EFFECTS OF TAX EVASION AND AVOIDANCE ON ECONOMY OF NIGERIA.
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EFFECTS OF TAX EVASION AND AVOIDANCE ON ECONOMY OF NIGERIA.
Chapter one
INTRODUCTION
1.1. Background of the Study
Nigeria is abundantly endowed with oil and gas, among other mineral resources, but the country’s over-reliance on oil money for economic development has left much to be desired.
According to Ariyo (1997), the 1973/74 oil boom increased Nigeria’s overdependence on oil money to the exclusion of all other revenue sources. This is unsustainable due to oil market fluctuations, which have typically resulted in deficit budgets.
Popoola (2009) believed that Nigerian tax administration and practice should be oriented around achieving economic goals, as the government’s budget for the year focuses on the oil sector.
While decrying the Nigerian tax system’s low productivity, “deficiencies in the tax administration and collection system, complex legislations, and apathy on the part of those outside the tax net” were identified as some of the root causes, according to Ijewere 1991 and Ndekwu 1991, as cited in Ariyo 1997.
Workers in Nigeria’s informal sector do not see the need to pay taxes, despite the fact that they dominate the economy. Civil servants should only pay tax on their earnings, which is equivalent to flogging a willing horse.
Furthermore, the efforts of the strong union in the formal sector do not even lay the groundwork for successful tax policy execution in the formal sector (Ayodele 2006).
Even revenue collection officers appear to be tolerant, if not conniving, with those in the informal sector when it comes to tax enforcement. All of this leads to income loss.
This research effort is particularly relevant in reawakening the consciousness of the Nigerian government and public on the successful use of taxes as a developmental tool, as well as examining the effect the tax system has had on the economy thus far.
Taxation undoubtedly has an impact on Nigeria’s economic progress. Efforts will be made in this research to determine how much Nigeria has been able to attain its economic goals through tax policies and administration.
The administrative roles of the federal, state, and municipal governments must also be reviewed in order to discover the root reasons of tax evasion and avoidance.
1.2 Statement of the Problem:
The first requirement of any modern government is to generate sufficient revenue, which is literally the breath of its nostril.” Thus, taxation is the government’s single largest source of revenue.
Nigerians see taxation as a way for the government to generate income at the price of their sweat. Many Nigerians have recently expressed worry over tax fraud and avoidance, as well as their impact on the Nigerian economy and revenue production.
In an effort to determine how taxation might be used to promote revenue collection or revitalise the Nigerian economy, tax evasion and avoidance have been observed to be on the rise in Nigeria. Tax avoidance and evasion are delicate subjects in taxation, hence the study is also quite sensitive.
As a result of the concerns mentioned above, the researchers decided to conduct research on the consequences of tax evasion and avoidance on the Nigerian economy.
1.3 RESEARCH QUESTIONS.
The researcher formulated the following study questions in order to reach a solid conclusion and propose solutions to Nigeria’s tax administration, evasion, and avoidance issues.
i. Do tax evasion and avoidance have a genuine impact on the government’s revenue growth?
ii. What management and organisational strategies will reduce tax evasion and promote administrative autonomy?
iii. Is there a relationship between tax administrators and taxpayers, and what circumstances could contribute to a high level of tax evasion?
iv. How do tax evasion and avoidance harm the Nigerian economy?
1.4 Objectives of the Study
The overarching goal of this research is to evaluate the impact of tax evasion and avoidance on the Nigerian economy, including its role in extending the government’s revenue base and the country’s overall economic development.
Therefore, the goal of this study is to show:
i. Examine the effectiveness of the tax administration machinery in decreasing tax evasion and avoidance.
ii. Determine the extent to which tax evasion and avoidance damage government revenue, particularly in Lagos state.
iii. Determine the extent to which tax evasion and avoidance harm the Nigerian economy.
iii. Investigate how the problem of evasion and avoidance in Nigeria might be addressed.
1.5: Research Hypotheses
Hypothesis One
Ho: Tax evasion has little effect on revenue growth in the Lagos State government.
Hi: Tax evasion has an impact on revenue growth for the Lagos State Government.
Hypothesis two.
Ho: The Tax Administration is not responsible for tax evasion and avoidance in Lagos State.
Hi: Tax Administration is in charge of tax evasion and avoidance in Lagos State.
1.6 Significance of Study
The significance of this work can first be evaluated in terms of its utility to the Nigerian people as a whole.
This study, among other things, will look into the impact of tax evasion and avoidance on government income and economic growth. Concern about the economy-wide impact of tax is significant because tax evasion and avoidance may cause the government to reduce spending on certain critical services, harming government effectiveness and efficiency.
Essentially, this research work aims to expose the role.
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