THE EFFECT OF TAX EVASION ON NIGERIA’S TERTIARY EDUCATIONAL SYSTEM
ABSTRACT
This study looked into the impact of tax evasion on Nigeria’s tertiary education system (a case study of University of Lagos, Akoka-Lagos). The study’s relevant prior literature was reviewed. We used a descriptive survey research design. The total sample size for this study was one hundred and eighty (180) tax payers drawn from the University of Lagos, Akoka’s nine (9) faculties.
Each of the nine faculties was assigned twenty (20) employees. The sample was chosen using a simple random sampling technique. The researcher administered a questionnaire to the selected respondents in order to collect data.
The collected data was statistically analyzed using descriptive statistics such as tables, frequency, and percentage, and the Chi-square (X2) statistical technique was used to test the hypotheses at the 0.05 level of significance. The findings revealed that companies evade tax due to a lack of a good tax enforcement agency in Nigeria, and failure to impose appropriate penalties on companies that evade tax encourages such acts to be repeated.
Second, government policies do effectively eliminate the problem of tax evasion. Finally, tax evasion has a significant impact on the funding of Nigeria’s higher education institutions.
It was therefore recommended, among other things, that a good tax enforcement agency be established or established in Nigeria in order to reduce the incidence of tax evasion by companies as well as individuals; that appropriate penalties be imposed on companies that evade tax by the appropriate tax agency or authority in order to discourage such acts from being repeated as well as to serve as a warning or lesson to others; and that adequate
CHAPTER ONE
INTRODUCTION
1.1 The Study’s Background
Education is universally recognized as a tool for national development in many countries around the world. The term educational system most commonly refers to public schooling, not private schooling, and more specifically to kindergarten through high school programs.
Schools or school districts are typically the smallest recognized form of “education system,” whereas the federal level of education is the largest. States are also thought to have educational systems. Simply put, an educational system includes everything involved in educating public school students at the federal, state, and local levels.
Nigeria’s educational system is based on the 9-3-4 system (primary school for 6 years, junior secondary school for 3 years, senior secondary school for 3 years, and university first degree for 4 years). Tertiary education, as a subset of any country’s educational system, consists of universities, polytechnics, and educational colleges. Universities are established to fulfill three roles: teaching, research, and community service, thereby contributing significantly to the nation’s social and economic development.
They are expected to impart high-level skills to a reasonable proportion of the workforce, as well as to develop individuals’ intellectual abilities and to engage in the training of competent and responsible professionals who are required in virtually all aspects of human endeavor. Polytechnics are critical to Nigeria’s educational, scientific, and technological advancement.
They are established to train and produce the technical manpower required to carry out the Nation’s development plans, goals, and strategies. Colleges of education are “train-the-trainers” institutions established to train and equip teachers for their important roles.
Education is a process of systematic training and instruction designed to transmit knowledge and the acquisition of skills, potentials, and abilities that will enable an individual to effectively contribute to the growth and development of his society and nation.
Education entails a person’s overall development, including physical, social, moral, intellectual, and mental growth (Osakwe, 2006). The process of facilitating learning or the acquisition of knowledge, skills, values, beliefs, and habits is referred to as education.
Tax is a civic contribution imposed by the government on her subjects (individuals and corporate bodies) in order to fund the government’s responsibilities of ensuring public welfare on social, economic, and political levels (Kiable and Nwankwo, 2009).
All companies incorporated in Nigeria must pay a 2% education tax on their profits. This tax is viewed as a social obligation imposed on all businesses to ensure that they contribute their fair share to the development of educational facilities in the country.
Because basic education is already taken care of by Universal Basic Education (UBE), the federal government of Nigeria announced the establishment of the Education Trust Fund (E.T.F) through the Education Tax, decree no 7 of 1993, before it later metamorphosed into Tertiary Education Trust Fund (TETFUND), the whole idea was to create an intermediary agency to manage the two percent of all assessable profit of companies registered in Nigeria on its behalf as a special fund.
According to the provisions that established it, the Tertiary Education Trust Fund (TETFUND) is intended to supplement other federal and state government grants, specifically for the provision or maintenance of essential physical infrastructures for teaching and learning, including the provision of instructional materials and equipment, research and publication, academic staff training and development, and any other need that, in the opinion of the Board of Trustees, is deeme.
A number of issues were alleged to have hampered effective tax administration in Nigeria. Tax evasion, on the other hand, is a major issue. Tax evasion is defined as intentional illegal behavior that involves a direct violation of tax laws in order to avoid paying taxes.
Tax evasion is a phenomenon that occurs in all countries. Indeed, regardless of the measures put in place, some companies incorporated in Nigeria continue to elude the government’s rules and regulations, as well as evade tax. Manipulation of educational tax law is considered illegal and must be checked and addressed by relevant tax authorities.
Tax evasion occurs when a tax payer or corporate body arranges his financial affairs in such a way that he pays the least amount of tax possible by breaking the law (Feld and Frey 2002). It can be accomplished through a deliberate act of omission or commission, such as understating income, documenting fictitious transactions, overcasting expenses, failing to file returns, and other methods.
However, in order to increase government revenues, the government must address the issue of tax evasion through the Tertiary Education Trust Fund (TETFUND) for the continuous improvement and maintenance of standards in Nigeria’s higher educational institutions.
1.2 Problem Description
Tax evasion has resulted in the loss of revenue owed to the government, resulting in insufficient revenue generated by the Tertiary Education Trust Fund (TETFUND). The available revenue, however, is insufficient for the government to meet its expenditure obligations, which include the provision of facilities and the improvement of educational standards in Nigerian higher education institutions.
As a result, the government relies solely on revenue generated from the exportation of crude petroleum oil to meet its expenditure obligations on higher education in Nigeria. However, university education in Nigeria is currently confronted with challenges such as insufficient funding, brain drain, a lack of provision and maintenance of essential physical infrastructures for teaching and learning, and other factors that will result in quality educational output in Nigerian higher institutions.
This public outcry over the various challenges faced by university education in Nigeria, such as inadequate finance, brain drain, lack of provision and maintenance of essential physical infrastructures for teaching and learning, and so on, could be traced back to the government’s loss of revenue due to tax evasion by companies in Nigeria.
As a result, the researcher intends to conduct research on the impact of tax evasion on Nigeria’s tertiary educational system (a case study of University of Lagos, Akoka-Lagos).
1.3 The Study’s Objectives
The primary goal of this research is to investigate the impact of tax evasion on Nigeria’s tertiary education system (a case study of University of Lagos, Akoka-Lagos).
The specific objectives for achieving the main goal of this study could be stated as follows;
1. To discover the causes of corporate tax evasion.
2. To determine whether government policies can eliminate avenues for tax evasion.
3. To assess the impact of tax evasion on Nigeria’s higher education institutions.
1.4 Research Issues
The following research questions will be posed based on the previously stated objectives:
1. What are the reasons for corporate tax evasion?
2. Can government policies eliminate tax evasion avenues?
3. What impact does tax evasion have on the funding of Nigeria’s higher education institutions?
1.5 Hypotheses for Research
1. Government policies do not address the issue of tax evasion.
2. Tax evasion has no discernible impact on the funding of Nigeria’s higher education institutions.
1.6 The Study’s Scope
This research will examine the impact of tax evasion on Nigeria’s Tertiary Education System. The researcher will focus on tertiary institutions in Nigeria, with a case study of the University of Lagos, Akoka Lagos. It specifically investigated the impact of tax evasion on Nigeria’s Tertiary Educational System, taking into account Education Tax and TETFUND. The researcher focused on all faculties at the University of Lagos, Akoka-Lagos.
1.7 Importance of the Research
The study is expected to:
v Assist the government in developing policies that will aid in the elimination of the problem of tax evasion in our tax collection process, allowing us to effectively fund education in the country.
v Assist the government in determining the reasons why many companies in Nigeria evade educational taxes.
v Assist the tax authority in assessing, making decisions, and finding positive ways to collect the appropriate educational tax for the development and adequate financing of our educational sector.
1.8 Study Limitations
Due to time constraints and financial constraints, the research will be limited to Nigeria’s Tertiary educational system, with a case study of the University of Lagos, Akoka – Lagos. In light of this, all staff in all nine (9) faculties at the University of Lagos, Akoka – Lagos were chosen at random.
In addition, the researcher encountered a problem when distributing the questionnaire to the faculty members in their various faculties. The difficulty was that some of the staff were unwilling to respond to the questionnaire due to time constraints.
To overcome this obstacle, the researcher carefully explained the objectives of the research while assuring them that their responses would be treated with strict confidentiality and used solely for academic purposes. As a result, the staff were overjoyed to respond to the questionnaire by providing the necessary information.
1.9 Term Definitions
Education is the process of acquiring general knowledge, developing reasoning and judgment abilities, and generally intellectually preparing oneself or others for mature life.
Educational system: This term refers to public schooling, not private schooling, and is commonly used to refer to kindergarten through high school programs. An education system includes everything involved in educating public school students at the federal, state, and local levels.
Tertiary education, also known as third stage, third level, and post-secondary education, is the educational level that follows the completion of a secondary school.
Taxes are charges imposed by the government on individuals, businesses, or transactions in order to raise funds for public purposes and control the use or production of certain items in the public interest.
Educational tax: This is defined as a tax levied at a rate of two percentage points (2%) on the assessable profit of a company registered in Nigeria (referred to as a “company” in the decree).
Tax evasion is defined as the deliberate and willful practice of failing to disclose all taxable income in order to pay less tax. This behavior is portrayed as a criminal act of violating tax laws, which will eventually result in a decrease in total government reven
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