasion and avoidance on nigeria economy. Avoidance takes the form of investment in arts collection, emigration of persons and capital. Tax compliance may be viewed in terms of tax avoidance and evasion. International journal of business and social science.
Tax planning module technical note nigeria business news. Abstract this paper attempts to look at the nigeria tax administration and its capacity to reduce tax evasion and generate revenue for development desire of the populace. Tax evasion has been an issue of concern in the nigerian tax system for decades. Effect of tax avoidance and tax evasion on personal income. This may include tax avoidance, which is tax reduction by legal means, and tax evasion which is the criminal nonpayment of tax liabilities. Why avoidance, evasion and administration are central, not peripheral, concepts in public finance 1426 1. Example of tax evasion is failing to declare part of ones income when one is under duty. This paper focuses on tax evasion and tax avoidance behavior of the self employed, using some selected states in. May 15, 2019 on the contrary, tax evasion is a practice of reducing tax liability through illegal means, i. Tax evasion may be distinguished from tax avoidance the reorganization of economic activity, possibly at some cost, to lower tax payment.
How can tax evasion and tax avoidance by minimized and eliminate in abia state. Many commentators and analyst blamed the situation on the tax authorities, for not living up to expectation with regards to tax administration. Tax evasion is the illegal evasion of taxes by individuals, corporations, and trusts. The difference between tax avoidance and tax evasion. Multinational companies and tax evasion and tax avoidance. Law and economics of taxation, tax avoidance and tax evasion. Impact of electronic taxation on tax evasion and avoidance.
Tax evasion on the other part is illegal and frowned at by every government and patriotic citizens and as a matter of fact punishable under our laws. Our results suggest that cracking down on evasion by the wealthy can be an. Tax payers are inherently disposed to reducing their tax liability either through tax evasion or tax avoidance. Is there any effect of tax evasion and tax avoidance on the nigeria economy. Kim 2008 believes that tax evasion is illegal and violation of tax laws, whereas tax avoidance is a legal way of decreasing tax burden. The major objective of the study is to identify the causes and effect of tax evasion and avoidance in the state and how it is done.
Evasion, avoidance, and real substitution response 1428 1. Tax evasion, income inequality and opportunity cost s of compliance introduction if asked to identify a single indicator th at best described the overall condition of the u. After stopping to evade, tax payers do not start avoiding more. While the law regard tax avoidance as a legitimate game and tax evasion is seen as immoral and illegal. Request pdf the role of multinational companies in tax evasion and tax avoidance. The effect of tax evasion and avoidance on nigerias.
Nigeria tax system was identified with many problems, such as tax evasion, avoidance and record falsifications which account for the consistent low tax yields. Despite its importance, limited scientific research has been undertaken the assessment of tax evasion practices in tanzania. The study of the effects of tax evasion and tax revenues on. In the following section, some examples of tax cases in nigeria are considered in order to show how mncs and accountants have exploited the ambiguities between tax evasion and tax avoidance for the purpose of furthering their own financial best interests. By definition, tax evasion is the reduction fred w. Taxpayers are inherently d isposed to reducing their tax liability either through tax evasion or tax avoidance. However, little attention has been placed on the issues of tax evasion in nigeria. The study examines the effect of tax avoidance and tax evasion on personal income tax administration in nigeria. Tax noncompliance is a range of activities that are unfavorable to a governments tax system.
Tax evasion is thus illegal and a criminal offence punishable by fines or even imprisonment. A conceptual approach of tax evasion and tax avoidance directly correlated with corruption and shadow economy. Pakistan problems of tax evasion, tax avoidance and. The examination of the influence of tax evasion on the total tax revenue showed that, other elements of the taxes kept constant, an increase in tax evasion by 1 unit led to a decrease in value of. In other words, tax avoidance is completely lawful because only those means are employed which are legal, while tax evasion is considered as a crime in the whole world, as it resorts to various kinds of deliberate manipulations. The case of nigeria tax evasion and tax avoidance reduce government revenues.
The result of tax evasion and avoidance is tax revenue loss which may cause serious damage to the proper performance of the public sector. This is approved for students in accountancy business computer science economics engineering arts. The use of the term noncompliance is used differently by different authors. The roles of multinational companies in tax evasion and. The article establishes that tax evasion and avoidance is a very serious social menace causing a major setback on nigeria economic development. The article establishes that tax evasion and avoidance is a very serious social menace causing a major setback on nigeria. Its most general use describes noncompliant behaviors with respect to different. Laundering money for salinas, bongo, the abachas argentine offshore bank scam of the 1990s, plus a secret. Tax evasion, tax avoidance and tax expenditures in.
In the first step, using monetary approach, an index for tax evasion for oecd countries is estimated. Tax rate showed a positive relationship with tax evasion. Businesses get into trouble with the irs when they intentionally evade taxes. Tax knowledge, penalties and tax compliance in small and. The result of the analysis shows tax evasion has significant effect on the economic development of yobe state and it is a confirmation of okafor research.
Effect of tax evasion on economic development of yobe state. Case study of federal inland revenue service firsogun state branchproject topics and materials in nigeria. Impact of tax administration on government revenue in a. The two are conventionally distinguished in terms of legality, with avoidance referring to legal measures to reduce tax liability and evasion as illegal measures. Literature revealed that tax avoidance and evasion represent some of the perplexing problems facing the nigerian economy. Tax avoidance and tax evasion the differences south. Tax evasion and tax avoidance, a problem which seems to have defied solution, had been deviled the tax system right from colonial times. According to richardson 2008, tax evasion as an intentional, illegal and unacceptable behaviour or activities involving a direct violation of tax law to evade the disbursement of tax.
Effect of tax avoidance and tax evasion on personal income tax administration in nigeria. The tax structures themselves are undoubtedly skewed by the realities of tax evasion, avoidance, and administrative costs. On the contrary, tax evasion is a practice of reducing tax liability through illegal means, i. Economic development is the development of economic. Law and economics of taxation, tax avoidance and tax. Impact of electronic taxation on tax evasion and avoidance a.
The results show that tax evasion and income tax rate has a u shape relationship. Tax avoidance is thus considered to be a matter of being sensible. This research specially focuses on the causes and remedies of tax evasion and avoidance in nigeria. The advantages of efficiency and lower cost to run business of the person in one part of the world can be earned in any part of the world. Tax evasion as defined by the canadian department of national revenue is the omission or commission of an act knowingly with intent to deceive so that. Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions. It is not an easy task to persuade taxpayers to comply with tax requirements even as the tax laws are not always precise in some respects 6. Tax evasion is the illegal evasion of taxes by dondes, corporations, and trusts. Causes of tax evasion in nigeria and effects on the. Tax avoidance and tax evasion are widely believed to be important factors limiting revenue mobilisation.
Is the existence of loopholes in the nigerian tax law system an opportunity for tax avoidance. Tax evasion and tax avoidance as opine by adebisi and gbegi 9 are one of the main problems of tax system in nigeria and africa and are described as twin devils which cause the difference between actual corresponding author. This research specially focuses on the causes and remedies of. This will assist government to make life more comfortable for her citizen. Get free research paper on the roles of multinational companies in tax evasion and tax avoidance in nigeria. This paper examines specific avenues for avoidance and evasion for both firms and individuals under a comprehensive national sales tax and discusses implications for the underground economy.
Chapter 8 tax avoidance and tax evasion iarc publications. It recommends that tax authorities should organize educative programme to enlighten tax payers on the different laws guiding the nigeria tax system, the need for the payment of tax and the effect of nonpayment of tax. Read all the latest news, breaking stories, top headlines, opinion, pictures and videos about tax evasion from nigeria and the world on today. According to spicer 1975, tax evasion and tax avoidance result in a loss of tax revenues, impair the chances of realizing the distributional or equity goal of taxation, and, if they become widespread, as they have in recent times, then more taxpayers may lose faith in the tax administration system and may be tempted to join the ranks of tax. The existence of tax evasion and tax avoidance in nigeria tax. In the second step, the effects of tax evasion and tax revenues on economic stability are studied. Oct, 2014 causes of tax evasion and tax avoidance in nigeria tax evasion according to uadialeet al. The study of the effects of tax evasion and tax revenues. Tanzania one of the important areas where tax evasion has been reported is customs duties. The importance, how to, effect causes relationship, comparison, history, role.
May 19, 2017 it recommends that tax authorities should organize educative programme to enlighten tax payers on the different laws guiding the nigeria tax system, the need for the payment of tax and the effect of nonpayment of tax. Like many other countries of the world, pakistan is facing major problems of tax evasion, tax avoidance and illicit trade in cigarettes and other tobacco products. Difference between tax avoidance and tax evasion with. Compliance might therefore be better defined in terms of compliance with the spirit as. This study aimed to assess the extent factors that influence tax evasion a case of temeke municipal council. Causes and effects of tax evasion and avoidance on the. Abdulhamid ellawule, lecturer, department of accounting, federal university, gashua, nigeria.
The federal republic of nigeria, and all the federated units, that is, all the state governments in the country have deployed various measures, which of course, are commendably, for the purpose of making such that, tax evasion and tax avoidance is curtailed, as well as, minimised in nigeria. While some had blamed the situation on tax authorities for not living up to expectation with regards to tax administration, others attribute it to. Abstract this paper attempts to look at the nigeria tax administration and its capacity to reduce tax evasion and. The impact of tax evasion and tax avoidance in nigeria.
This study was on the causes and effect of tax evasion and avoidance on the economy board of internal revenue in abia state. Tax evading attitude is argued to have an adverse effect on governments socioeconomic and political programs. Tax avoidance and tax evasion the differences tax avoidance is generally the legal exploitation of the tax regime to ones own advantage, to attempt to reduce the amount of tax that is payable by means that are within the law whilst making a full disclosure of the material information to the tax authorities. Tax evasion and avoidance both have negative implications on the economy as they. This is one of the reasons why the hdi and the educational index of the state are as low as 0. The analysis shows that opportunities for avoidance and evasion will be sustained, not eliminated, by a change in tax structure. Nigerian tax system in 1998, tax payers are now required to file in their tax returns independently.
Tax evasion and tax avoidance phenomena are present in all economies. Income tax evasion and avoidance their causes and remedies nigeria preface revenue generation of our country is mostly based on the income derived from tax, which can either be direct tax or indirect tax. Impact of tax administration on government revenue in developing economy. This has led to a growing attention among policy makers and scholars. Tax evasion and avoidance behaviour of the selfemployed nigerians. This is a serious indictment of the administrative machinery and capacity of the tax authorities in nigeria.
Tax evasion, income inequality and opportunity cost s of. Tax compliance is a major problem for many tax authorities. Taxation is process on machinery by which group or communities made contribution from. Tax evasion may be distinguished from tax avoidancethe reorganization of economic activity, possibly at some cost, to lower tax payment. Tax avoidance on the other hand is the legal use of tax laws in order to reduce one. Tax planning module technical note nigeria business.
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