The research instrument used in collecting the data was questionnaires and oral interview. American journal of humanities and social sciences 1. Pdf tax evasion and the law in nigeria researchgate. Causes and effects of tax evasion and avoidance on the. Its always best to discuss any questions or concerns with a tax professional before filing your taxes. This will assist government to make life more comfortable for her citizen. To solve the research problem, both primary and secondary data were collected. However, despite the government efforts to bridle the practices of tax evasion and tax. It triggers prices if not properly managed and reduces the zeal for investment. Worksheet solutions the difference between tax avoidance and tax evasion theme 1. This paper examined the impact of tax evasion and avoidance on growth of the nigerian economy. Given that the purpose of introducing electronic tax system is to improve revenue collection which will in turn improve the countrys economic growth, the study empirically examined how the implementation of etaxation in 2015 has affected tax revenue, federally collected revenue and taxtogdp ratio. Law and economics of taxation, tax avoidance and tax evasion.
What role does education play in the tax compliance decision. Just be aware that there are some gray areas in the law. First, tax avoidance or evasion occurs across the tax spectrum and is not peculiar to any tax type such as import taxes, stamp duties, vat, paye and income tax. Hmrc to tackle avoidance, evasion, and noncompliance. The results show that tax evasion and income tax rate has a u shape relationship. The starting point is an incursion into the history of taxation, especially personal taxation in nigeria. O 2 0 effect of tax avoidance and tax evasion on personal income tax administration in nigeria. The line between tax avoidance and tax evasion can be slight. Getting a competent, honest tax expert can save you from going over the line to tax evasion.
Apr 29, 2020 note the word avoid in the definition. Tax evasion is a problem which seemed to have defied solution, had bedeviled the nigerian. Tax avoidance and tax evasion explained and exemplified. This brings about reactions from various sections of the economy. Impact of tax evasion and tax avoidance in nigeria economy pdf. An empirical study of tax evasion and tax avoidance. The concept of taxation has been a concern of global significance as it affects every economy irrespective of national differences oboh etal. Omorogiuwa 1981 has opined that ineffective tax administration is the main factor responsible for large scale tax evasion in nigeria. Economic development is the development of economic. If a state or federal agency has already contacted you about an issue with your taxes, its important to have an skilled advocate on your side.
This may include tax avoidance, which is tax reduction by legal means, and tax evasion which is the criminal nonpayment of tax liabilities. American journal of humanities and social sciences vo1. Have new tax reforms reduce tax evasion and tax avoidance and tax avoidance in nigeria 6. This paper attempts to look at tax evasion and avoidance and the approach of the nigerian courts and legislature. In the second step, the effects of tax evasion and tax revenues on economic stability are studied. Tax avoidance and tax evasion what is the difference. Many commentators and analyst blamed the situation on the tax authorities, for not living up to expectation with regards to tax administration.
This study examined the impact of etaxation on nigerias revenue and economic growth. Evasion, avoidance, and real substitution response 1428 1. In contrast, tax avoidance is the legal use of tax laws to reduce ones tax burden. Legal aspects of tax avoidance and tax evasion two general points can be made about tax avoidance and evasion. Tax avoidance and tax evasion the differences south. This government effort, notwithstanding, the problem of tax evasion and avoidance still persists alabi, 2001. 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. May 19, 2017 the article considers the effects of tax avoidance and tax evasion on nigeria economic development. Impact of electronic taxation on tax evasion and avoidance. A similar research conducted by 11 captured no effects between tax evasion and tax penalties. Pdf curbing tax evasion and avoidance in personal income tax. Tax evasion is thus illegal and a criminal offence punishable by fines or even imprisonment.
There is no doubt that revenue due any government will be reduced by the unpatriotic act of tax evaders. The role of multinational companies in tax evasion and tax. Laundering money for salinas, bongo, the abachas argentine offshore bank scam of the 1990s, plus a secret. Inflation affects both the private and government sectors as well as individuals.
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. An empirical analysis of tax leakages and economic growth in. Tax avoidance, tax evasion, tax heavens, illicit financial flows and global tax governance are real buzzwords that have come to dominate current international political and financial domains. Causes of tax evasion in nigeria and effects on the economy.
Tax rate showed a positive relationship with tax evasion. Tax evasion is the illegal evasion of taxes by individuals, corporations, and trusts. Investigation into the causes of tax evasion edustore. The research instrument used in collecting the data was questionnaires and oral. 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. There are some forms of tax evasion devices which nigeria has. The study of the effects of tax evasion and tax revenues on. Sources of aggressive tax planning, avoidance, evasion and noncompliance avoidance, evasion and noncompliance can be seen in a wide range of behaviours across different customer groups and taxes. The article establishes that tax evasion and avoidance is a very serious social menace causing a major setback on nigeria economic development. Given that the purpose of introducing electronic tax system is to improve revenue collection which will in turn improve the countrys economic growth, the study empirically examined how the implementation of etaxation in 2015 has affected tax revenue, federally collected revenue and tax togdp ratio.
Tax evasion has been an issue of concern in the nigerian tax system for decades. Most individuals eligible to pay tax are not usually amenable to doing so willingly thereby resulting in tax evasion and tax avoidance. Worksheet solutions the difference between tax avoidance. 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. The problem of tax evasion and tax avoidance in nigeria. Therefore, this study seeks to investigate the effect of tax evasion and avoidance on nigerias economic growth. According to omotoso 2001, in his definition of the modern taxes. Kim 2008 believes that tax evasion is illegal and violation of tax laws, whereas tax avoidance is a legal way of decreasing tax burden. Nigeria tax system was identified with many problems, such as tax evasion, avoidance and record falsifications which account for the consistent low tax yields.
Multinational companies and tax evasion and tax avoidance. However, when there are leakages in tax collection through evasion, no development can take place, thus in most countries where, there is high rate tax evasion and avoidance, it is usually associated with high unemployment. Jun 16, 2017 it is the view of many people that the loss of revenue caused by widespread tax evasion and tax avoidance in nigeria is due to inefficient and inept tax administration. 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. While the law regard tax avoidance as a legitimate game and tax evasion is seen as immoral and illegal. Tax avoidance is thus considered to be a matter of being sensible. Impact of etaxation on nigerias revenue and economic growth. This research project is a very crucial study on the effects on tax evasion and avoidance on nigeria economy. Law and economics of taxation, tax avoidance and tax. Effects of tax evasion and avoidance tax evasion and tax avoidance has undoubtedly affected adversely the government revenue generation capability and the economy as a whole. Curbing tax evasion and avoidance in personal income tax administration. The study examines the effect of tax avoidance and tax evasion on personal income tax administration in 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. The effect of tax evasion and avoidance on nigerias. Tax evasion and economic growth in selected african countries, 19852010 william bekoe4 abstract major tax reforms were undertaken in the 1980s with the aim of enhancing revenue mobilisation and laying the foundation for sustained economic growth. New national tax policy approval in late december 2008 nigeria hg org. Effects of tax evasion and avoidance on the nigerian. Attempts are also made to define and distinguish evasion and avoidance while at the same time possible reasons are explored for explaining why people react to evasion and avoidance. Tax evasion and the law in nigeria authority shall serve a demand note on the taxable person, and if payment is still not made within one month from the date of the service of the demand note, the relevant authority may proceed to enforce the payment in line with the provisions of the act1. Together these are forecast to raise an additional. Tax noncompliance is a range of activities that are unfavorable to a governments tax system. Particular menace in nigeria tax system is tax evasion occasioned by where taxpayers pay taxes and yet provide own infrastructure, increasing costs to taxpayers etc.
Impact of etaxation on nigerias revenue and economic. Effects of tax evasion and avoidance on the nigerian economy. Pdf this paper has dealt with the incidence of tax evasion and how. The impact of tax evasion and tax aviodance in nigeria economy. 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. Problems within the tax administration machinery is one of the causes of tax evasion and avoidance in nigeria, such problems arises from the loopholes found in the provision of tax law, and sometimes such problems ranged from tax law, untrained man power, transportation issues and corrupt practices endulged by taxpayers. This study examined the impact of etaxation on nigeria s revenue and economic growth. Tax evading attitude is argued to have an adverse effect on governments socioeconomic and political programs. In the first step, using monetary approach, an index for tax evasion for oecd countries is estimated. This work evaluates the effect of tax avoidance and tax evasion on economic growth and development in nigeria 20062016. Yet, a potential increment in penalties resulting from tax evasion connote a corresponding decrease in taxpayers potential taxevading behaviors 23. Why avoidance, evasion and administration are central, not peripheral, concepts in public finance 1426 1. Electronic taxation was introduced to ensure efficiency and justice in collecting tax.
Mar 01, 2018 tax avoidance, tax evasion, tax heavens, illicit financial flows and global tax governance are real buzzwords that have come to dominate current international political and financial domains. What is the ethical view of an average selfemployed nigerian on tax evasion and tax avoidance. The use of the term noncompliance is used differently by different authors. Outside the rank and file of the salaried employees, most citizens in nigeria and cameroon pay inadequate taxes or no taxes at all and behaviours like these have. The attitude of the nigerian courts and legislature to tax evasion and avoidance are illustrated and in conclusion suggestions are offered to remedy the various. The study adopted the expost facto research design and. It aimed to give a detailed examination of the effect of tax avoidance on the economic growth and development 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. Effect of tax avoidance and evasion to the economic. Tax avoidance, understood as the use of the socalled loopholes in the tax legislation to reduce ones tax payments increasingly tops news charts.
Reduction of quantum of tax liabilities through fraudulent tax returns. Tax evasion and avoidace in nigeria nials discussion. Taxation is process on machinery by which group or communities made contribution from. Its most general use describes noncompliant behaviors with respect to different. However, despite the government efforts to bridle the practices of tax evasion and tax avoidance in nigeria, the problem still persists.
Prospects and impacts of electronic taxation in a developing economy like nigeria. Judicial and legislative approaches to tax evasion and avoidance. 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. Tax evasion may be distinguished from tax avoidance the reorganization of economic activity, possibly at some cost, to lower tax payment. The relationship between civil and criminal tax fraud and its. Tax evasion and governance challeneges in the nigerian. Judicial and legislative approaches to tax evasion and. May 30, 2018 the impact of tax evasion and tax aviodance in nigeria economy. World banks doing business 2011 report asserted that while ghana 78, south africa 24, and nigeria ranks 4. Pdf effect of tax avoidance and tax evasion on personal income.
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. Yet african countries continue to experience low tax revenue, hence declining economic growth. Secondly, legislation that addresses avoidance or evasion must necessarily. The study of the effects of tax evasion and tax revenues. Law of taxation, nigeria tax system, law and economics, tax evasion, tax avoidance. The taxpayers responsibilities key terms tax avoidancean action taken to lessen tax liability and maximize aftertax income. 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. Tax deficiency can arise by operation of law when there is a failure to file and the government later determines the tax liability. What are the possible effects of tax evasion and avoidance economics development of the country and abia state in particular 4. The effect of tax evasion and avoidance on nigerias economic. Do the loopholes in the tax laws encourage tax evasion and tax avoidance in nigeria.
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