Assessment Of The Problems Of Tax Evasion And Tax Avoidance In Nigeria

Introduction

1.1 Background of the Study

"You can have a lord, you can have a king, but the man to fear in the tax collector" (Hepker, 1975:15). This inscription was found on a day tablet in Iraq about 3,500 years ago it goes a long way in explaining the reaction of people to the question of taxation just like simple mention of the word "tax" beings out the ugly sides of many people scattered all over the world.

Nigeria at 47 has been a vast disregard and abuse of countless public laws and policies. in almost every issue you turn to, there is a problem awaiting attention. The issue of taxation is no exception. It is no secret that taxation is one of every nations strongest source of revenue, and it"s importance can therefore, never be over emphasized. Nigeria has a population of well over one hundred million people today, but less than half of this great number respond favourably to this civic responsibility. The reaction of people is a shocking one some even result to violence when asked to pay taxes many question are bound to arise and these questions aroused the interest of the researcher in this vital topic. Are we to sympathize with the common man who feels cheated at having to pay taxes or more sensibly recognize the plight of a government that is struggling to keep the nation making on tax revenue which is not forthcoming! How else can the government provide the basic amenities necessary for the use and comfort of it"s citizen!

Undoubtedly, this research work is timely and its importance cannot be over emphasized, as this is an issue that threaten the continue growth a well-being of our father land, the great giant of Africa i.e Nigeria

1.2 Research Assessment

The greater majority of the Nigerian population is made up of people who are ready to resort to every means necessary to either pay as the tax as possible, or a better alternative to pay no tax at all. The situation has become so widespread that is secondary scholars today you discover even under graduates and secondary leaver mapping out strategies to minimize or completely escape taxation. Some revenue collectors have even met with physical resistance and crude man handing in the discharge of their duties.

This state of affairs is very alarming as even the civilized and supposedly enlightened people engage in these practices what could have led to this deplorable state? Why are people so antagonistic and uncivilized when it comes to taxation? Are they justified what effects are they having on the Nigeria economy? What can be done to save the situation? Can people be motivated to begin to respond favourably what effects are the having on the development of the country in general what does the law say about of? Is it adequate

These and others are the question that this research work seek to answer as well as proffer suggestion toward finding a lasting solution to the giant assessment of tax evasion and tax avoidance in Nigeria.

1.3 Objective of the Study

This research work titled "the assessment of tax evasion and tax avoidance in Nigeria" seeks to expose the major consultants facing the administration of taxes in Nigeria and the consequence that these constraints have on the Nigeria economy to identify the evils tax evasion and tax avoidance, as well as identify the forms they take and to suggest possible solutions to the problem of controlling tax evasion and tax avoidance. It also makes a critical assessment of the adequacy of the legal provision against these evils and further expose how these evils have hindered the department of the nation.

It is sincerely hoped that this work will arouse the interest of four officials, tax payers a change of attitude and curb these evils that pose a great obstacles in our search for a better nation.

1.4 Significance of the Study

Taxation is a subject which effect the lives of all men whether directly or indirectly. this invariably means that the society as a whole is affected by taxation in Nigeria, as it strives to achieve its societal goal. It is hoped that this work will help the society come to better understanding and appreciation of the essence of taxation and encourage them to desist from the practices of tax evasion and tax avoidance. Tax officials revenue collects officer also stand to benefit from the suggestion proffered by the researcher. Even the government has plenty to gain from picking some ideas from this work and implementing them since the subject affect all men all men stand to gain from this work and this create a better nation for all of us.

1.5 Scope of the Study

This work include information gathered from tax official and tax payers in Ilorin, Kwara State, since the assessment created by tax evasion and tax avoidance are mainly identified in all the 36 states of the federation, this information is extensively application to the country as a whole. The reason behind this section is the availability of satisfactory data and the willingness of the tax official and tax payers in this state to provide helpful information.

This study is mainly based on the information obtained, findings from books and documents about federal government tax revue, as well as helpful details obtained from tax records and the result of interview with tax official and tax payers.

1.6 Research Methodology

Research methodology has to do with the rules principles, procedure as well as the ways and manner in which the scientific investigation is to be carried out ii state the method of data collection to be adopted for this research work.

Primary and secondary sources were used to collect data and primary sources of data include interview and administration of questionnaire, while secondary data include journals, staff manual, textbooks and other materials.

1.7 Research Question

What are the impact of economic and social effects of tax evasion and tax avoidance in Nigeria

How do tax evasion and tax avoidance affect the economic price stability in Nigeria

How do tax evasion and tax avoidance affect the economic growth and development in Nigeria.

1.8 Plan of the Study

This research report is divided into five chapters

Chapter one contains introduction, background of the study, research assessment, significance of the study, scope of the study, research methodology, research hypothesis, research question, plan of the study and definition of relevant word.

Chapter two contains literature review on the research topic and the third

Chapter contain the management of the business organization, data generated and discuss of result.

Chapter four deals with historical background of case study, research design as well as the assessment of tax evasion and tax avoidance in Nigeria.

Chapter five contains summary, conclusion and recommendation made at the end of the research work.

1.9 Definitions of Relevant Terms

Two terms will be in constant use all through this research work and therefore there is the need to clearly define them so as to convey a concise understanding of the content of this work to the reader. The terms are tax evasion and tax avoidance.

Tax Evasion:

Is a deliberate attempt not to pay tax. it is an illegal practice which stems from acts of concealing, dishonesty, deception, ignorance, negligence or outright escape of tax payment on the part of the tax payer and results in his paying less tax or not tax at all. this of course, reduces the revenue that would have otherwise accrued to government.

Tax avoidance:

Is defined as the process of arranging one" affairs in such a way as to take advantage of loop holes or provision in the tax laws. The result is similar to that of tax evasion, as the tax payees ends up paying less than he would otherwise have paid or does not pay at this reducing the revenue that would have accrued to government.

5.0 Summary of Findings, Conclusion and Recommendation

5.1 Summary of Findings

Having viewed all the findings carried out in the form of questionnaire, interview conducted and the review of relate literature, it is emphatic that taxation is indispensable and essential for continued existence and economic strength of the modern state. Notwithstanding, majority of tax payers in Nigeria, are yet to understand the payment of taxes is essential to their existence as individual and as a nation. This lack of appreciation of the importance of taxation among tax payers can be attributed to ignorance and lack sense of civic responsibility on the part of the tax payers.
It is important to say that unless the present level tax evasion and avoidance in Nigeria is curbed, the realization on the general objectives of raising revenue to finance the countries development plants is untenable.

The following reason were discovered as being responsible for why people engage in the evil practices of tax evasion and avoidance.

Unbearable high tax rates

Lack of faith in the ability of the government to properly use the money collected

Total ignorance of the motive behind taxation

The inefficiency of tax administration and the untrained tax official

Absence of any visible benefits accruing to tax payers

The ridiculous low penalties prescribed in the stated tax law for late payment or non payment of taxes.

Outright unwillingness to contribute towards the unkeep of the society.

A general agreement that the masses bear the brunt of taxation.

Failure of tax official to issue notices advising tax payers to keep accurate records of their business transaction resulting in the fact that little or no records are kept in sole proprietorship and partnership.

Illiteracy most tax payers are not literate

Confusion concerning the computation of tax liability.

5.2 Research Limitations

This research work was not done without limitations. The researcher encountered some constraint in the course of carrying out this research.

These limitations were.

Lack of adequate time for in depth research work to be carried out by the research

Inadequate finance for the production of some necessary materials and copies.

The red taped involved in obtaining information also posed a serious limit. In gathering in format series of approvals by diverse officials were required before such information could be divulged. Data mostly figures referred to as "classified data/information" were tightly withheld based on the fact that they are not meant for public consumption.

Transportation cost to and from the company was a bit costly. These constraint not withstand the researcher were able to gather relevant information considered necessary for this research work.

5.3 Conclusion

In the light of the research carried out on the topic titled "The problem of the tax evasion and avoidance in Nigeria it is very clear that these two evils have slowly but steadily eaten into fabrics of the nations economy and are very likely to increase in intensity and effect unless handled a tax evasion and tax avoidance be attacked in its entire ramification, if there is to be any meaningful tax administrational this country and if the economy of the country must improve

5.4 Recommendations

Having established the fact that tax evasion and avoidance are rampant in the country couple with the fact that the various tax authorities rarely evoke the appropriate provision of the law to fight tax evasion and avoidance it is necessary for the researcher to make some necessary suggestion of combating these evils. These are discussed as follows.

Tax law:

There should be an attempt at improving the law itself. The often quoted view of Adam Smith "that tax to be paid out to be certain and that the form of payment manner of payment and the quantity to be paid ought to be clear and plan" and still hold ground today such certainty clarity and plainness can only originate from a meticulous drafting of tax legislation to rid it of all ambiguities and completeness, this will help preventing any attempt by tax payers and their advisers to manipulates the law to achieve their advance motive.

Public enlightment:

Must tax payers in Nigeria are ignorant of this roles and motives of taxation in a modern society, as well as being ignorant of some specific taxes (like capital gain tax, capital transfer tax e.t.c) in the country other are dishonesty and lack of sense of civic responsibility educational and public enlightment programmes should be carried out to educate the citizens on the evils of tax evasion and avoidance to society and to help them understand that tax officials are not public enemies but servants. The programme should include the publication of articles in magazines, newspaper and journals, the organization of lecturers with various groups of tax payers and the organization of programme on radio and television.

There should also be link between tax paid and the services rendered in order to prevent evasion.

Literature business should be compelled to keep account and utilize the services of qualified accountant in the preparation of their audited accounts.

In order to ensure compliance and reduce tax evasion, tax payment should be designed to meet the convenience of those tax laws be reviewed and amends to permit tax payers not to be subjected to the PAYE system, to pay their taxes installmentally during the year in which income is earned rather than in arrears.

Short penalties for various offense should be imposed and carried out. This will help reduce evasion and discourage intending evades and avoiders.

Frequency and prompt exchange of information respect of tax payers amongst the various tax authorities is necessity. Similarly, the various tax department should seek the support of all other agencies of government for the purpose of gathering information about tax payers list of contractors can be commence and industry and such list used to cross check the correctness or otherwise of tax returns field by the contracts.

To properly combat tax evasion and avoidance, the improvement of tax staff is a necessity. Personal should be trained and machinery for gathering tax information should be provided. this can be done by organizing in service training programme and employing computers to handle logistic matters.

The use of tax clearance certificate as a means of combating tax evasion in this country has so far proved to be a success in term of huge revenue yield. It is private business transaction with a view of binding more self-employed people into tax net.

There should be an adequate number staff for tax collection to ensure that all areas which need to be covered are properly covered and the taxes collected, such staff should always carry their identify card to alternative their claims and be properly remunerated to curb their collaboration with evaders.

There is a need for a national indentify card, details of which can be used to identify those who have fulfilled their civic duties.

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