Tax planning module technical note nigeria business. Many commentators and analyst blamed the situation on the tax authorities, for not living up to expectation with regards to tax administration. Laundering money for salinas, bongo, the abachas argentine offshore bank scam of the 1990s, plus a secret. Our results suggest that cracking down on evasion by the wealthy can be an. Why avoidance, evasion and administration are central, not peripheral, concepts in public finance 1426 1. 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. After stopping to evade, tax payers do not start avoiding more. 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. Abstract this paper attempts to look at the nigeria tax administration and its capacity to reduce tax evasion and.
Tax avoidance, capital flight and poverty in nigeria. 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 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. The impacts of tax evasion and avoidance to the economy of nigeria cannot be overemphasized. While the law regard tax avoidance as a legitimate game and tax evasion is seen as immoral and illegal. Taxation is process on machinery by which group or communities made contribution from. Tax evasion is the illegal evasion of taxes by individuals, corporations, and trusts.
Taxpayers are inherently d isposed to reducing their tax liability either through tax evasion or tax avoidance. But your business can avoid paying taxes, and your tax preparer can help you do that. Tax evasion, income inequality and opportunity cost s of. The problem of tax evasion and tax avoidance in nigeria. Tax planning module technical note nigeria business news. This is one of the reasons why the hdi and the educational index of the state are as low as 0. Request pdf the role of multinational companies in tax evasion and tax avoidance. Tax evasion and governance challeneges in the nigerian. This study aimed to assess the extent factors that influence tax evasion a case of temeke municipal council.
Tax evasion may be distinguished from tax avoidance the reorganization of economic activity, possibly at some cost, to lower tax payment. 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 thus considered to be a matter of being sensible. This study was on the causes and effect of tax evasion and avoidance on the economy board of internal revenue in abia state. To solve the research problem, both primary and secondary data were collected. Tax avoidance on the other hand is the legal use of tax laws in order to reduce one.
Tax knowledge, penalties and tax compliance in small and. Tax evasion and tax avoidance phenomena are present in all economies. The study examines the effect of tax avoidance and tax evasion on personal income tax administration in nigeria. 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. 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. 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. 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. 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.
Example of tax evasion is failing to declare part of ones income when one is under duty. 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. 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. Chapter 8 tax avoidance and tax evasion iarc publications. 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 evasion and avoidance behaviour of the selfemployed nigerians. This practice informed the need for tax audit, to ensure tax payers file in accurate information regarding their income and expenses. Causes and effects of tax evasion and avoidance on the. Read all the latest news, breaking stories, top headlines, opinion, pictures and videos about tax evasion from nigeria and the world on today. This will assist government to make life more comfortable for her citizen. It is in light of the foregoing that the various tax regimes provide for the punishment of tax evasions in nigeria. In fact, in 2014, pakistan, together with the philippines and vietnam, accounted for more than three quarters of all illicit cigarettes consumed in asia. Law and economics of taxation, tax avoidance and tax evasion. 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 is thus illegal and a criminal offence punishable by fines or even imprisonment. Causes of tax evasion in nigeria and effects on the. The tax structures themselves are undoubtedly skewed by the realities of tax evasion, avoidance, and administrative costs. Law and economics of taxation, tax avoidance and tax. Tax evasion and avoidance have adverse effect on government revenue. Tax evading attitude is argued to have an adverse effect on governments socioeconomic and political programs.
The case of nigeria tax evasion and tax avoidance reduce government revenues. This research specially focuses on the causes and remedies of tax evasion and avoidance in nigeria. This paper focuses on tax evasion and tax avoidance behavior of the self employed, using some selected states in. Impact of tax administration on government revenue in a. Tax evasion is the illegal evasion of taxes by dondes, corporations, and trusts. 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. Tax avoidance and tax evasion what is the difference. Tax avoidance and tax evasion are widely believed to be important factors limiting revenue mobilisation. The existence of tax evasion and tax avoidance in nigeria tax. Effect of tax avoidance and tax evasion on personal income tax administration in nigeria.
The roles of multinational companies in tax evasion and. Literature revealed that tax avoidance and evasion represent some of the perplexing problems facing the nigerian economy. Tax rate showed a positive relationship with tax evasion. Tax evasion, tax avoidance and tax expenditures in. The research instrument used in collecting the data was questionnaires and oral interview. While some had blamed the situation on tax authorities for not living up to expectation with regards to tax administration, others attribute it to. Electronic taxation was introduced to ensure efficiency and justice in collecting tax. 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. The importance, how to, effect causes relationship, comparison, history, role. 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. The difference between tax avoidance and tax evasion. Tax evasion may be distinguished from tax avoidancethe reorganization of economic activity, possibly at some cost, to lower tax payment. Prospects and impacts of electronic taxation in a developing economy like nigeria.
Causes of tax evasion and tax avoidance in nigeria tax evasion according to uadialeet al. Pakistan problems of tax evasion, tax avoidance and. This is approved for students in accountancy business computer science economics engineering arts. Tax noncompliance is a range of activities that are unfavorable to a governments tax system. One of the effects of tax evasion and avoidance is that, it discouraged bribery, corruption and waste of resources.
Nigerian tax system in 1998, tax payers are now required to file in their tax returns independently. The use of the term noncompliance is used differently by different authors. 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. Tax payers are inherently disposed to reducing their tax liability either through tax evasion or tax avoidance. How can tax evasion and tax avoidance by minimized and eliminate in abia state. Tax compliance is a major problem for many tax authorities. 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 analysis shows that opportunities for avoidance and evasion will be sustained, not eliminated, by a change in tax structure. Difference between tax avoidance and tax evasion with.
Impact of electronic taxation on tax evasion and avoidance a. Tax evasion, tax avoidance and tax expenditures in developing. In the second step, the effects of tax evasion and tax revenues on economic stability are studied. 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. Oct, 2014 causes of tax evasion and tax avoidance in nigeria tax evasion according to uadialeet al. Tax avoidance and tax evasion the differences south. Case study of federal inland revenue service firsogun state branchproject topics and materials in nigeria. Businesses get into trouble with the irs when they intentionally evade taxes. The role of multinational companies in tax evasion and tax. Tax avoidance is an act of doing everything possible within the confines of the tax law to reduce the tax paid.
However, little attention has been placed on the issues of tax evasion in nigeria. Tax evasion and tax avoidance, a problem which seems to have defied solution, had been deviled the tax system right from colonial times. Tax compliance may be viewed in terms of tax avoidance and evasion. On the contrary, tax evasion is a practice of reducing tax liability through illegal means, i. The article establishes that tax evasion and avoidance is a very serious social menace causing a major setback on nigeria. Effect of tax evasion on economic development of yobe state.
In the first step, using monetary approach, an index for tax evasion for oecd countries is estimated. Is the existence of loopholes in the nigerian tax law system an opportunity for tax avoidance. 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. International journal of business and social science.
Impact of electronic taxation on tax evasion and avoidance. Abdulhamid ellawule, lecturer, department of accounting, federal university, gashua, nigeria. The results show that tax evasion and income tax rate has a u shape relationship. This research specially focuses on the causes and remedies of. Evasion, avoidance, and real substitution response 1428 1.
Avoidance takes the form of investment in arts collection, emigration of persons and capital. Its most general use describes noncompliant behaviors with respect to different. Economic development is the development of economic. 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.
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. The two are conventionally distinguished in terms of legality, with avoidance referring to legal measures to reduce tax liability and evasion as illegal measures. This is a serious indictment of the administrative machinery and capacity of the tax authorities in nigeria. This has led to a growing attention among policy makers and scholars.
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. The result of tax evasion and avoidance is tax revenue loss which may cause serious damage to the proper performance of the public sector. Nigeria tax system was identified with many problems, such as tax evasion, avoidance and record falsifications which account for the consistent low tax yields. The article establishes that tax evasion and avoidance is a very serious social menace causing a major setback on nigeria economic development. The study of the effects of tax evasion and tax revenues. Law of taxation, nigeria tax system, law and economics, tax evasion, tax avoidance. Tax evasion has been an issue of concern in the nigerian tax system for decades. In contrast, tax avoidance is the legal use of tax laws to reduce ones tax burden. Tax evasion and avoidance both have negative implications on the economy as they. Effect of tax evasion on economic development of yobe. Tanzania one of the important areas where tax evasion has been reported is customs duties. And this practice has affected the nigerian economy negatively. This may include tax avoidance, which is tax reduction by legal means, and tax evasion which is the criminal nonpayment of tax liabilities.
Is there any effect of tax evasion and tax avoidance on the nigeria economy. The effect of tax evasion and avoidance on nigerias. 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. The impact of tax evasion and tax avoidance in nigeria. 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. 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. May 15, 2019 on the contrary, tax evasion is a practice of reducing tax liability through illegal means, i. 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. 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. Multinational companies and tax evasion and tax avoidance.
An empirical study of tax evasion and tax avoidance by. Impact of tax administration on government revenue in developing economy. Effect of tax avoidance and tax evasion on personal income. 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. Despite its importance, limited scientific research has been undertaken the assessment of tax evasion practices in tanzania. 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. This brings about reactions from various sections of the economy. By definition, tax evasion is the reduction fred w. Compliance might therefore be better defined in terms of compliance with the spirit as. The study of the effects of tax evasion and tax revenues on. A conceptual approach of tax evasion and tax avoidance directly correlated with corruption and shadow economy.