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(A CASE STUDY OF OYO STATE BOARD OF INTERNAL REVENUE, GOVERNMENT SECRETARIAT, AGODI, IBADAN, OYO STATE, NIGERIA.)
KAYODE OLADIPUPO OLAYEMI
Research Analyst (self employed)
THE POLYTECHNIC, IBADAN
ABSTRACT Tax evasion is a problem which seemed to have defied solution, had bedeviled the Nigerian tax system right from the colonial times. While some have blamed the situation on the tax authorities for not living up to expectation with regards to tax administration, others attribute it to the unpatriotic attitude of the taxpayers. It was in the light of these contending positions that this researcher carried out a survey involving state tax authorities and individual taxpayers in Nigeria. The study sought to identify the causes of tax evasion and avoidance amongst individual taxpayers, the way through which it is perpetrated and the social and economic consequences brought about by this problem. It was found, among others, that loopholes in the tax laws, poverty and lack of adequate public enlightenment are responsible for the problem. The taxpayer
perpetrates this unpatriotic act through such means as concealment of profit and interference with the Revenue agents through bribery and corruption. The situation results in the inability of government to render essential services adequately, creation of resentment among honest taxpayers, and inequality in the society. It was recommended that tax officials should be constantly trained and re-trained on the job, a deliberate and more aggressive public enlightenment campaign be embarked upon by government and the establishment of Revenue Courts by state governments having powers to impose heavy monetary penalties and criminal sanctions.
CHAPTER ONE 1.1 INTRODUCTION
Tax evasion is a crime in almost all developed countries and subjects the guilty party to fines and/or imprisonment - in China the punishment can be as severe as the death penalty. In Switzerland, many acts that would amount to criminal tax evasion in other countries are treated as civil matters. Even dishonestly misreporting income in a tax return is not necessarily considered a crime. Such matters are dealt with in the Swiss tax courts, not the criminal courts. However, even in Switzerland, some fraudulent tax conduct is criminal, for example, deliberate falsification of records. Moreover, civil tax transgressions may give rise to penalties. So the difference between Switzerland and other countries, while significant, is limited. It is often considered that extent of evasion depends on the severity of punishment for evasion. Normally, the higher the evaded amount, the higher the degree of punishment. (Allingham, and Sandmo 1972) According to The desire to uplift one’s society is the first desire of every patriotic citizen. Tax payment is a demonstration of such a desire. The payment of tax is a civic duty and an imposed contribution by government on her subjects and companies to enable her finance or run public utilities and perform other social responsibilities. Taxes, thus, constitutes the principal source of government revenue. However, one of the greatest problems facing the Nigerian Tax
Civil Servants and other salaried workers are the only class of people that actually pay tax in Nigeria. These “Twin devils” have created a great gulf between actual and potential revenue. many of these professionals live a lifestyle inconsistent with reported income. the theoretical equity of the tax to a large measure is lost.System is the problem of tax evasion and tax avoidance. Tax evasion and avoidance no doubt deny any government the tax revenue due to her. contractors. 1. the Nigerian situation seems unique when viewed against the scale of corrupt practices prevalent in Nigeria. As observed by Ayua (1999) these persons blatantly refuse to pay tax by reporting losses every year. which is usually unrealistically low for the nature of their businesses. tax avoidance is the active means by which the taxpayer seeks to reduce or remove altogether his liability to tax without actually breaking the law. While tax evasion is the willful and deliberate violation of the law in order to escape payment of tax which is unquestionably imposed by law of the tax jurisdiction. since tax is a principal source of government revenue. The government has for the umpteenth time complained of the widespread incidence of tax avoidance and evasion in the country as companies and other taxable persons employ various tax avoidance devices to escape or minimize their taxes or deliberately employ fraudulent ways and means of evading tax altogether sometimes with the active connivance of the tax officials. which results in a gap between the potential and actual tax collections. the major problem lies in the collection of the taxes especially from the self-employed such as the businessmen. professional practitioners like lawyers.2 STATEMENT OF PROBLEM Although tax evasion is a problem that faces every tax system. As pointed out by Reynoids (1963). Under direct personal taxation as practiced in Nigeria. accountants. According to him. if persons are able to escape by legal or illegal means the tax to which they should logically be subject under the general scope of the tax. architects and traders in shops among others. doctors. However. he added. Almost all Nigerian taxpayer is married with four children! Similarly. This study is aimed at bridging this gap. many have turned the statutory personal allowances and relief into a fertile ground for tax evasion. despite the tax provision meant to plug loopholes through which taxable persons can minimize tax liability the 4 . even among the salaried workers.
5 SIGNIFICANCE OF THE STUDY The impact of office automation on organizational productivity is a very important source of study because of the following reasons: 5 .3 PURPOSE OF THE STUDY The major focus of the study is an appraisal of tax evasion on financial crime in Nigeria. Some state governments in an effort towards solving this problem had even gone to the extent of engaging the services of tax consultants. say a lot about tax administration system in Nigeria both in its design and in the disposition of some taxpayers towards taxation. 1. There is no doubt that revenue due any government will be reduced by the unpatriotic act of tax evaders. the problem of tax evasion and avoidance still persists (Alabi.4 RESEARCH QUESTIONS What are the causes of tax evasion? What are the various ways through which tax evasion is being perpetrated? What are the economic and social effects of Tax evasion? 1. notwithstanding. 1.self-employed persons employ all kinds of avoidance schemes to minimise or escape tax liability and makes you wonder whether there are still any tax officials working in that capacity. 2001). no doubt. Other needs of the study are: To know the causes (reasons) of tax evasion To Identify the problems militating against tax assessment and collection To know the various ways through which tax evasion is being perpetrated To assess the economic and social effects of Tax evasion To evaluate the possible consequences of tax evasion on state’s tax revenue in Nigeria. While it immediately presupposes that there are legal framework put in place to punish tax evaders it perhaps raises a poser on the efficiency and effectiveness of tax laws and tax administration in Nigeria. Such scenarios. This government effort.
Agodi. To any individual or group that may want to carry out research on similar issue in the Nigerian environment and other part of the African continent with the overall objectives of persuading tax payers (self-employed & salary earners) and organizations to be more committed in tax payment. Ibadan for academic purpose. This is to enable the researcher draw relevant conclusion from the study. 1. effects and consequences of tax evasion and possible ways of creating environment conductive for tax administration in Nigeria. Ibadan. Oyo state. It will enable accountancy students to understand the causes. Agodi. the study will be useful for providing knowledge for all students at all levels and lecturers. Since this is one of the major driving force that enable government to render essential services adequately. Government Secretariat. The study will make use of questionnaires to draw data/information from the respondents which would be tested to ensure validity and reliability. Nigeria and other limitations are inadequate finance to carryout an effective study and the limited time given for the completion of the research work will not allow the researcher to visit other branches. effects and the usefulness of tax the more. 1.To expand the knowledge on tax evasion so as to provide useful information to scholars. practitioners and government that would assist them in understanding the causes.6 DELIMITATION OF THE STUDY The study will be carried out within Ibadan Metropolis with a focus on the Oyo State Board of Internal Revenue. Government Secretariat. To the management of Oyo State Board of Internal Revenue and other States Internal Revenue Authorities in Nigeria. It is expected that management of the management of Oyo State Internal Revenue Board would be guided by the findings of Tax evasion in order to curb inequality in the society. 6 . Ibadan. Oyo state. Nigeria.7 LIMITATIONS OF THE STUDY The results will be limited to Oyo State Board of Internal Revenue. To The Polytechnic.
services. 1.8 DEFINITION OF TERMS TAX: Tax can be defined as a compulsory levy by government on goods. income and wealth primarily to obtain revenue.1. Tax Policies: represent key resource allocator between the public and private sectors in a country VAT: Value Added Tax is a consumption tax levied at each stage of the consumption chain. Sierra Leone) during the colonial era. such chargeable assets may be corporeal or incorporeal and it does not matter that such asset is not situated in Nigeria. The name was later changed in 1961 when the Federal Board of Inland Revenue (FBIR) was established under Section 4 of the Companies and Income Tax Act (CITA) No. streamlines consumption of certain goods and services. It was carved from the erstwhile Inland Revenue Department that covered what was then the AngloPhone West Africa (including Ghana. reduces inflation and generates employment. The Federal Inland Revenue Service is constitutionally empowered to collect taxes. these are designed to ensure that the tax payable in Nigeria on the profits of a Nigerian company being remitted into the country are reduced by the amount of foreign Tax paid abroad and vice versa where an overseas company receives profits from Nigeria that have already been taxed in Nigeria. A further transformation took place in 1993 when the Finance (Miscellaneous Taxation Provisions) Act No 3 of 1993 established the Federal Inland Revenue Service FIRS as the 7 . Tax provides revenue to fund governance. In 1958. ensures resource redistribution. Gambia. the Board of Inland Revenue was established under the Income Tax Ordinance of 1958. Tax Treaties: Nigeria has a number tax treaties referred to as double taxation agreements with a number of countries. FIRS. and is borne by the final consumer.9 HISTORICAL BACKGROUND OF OYO STATE BOARD OF INTERNAL REVENUE The Nigerian Federal Inland Revenue Service. Capital Gains Tax: This accrues on an actual year basis and it pertains to all gains accruing to a taxpayer from the sale or lease or other transfer of proprietary rights in a chargeable interest which are subject to a capital gains tax of 10%. was created in 1943. FBIR operated then as a department in the Federal Ministry of Finance. 22 of 1961.
tax legislation. Parastatals and Public Companies. Ensure the effectiveness and optimum collection of all taxes and penalties due to Government under the relevant laws. Monitor and co-ordinate the collections of taxes and revenue in the State by all agencies of the Government such as the Ministries. Board Of Internal Revenue Objectives are: To administer the personal income tax decree. Identify sources of revenue available in the State. and Generally exercise control over the management of the State’s internal revenue service on matters of policies. The Act also created the office of the Executive Chairman of the Board. Make recommendations. where appropriate to the joint tax board on tax policy. tax reform. Appropriately assess all sources of revenue and taxes in the State. (2007). In 2007. which granted autonomy to the service. 1993 and any tax or levy shall be under the care and management of the board. the Federal Inland Revenue Service Establishment Act. Enlighten the public on the subject of taxation. was enacted. proposals. 8 . Do all such things as it may consider necessary or expedient for the assessment and collection of taxes and revenue. for the expansion and increase of the internal sources of revenue for the State. Design an effective revenue collection and machinery and implement it. Formulate from time to time.operational arm of FBIR. Enforce all laws relating to taxation and revenue collection. tax treaties and exemptions. as may be required from time to time. Keep proper account and records in relations to all tax and revenue collections made by the board.
In other word. The types of taxes will have are: 9 .1 WHAT IS TAX? Tax can be defined as a compulsory levy by government on goods. Primarily to obtain revenue. It provides definite source of revenue of person for government expenditure. it is levy or dues on the income of persons and companies. income and wealth.CHAPTER TWO LITERATURE REVIEW 2. It is the way by which government obtain extra money it spends from income of individual or companies. services.
Direct Tax 2. department. State. Of importance at this juncture however are tax regulations pertaining to investors both foreign and Local. Federal. Value Added Tax (Vat): This was introduced by the VAT decree No. Excise Duties 3. taxation is enforced by the 3 tiers of Government. Value Added Tax (VAT) 2. Custom Duties 2. i.e. VAT paid by a business on purchases is known 10 . or government agency cannot be concluded without evidence of tax clearance. and is borne by the final consumer.e.1. 1998.2 TAXES IN NIGERIA Under current Nigerian law. The importance of tax regulations cannot be over-emphasized. Indirect Tax Direct taxes in Nigeria consist of the following: o o o o o o Company Income Tax (CIT) Personal Income Tax (PIT) Withholding Tax (WHT) Capital Gain Tax (CGT) Capital Transfer Tax (CTT) Petroleum Profit Tax (PPT) Indirect taxes in Nigeria consist of the following: 1. It requires a taxable person upon registering with the Federal Board of Inland Revenue to charge and collect VAT at a flat rate of 5% (recently increased to 10%) of all invoiced amounts of taxable goods and services. It is a consumption tax levied at each stage of the consumption chain. to replace the old sales tax. The following are some of the relevant tax regulations in the country. 2 of 1993. a Tax Clearance Certificate certifying that all taxes due for the three immediately preceding years of assessment have been settled in full. and Local Government with each having its sphere clearly spelt out in the Taxes and Levies (approved list for Collection) Decree. 1. as most transactions with any Ministry. i.
and other gains or benefits. The Employers of labor are deemed to be agents of the tax authority for the purposes of remitting taxes deducted from salaries due to employees. Capital Gains Tax: This accrues on an actual year basis and it pertains to all gains accruing to a taxpayer from the sale or lease or other transfer of proprietary rights in a chargeable interest which are subject to a capital gains tax of 10%. This tax is viewed as a social obligation placed on all companies in ensuring that they contribute their own quota in developing educational facilities in the country. If output exceeds input in any particular month the excess is remitted to the Federal Board Of Inland Revenue (FBIR) but where input exceeds output the taxpayer is entitled to a refund of the excess from FBIR though in practice this is not always possible. Where however the taxpayer is a non-resident company or individual the tax will only be levied on the amount received or brought into Nigeria. 4. Computation of capital gains tax is done by deducting from the sum received or receivable from the cost of acquisition to the person realizing the chargeable gain plus expenditure incurred on the improvement or expenses incidental to the realization of the asset. It should be stated at this point that recoverable input is limited to VAT on goods imported directly for resale and goods that form the stock-in-trade used for the direct production of any new product on which the output VAT is charged. 3. the salaries. allowances. wages. 104 of 1993. 2. However residency of the Taxpayer determines the extent of a taxpayer’s liability in Nigeria. which is recovered from VAT charged on company’s sales. A Taxpayer however has the option of recovering excess input from excess output of a subsequent period. Personal Income Tax: The legal basis for this tax is found in the provisions of the Personal Income Tax Decree [now Act]. Education Tax: An education tax of 2% of assessable profits is imposed on all companies incorporated in Nigeria. such chargeable assets may be corporeal or incorporeal and it does not matter that such asset is not situated in Nigeria. A person’s place of residence for this purpose is defined as a place available for his 11 .as input tax. given or granted to an employee are chargeable to tax. known as output tax. Every taxpayer in Nigeria is liable to pay tax on the aggregate amount of his income whether derived from within or outside Nigeria. fees.
domestic use in Nigeria on a relevant day. 2. This should be done not later than 30 days after the deduction. Interest on loans for developing an owner-occupied residential house. a payment is due from one person to another. Once residence can be established. Sections 60 to 64 of the Company Income Tax Act (as amended). excluding hotels and rest houses. 5. which is computed as 10% of annual basic salary subject to a maximum of N7. the person making the payment is expected to deduct tax at the applicable rate and remit it to the relevant tax authority. and Section 51(a) of the Petroleum Profits Tax Act (as amended). 500 per annum. Retirement gratuities and compensation loss of office. expatriates holding residence permits are liable to tax in Nigeria even if they reside in the country for less than 183days in any 12-month period. Some of these activities and Services and their current applicable rates include:Payment Rent Construction Dividend Royalties Commission Professional Fees Technical Consultancy Fees %Corporate 10 5 10 10 10 10 10 10 %Individual/Partnership 10 5 10 5 5 5 5 5 12 . The cost of passage to or from Nigeria incurred by the employee. A person is deemed resident in Nigeria if he resides in Nigeria for 183 days in any 12-month period. the relevant tax authority of the territory is the tax Authority in which the taxpayer has his place of residence or principal place of business. 4. Medical or Dental expenses incurred by the employee. This provision can be found in sections 68 to 72 of the Personal Income Tax Decree No. 3. The following are however exempted from tax: 1. Leave allowance. Withholding Tax: Nigerian law subjects certain activities and services to Withholding Tax. This basically means that where during transactions in any of the specified activities or services. 5. 104 of 1993.
business or investment. 8.6. 5% of basic salary subject. Nigerian Social Investment Trust Fund (NSITF): This is governed by the NSITF Decree. these are designed to ensure that the tax payable in Nigeria on the profits of a Nigerian company being remitted into the country are reduced by the amount of foreign Tax paid abroad and vice versa where an overseas company receives profits from Nigeria that have already been taxed in Nigeria. France. where also a company is a shareholder in another company then such dividends are excluded from the profits of the company for the purposes of computation of the tax. In short it is a term used to denote those various devices which have been adopted with the aim of saving tax and thus sheltering the taxpayers income from greater liability which would have been otherwise incurred (Kiabel. Expatriates are excluded from this requirement where they can show proof of a similar contribution in their home country. and requires everybody employed in a Nigerian incorporated company to contribute a certain percentage of their salary to the fund. Canada and Pakistan.5% of his salary subject to a maximum of N 1. These include profits accruing in. Also companies paying dividends to its shareholders are first obliged to pay tax on it’s profits at the companies tax rate. 7. The rate of contributions is defined as follows. where the contributor is an employee. 2. 2001). 2. arranges his business in 13 . Tax Treaties: Nigeria has a number tax treaties referred to as double taxation agreements with a number of countries. Ani et al (1978) had described tax avoidance as follows: the taxpayers knowing what the law is decides not to be caught by it. however dividends paid in the form of bonus share or scrip shares to individual share holders are not subject to tax. where the contributor is an employer. Companies Income Tax: Tax is payable for each year of assessment of the profits of any company at a rate of 30%. Some of these countries include the UK. derived form brought into or received from a trade.3 THE MEANING OF TAX EVASION AND TAX AVOIDANCE Tax avoidance arises in a situation where the taxpayer arranges his financial affairs in a way that would make him pay the least possible amount of tax without infringing the legal rules. This contribution is based on the assumption that the maximum basic salary in Nigeria is N48.200 per annum. The Netherlands. Belgium. Generally in Nigeria company dividends or other company distribution whether or not of a capital nature made by a Nigerian company is liable to tax at source of 10%. 000 per annum.
Tax evasion is accomplished by European Journal of Economics. c) omission or misstatement of items from returns. Examples of tax avoidance include: (i) Seeking professional advice.such a manner as to escape tax liability partially or entirely. It is a lawful trick or manipulation to evade the payment of tax. According to Farayola (1987). d) claming relief (in Personal Income Tax). Thus. And the taxpayer is in like manner entitled to be astute to prevent so far as he honestly can the depletion of his means by the Revenue. Tax evasion is an outright. tax evasion is the fraudulent. (ii) Reducing one’s income by submitting claims for expenses in earning the income. dishonest. for example. intentional distortion or concealment of facts and figures with the intention of avoiding the payment of or reducing the amount of tax otherwise payable. e) understating income. The meaning of tax avoidance is vividly captured in the case involving Ayrshire Pullman Motor Services and David M. b) failure to submit returns. which is open to it under the taxing statutes for the purpose of depleting the taxpayer’s pocket. Tax avoidance is thus considered to be a matter of being sensible. Finance And Administrative Sciences . of children that do not exist. (iii)Increasing the number of one’s children (in Nigeria the maximum allowable is four). withholding tax. These acts of omission or commission might include: a) failure to pay tax e. (iv)taking additional life assurance policies.Issue 15 (2009) deliberate act of omission or commission which in themselves constitute criminal acts under the tax laws. dishonest action whereby the taxpayer endeavours to reduce his tax liability through the use of illegal means. 14 . it is clear that tax avoidance is legal or at least not illegal since one is mostly probably using the tax laws to limit his tax liability under the same laws. The Inland Revenue is not slow and quite rightly to take every advantage.g. Lord Clyde held that: No man in this country is under the smallest obligation moral or otherwise so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores. Ritchin Vs Commissioner of Inland Revenue when the Lord President. While the law regards tax avoidance as a legitimate game tax evasion is seen as immoral and illegal.
No doubt. In the same vein. When they detect an instance of evasion. (Spiro. 15 . they refrain from reporting in return for illegal gratification or bribe. tax evasion and avoidance had robbed the Nigerian government of substantial tax revenue. The most common form of tax evasion in Nigeria is through failure to render tax returns to the Relevant Tax Authority. A tax evader may be charged to court for criminal offences with the consequent fines.4 THE PROBLEMS OF TAX EVASION IN NIGERIA a) Corruption by Tax Officials Corrupt tax officials cooperate with the tax payers who intend to evade taxes. Peter S. the Clearing and Forwarding agents help in evasion of Customs duties. Corruption by tax officials is a serious problem for the tax administration in a huge number of underdeveloped countries. Peter S. 2. It has become so widespread that there now exists a cash economy of vast proportions over which the taxman has no control and which is growing at several times the rate of the national economy. And as observed by Sosanya (1981): Tax evading has become the favourite crime of the Nigerian. (Spiro. (2005). (2005). g) overstating expenses. so popular that it makes armed robbery seem like minority interest. 85 percent of corporate tax revenue in the country accrues from the 196 companies listed on the exchange compared to the 30. penalties and at times imprisonment being levied on him for evading tax (Faseun 2001).f) documenting fictitious transactions. It has been suggested that removal of human interface is a reliable solution to this problem.000 companies registeredwith the Corporate Affairs Commission. b) Role of Middleman It is often alleged that tax lawyers and chartered accountants help taxpayers including firms and companies in evading taxes. h) failure to answer queries. This is a serious indictment of the administrative machinery and capacity of the tax authorities in Nigeria. According to the Nigerian Stock Exchange.
however. D (1999) 2. There is no guaranteed compensatory benefit. Evidences of wastage of public funds abound in the form of inflated contract prices. He sees taxation as a discredited imposition and evidently obnoxious. The cumulative effect thereby produced is the resolve of many honest taxpayers never to pay their due taxes again. should not be paid as the authority do not provide amenities which are in any way commensurate with the taxes paid. It has been suggested that tax farming may be a solution to the problem of tax evasion seen in developing countries. This thinking is often a root cause of most civil disturbances in parts of the country.e. in unexecuted but paid contracts or in the criminal acts of using diverse methods and loopholes to exhaust funds voted for ministries and governmental departments before the financial year run out. as they are applicable in any country that tax is imposed. Government leases out the collection system to a private entity for a fixed amount who then collects the revenue and shoulders the risk of attempts at evasion by the tax-payers. or at most pay under compulsion. Some are peculiar to different areas. Misuse or Mismanagement of Collections Made More often than not there are reports in the news media of how government functionaries misuse taxpayers’ money. In Nigeria some of these causes as identified by Onuigbo (1986) include: The Absence of a “Quid Pro Quo” The average human being abhors the payment of tax. something of value given in return (by the Government) for the taxes paid. Taxes.c) Tax Farming Tax farming is an old means of collection of revenue when it is difficult to determine the leviable amount taxes with certainty. Inequitable Distribution of Amenities In many parts of Nigeria citizens are opposed to the payment of any form of taxes and rates on the ground that government had been unfair in the distribution of amenities and other good things of life. it is commonly argued. (Alam. This stems mainly from the absence of a “quid pro quo” i.5 WHY PEOPLE EVADE TAX IN NIGERIA The causes of tax evasion and avoidance are universal. 16 .
This lack of spirit of civic responsibility amongst the majority of Nigerians is a major cause of tax evasion in Nigeria. Absence of Spirit of Civic Responsibility Most Nigerians probably due to illiteracy and ignorance fail to understand that they owe certain responsibilities to government. Even when the government says it is poor they would rather argue that the government should print more money to solve her problems. 2. The creation of local government councils. due to mobility. a solution to the problem probably lies in the proper education and orientation of the taxpayers towards government and its functionaries. As argued by Kiabel (2001). Kiabel (2001) has argued that some businessmen do not see any reason why they should pay tax irrespective of the fabulous profits made. one of which is the payment of tax.Remoteness of Taxpayers from the Government There is this common belief which most taxpayers have about the nature of government. mistaken belief on the part of some illiterate taxpayers that only wages and salaries represent taxable income. This is the direct display of the spirit of unpatriotism. He contended also that partial evasion may be due to inadequate accounting records maintained by traders. evasion is more pronounced on the part of self-employed taxpayers who move from compound to compound at frequent intervals than it is with salary and wage earners with known and permanent address. The average Nigerian has an inborn bias or hatred against most government functionaries who in most cases live apart from the taxpayers. which is supposed to bring government closer to the people had not helped matters. most taxpayers would reason. Such people take the stand that no matter the income or revenue that was acquired during the year nothing will be paid as tax or they may prepare their accounts in such a way that a loss will be reflected. for one to part with his hard earned resources for the upkeep of these (imagined) enemies. Generally tax evasion which is illegal achieves the same goal as tax avoidance. According to him. It hurts.6 WAYS BY WHICH TAX EVASION IS BEING PERPETRATED 17 . For example Orewa (1957) had earlier investigated the characteristics of evasion and found that complete evasion results from high degree of interdistrict mobility on the part of the taxpayers. Some other authors have at one time or the other attributed the causes(s) of tax evasion and avoidance to various reasons.
interference with the tax administration through bribery and corruption and any other unlawful means employed which seeks to with hold tax which is otherwise payable.The taxpayer indulges in evasion by resorting to various abnormal practices. Some of these are acts of omission and others are acts of commission. improper utilization may be made of temporary taxpayers status. refuge may be sought in foreign bank accounts or in investment abroad to escape the reach of the local laws. emigration of persons and capital. These include setting up subsidiaries or associated companies while maintaining financial interests in the outcome of both with a view of facilitating transactions as may be advantageous from the tax point of view. These practices erode moral values and build up inflationary pressures. This increases the quantity of money in circulation but without a corresponding 18 . arranging the transfer of losses of defunct business for the purpose of obtaining a set-off against profits of the other and establishing tax haven entities in foreign countries. Companies declare higher dividends and individuals have a high take home profit. It generates investment distortion in the form of the purchase of assets exempted from tax or under-valued for tax purposes. Evasion takes the form of investment in arts collection. Other forms of tax evasion include claiming of fictitious deductions. failure to pay or keep records or adequate records. 2. There are various refinements to the blatant act of tax evasion which render detection difficult: secreted wealth may be siphoned off to foreign countries through smuggling activities. fleeing the country to avoid payment of tax. individuals and companies have a lot of money at their disposal. According to Toby (1983) tax avoidance consists of manipulations of transactions by resorting to various strategies. This point can be buttressed with the fact that because of the evasion of tax. failure to pay over to the revenue the estimated tax. And as observed by Toby (1983) the taxpayer indulges in evasion by resorting to various practices.7 EFFECTS OF TAX EVASION ON GOVERNMENT REVENUE Tax evasion has adverse effects on government revenue.
(1999) identified the following as a means through which government can overcome tax evasion. A conviction for tax evasion can carry with it up to a five-year prison sentence and/or fines up to $100.8 PUNISHMENT FOR TAX EVASION Tax evasion is a FELONY and a very serious crime. new local VAT offices should be established all over the country. VAT has become a veritable source of revenue earnings for the government and therefore needs to be strengthened and expanded. Rather. 2.000 in fines.increase in the goods and services.000 for each year a taxpayer failed to file. This then build up what is known as inflationary trends where large money chase few goods. It is a MISDEMEANOR.000. The consequences for being found guilty is a maximum of 1 year in prison and/or fines totaling up to $25. Filing a false return: Prosecution for this crime is appropriate when a taxpayer has provided the government with false or misleading information on the taxpayer's tax return. Government should continue to ensure that the tariff policy enables our local industries to be competitive. campaigns & computerization. In such cases. The administration of tax collection will be strengthened to ensure more efficient tax collection. awareness. 19 . They are. Not filing a tax return at all: Failing to file a tax return is the least serious of the three tax crimes. the government does not have to prove the taxpayer intended to evade tax laws. aggressive action should be taken to block revenue leakage on high duty goods and bulk items. Specifically. Punishment for this crime can consist of up to three years in prison and/or up to $100. Filing a false return is a felony. through training of staff.9 POSSIBLE SOLUTIONS TO REDUCE FINANCIAL CRIME ON TAX EVASION Aguolu. To broaden the tax base and to bring the VAT administration closer to the taxpayers. 2. it merely must prove that the taxpayer filed a false return.
Government should also ensure fair tax administration based on the principle of derivation of tax proceeds.0 RESEARCH METHODOLOGY 20 . it is recommended that the tax law should be enacted. CHAPTER THREE 3.
methods of data and types of data collection instruments and analysis. The questionnaire will be in two parts. while part “B” will deals with data concerning the research hypotheses. Part “A” will deals with the Bio-data of the respondents. It is the blue print for the study. Nigeria. It involves a self-designed questionnaire in collecting data from the respondents. This chapter states the source of the data.1 RESEARCH DESIGN The survey research design will be used in this study. 3. Oyo state.3 RESEARCH INSTRUMENT Primary and secondary sources of data will be used for this research work. The questionnaire will be designed carefully in line with the relevant issue or problem to be raised in the research.4 METHOD OF DATA COLLECTION The main instrument to be used for this study is structured assessment questionnaire with closed ended questions. Government Secretariat. journals and internet materials which will enable the researcher to get acquainted with the some empirically verified views of some authorities on the research problem. This is chosen in order to make reference to phenomena as they exist in real life and it is relatively economical in terms of time and resources. Ibadan. While Secondary source of data will be various textbooks. 3. sampling procedure and design as well as the basic approach applied in this work 3.2 POPULATION AND SAMPLE SIZE The population of this study will be based on 30 respondents to be drawn from the entire staff of the Oyo State Board of Internal Revenue. Primary source of data will be through the use of questionnaire and they will be closedended questions.This chapter contains explicit step by step procedures on what will be done by the researcher and how it will be carried out. Agodi. 3. 21 .
Agodi. METHOD OF DATA ANALYSIS The data collected will be analyzed through the used of simple percentage. University of Oxford CHAPTER FOUR 4. Finance and Trade Policy Research Centre. J. Ibadan.Thereafter. (1998) Personal Income Taxation in Nigeria including Capital Gains Tax. Queen Elizabeth House. Alex Cobham (2005): Tax evasion. 3.5 analysis. Government Secretariat.A. Lagos. Soji (2001) “Tax Planning” A Paper delivered at the Workshop on Nigerian corporate and Personal Income Tax Management. it will be distributed among the staffs of the Oyo State Board of Internal Revenue. Yaba. and this will take me two week because of the delay one might encounter from some of staffs of the company and the time to administer the questionnaires filled. Lagos. Ariwodola. tables and descriptive REFERENCES Alabi. August 15th. tax avoidance and development finance.0 PRESENTATION AND ANALYSIS OF DATA 22 . JAA Nigeria. Thirty questionnaires will be served and hopefully expected to be fully recovered and then administer.
each responses is presented in percentage in relation to the general or overall responses received in each particular case.4. Hence. Number of Percent Responses age of Received Respon ses 26 87% 23 .1 INTRODUCTION This chapter deals with the presentation and analysis of data collected during the research work conducted. the questionnaires sent to the staff of Dansa Foods Limited were all collected back with the following statistics of respondents. 4. the responses receive was 26 representing 87% of the total questionnaires distributed. The effort here is to present the data collected from the different respondents in a more meaningful ways to the readers. The rest four questionnaires were also received back but they are not fill. The statistics reported in this chapter were all based on the above responses and interviews conducted. This was done to raise comparison among the variables involved and the guard the heart of the researcher into proper findings. However.2 QUESTIONNAIRE RESULTS As formerly stated in chapter three. Table 1: Questionnaire Administered and Returned Number of Questionna ires Distributed 30 Field Survey The table one above shows that 30 questionnaires were distributed among the sampled staff in University of Ibadan.
Table 2: Personal Data Of The Respondent On Sex Variables Male Female Total Field Survey Numbers of the responses Received 20 6 26 Percentage 77 23 100 From the above table 2. Table 4: Marital Status Of The Respondents Variables Single Married Divorced Total Field Survey Numbers of the responses Received 18 8 26 Percentage 69 31 100 24 . Table 3: Age Distribution Of The Respondents Variables 21-30yrs 31-40yrs 41yrs & above Total Field Survey Numbers of the responses Received 21 3 2 26 Percentage 81 12 7 100 In the table 3 above. the total of male who responded to the questionnaires were 20(77%) while 6(23%) represent female. while aged 41yrs above filled 2[7%]. it is revealed that majority of the respondents aged 21-30yrs filled 21[81%] of the questionnaires compare to aged 31-40yrs that filled 3[12%].
Table 6: Length of Services Variables Below 5yrs 5-10yrs 11yrs & above Total Field Survey Numbers of the responses Received 2 15 9 26 Percentage 8 58 34 100 Table 6 shows 2[8%] are below 5yrs. married at 8[31%] and 0% for respondents who were divorced. While 3(12%) possess professional qualification in addition.The above table 4 shows single at 18[69%]. Table 7: Position Head Of The Respondents Variables Management staff Senior staff Junior staff Numbers of the responses Received 2 13 11 Percentage 69 31 - 25 . 15[58%] are below 5-10yrs while 9[34%] of the respondents have been in the organisation for more than 11yrs. 12(46%) possess HND/BSc. Table 5:Educational Background of the Respondents Variables ND HND/BSc Professional Total Field Survey Numbers of the responses Received 11 12 3 26 Percentage 42 43 12 100 Only 11(42%) of the total possess National Diploma (ND).
it is revealed that 20(77%) of the respondents which is the highest were of the opinion that lack of good internal control leads to fraud perpetration. 4(15%) of the respondents agreed to the opinion while 2(8%) disagree with the opinion. Question ‘10’ & ‘11’ in the questionnaire reveal answers to the above hypothesis one. Variables Strongly Agree Agree Undecided Disagree Strongly disagree Total Field Survey Numbers of the responses Received 20 4 2 26 Percentage 77 15 8 100 From the above table 8. Table 8: Question 10:Lack of Good internal control leads to fraud perpetration.Lack of good internal control is a major cause of fraud in educational institution using University of Ibadan as a case study.Lack of good internal control is not a major cause of fraud in educational institution using University of Ibadan as a case study.3 4. Hi:.Total Field Survey 26 100 The above table shows that 2[8%] were at management level 13[50%] were senior staff while 11[42%] were junior staff of University of Ibadan.1 DATA ANALYSIS AND INTERPRETATION Hypothesis One Ho:. SECTION B 4. 26 .3.
3. there should be maintenance of a rewarding workmen compensation scheme. One of the respondents suggested that. Variables Strongly Agree Agree Undecided Disagree Strongly disagree Total Field Survey Numbers of the responses Received 26 26 Percentage 100 100 The above table 9 depicts that. 4. Hence. 26(100%) which represent the total sample size of the respondents strongly agreed on the fact that Lack of attractive pay packages leads to fraud perpetration. Some of the respondents claimed that prompt and attractive pay packages will enable average lecturers to live above poverty level. discipline of staff and improve the standard of living of such lecturer or professor in question. Table 9: Question 11:Lack of attractive pay packages leads to fraud perpetration.2 Hypothesis Two Ho: .Establishment of effective internal control department has negative impact on efficiency of Educational Institutions Hi: . he or she will shun the temptation to defraud his/her employer. it was deduced that there is no specific system on ground that will ensures all types of checks and balances for both operational and financial as expected of the institution.Establishment of effective internal control department has positive impact on efficiency of Educational Institutions 27 . This will encourage hardworking.With the oral interview made with some of the respondents.
should be the watch word of every staff. Table 10: Question 12:Effedtive internal audit department helps to guard against fraud in educational institutions Variables Strongly Agree Agree Undecided Disagree Strongly disagree Total Field Survey Numbers of the responses Received 23 3 26 Percentage 88 12 100 From the above analysis in table 10. Some respondents say management by example. Every one should comply with the laid down policies and procedures in the performance of any of their function. or management staff of the institution. This will be headed by a qualified accountant and the accountant should be responsible to the Vice chancellor of the institution or higher authority in the institution. be it lecturer. With the help of the oral interview. The remaining 3(12%) of the respondents sampled also gave their support on the opinion.Question ‘12’ in the questionnaire reveals answer to the above hypothesis two. it was deduced that 23(88%) of the respondents which is the majority gave their consent that effective internal audit department helps to guard against fraud in educational institution. 28 . one of the respondents suggested that educational institutions should try as much as possible to have an effective internal audit department. professor.
the ever increasing menaces of fraud. it is the responsibility of the management to installed good internal control system.3. observing the attitude of the staff in audit department towards work and their spending habit whether amount spent is commensurate with the come earned etc.Educational institution with good internal control system cannot prevent the menace of fraud Hi: . putting operating procedures manual in writing. 29 . The researcher also deduced from the personal interview made with some of the subjects that. keeping of adequate records.4. Other said that. will be drastically reduced to its barest minimum and eventually eradicated. which has ruined many Nigerian educational institution financially. if the aforementioned measures are strictly adhered to.3 Hypothesis Three Ho: .Educational institution with good internal control system can prevent the menace of fraud Question ‘15’ in the questionnaire reveals answer to the above hypothesis two. Table 11: Question 15: Educational institution with good internal control system can prevent the menace of fraud Variables Strongly Agree Agree Undecided Disagree Strongly disagree Total Field Survey Numbers of the responses Received 26 26 Percentage 100 The above table 11 revealed that 26(100%) which represent the total sample size strongly agreed on the fact that educational institution with good internal control system can prevent the menace of fraud.
misappropriation and theft. mismanagement. it is very cleared that accountant in local government are not allow to discharge their obligation effectively and efficiently due to party politics and Godfatherism which often prevented them from working for the development and improvement of their areas. During the oral interview. the researcher ignore null hypothesis and accepted alternative hypothesis which says that. With the help of the oral interview. misappropriation and theft and I will be very happy if ‘The Game of Politics’ among the public officers stop and allow us to practice our profession independently”. there is mismanagement of fund for which the council is not punished. assets against loss. With the help of the oral interview. 21(100%) which represent the total sample size of the respondents strongly agreed on the fact that it is the duty of an accountant to safeguard local government. role of accountants in local government enhance national development The results of questions 10 & 11 of hypothesis two revealed that 16 (76%) which represent majority of the respondents claimed that poor revenue administration among the stakeholders hinder the growth and development of local government and in question ‘11’.. Some respondents say that local government authority usually incurred a lots of capital expenditure and this is usually settle out of recurrent 30 . there will be growth and improvement in the standard of living. Therefore. “Part of my duty is to safeguard and protect national assets against loss. the effective management of the finance of the local government authorities in Nigeria is often affected by shortage and sometime by total lack of resources. one of the respondents says that. One of the accountant says. The results of questions 7 & 8 of hypothesis one revealed that 16 (76%) of the respondents which is the highest were of the opinion that accountants are primary contributors to national building and in question 8.3 DISCUSSION OF FINDINGS The empirical results indicate that accountants performed crucial roles in local government administration. Once they discharge their responsibility with integrity and accuracy. mismanagement.4. Sometimes. some of the respondent claimed that “Accountants have crucial roles in development and national building. 21 (100%) strongly agreed on the fact that Inadequate Statutory allocation from federation account is one of the problem of local government accounting system. From the available information gathered by the researcher.
the quality of the finance officer determine the quality of the accounting system.fund. Therefore. The result of such settlement is that there is either no or little money available to meet a minimum acceptable level of recurrent expenditure. one of the respondents opined that. ‘quality of financial officer is a problem to the accounting system in the local government. financial problem hindered the growth and development of the local government. Mediocre who cannot manage effectively are even worse compare to educated people who are inexperience in accounting practice and procedures. Therefore. One the subjects advise that the government to always employ staff base on qualification not with connection to politics or personal interest. During the oral interview. From the analysis above the researcher could conclude that. One of the subjects suggested that qualified accountant should be employed to oversee and give advice on financial issues in the local government authorities. the researcher ignore null hypothesis and accepted alternative hypothesis which says that. They prefer employing inexperience and unexposed staff who cannot render meaningful service to the local government. Internal and external auditors should be allowed to perform their duties independently. the researcher ignore null hypothesis and accepted alternative hypothesis. for monetary reward and on connection basis. CHAPTER FIVE SUMMARY. 20 (95%) of the respondents strongly agreed to the fact that corrupt finance officers constitute a problem in the local government system. there employment is based on political ground. The son of the soil syndrome and neglecting of professionalism is the order of the day. CONCLUSION AND RECOMMENDATIONS SUMMARY 31 . The results of questions 12 & 15 of hypothesis three revealed that 15(71%) which represent majority of the respondents claimed that the quality of financial officer in the local government determine the quality of the accounting system and in question ‘15’.
(f) The ridiculously low penalties prescribed in the Tax Laws for late payment or non-payment of tax. (e) The inefficiency of tax administration which gives room for tax evasion. During the cause of the research. it is cleared that tax evasion of income tax is an illegal activity and it is difficult to obtain in any country. It is convincing now that Tax evasion said to be partial or total bad when a taxpayer under-declares his income for tax purposes and total evasion of income tax occurs when a taxpayer who is already qualified to pay tax refuses to get his name registered in the tax roll. and (g) Outright unwillingness to contribute towards the upkeep of one’s society. in the course of the research it was made known that the criminal act of tax evasion is perpetrated in a number of ways. In the words of M. Understandably. it is irresistible to say that evasion of the income tax is a serious problem in Nigeria. He deposed that evasion is more pronounced on the part of self-employed taxpayers viz market women.C. as there appears to be a big gap between actual and potential income tax collections by the various levels of government.The research work has been able to reveal that the end total of tax evasion is less revenue to the taxing authority. (c) Total ignorance of the law. ‘it is not very different from trying to determine the consumption of Indian hemp or the degree of illegal gambling’. In view of the aforementioned. (b) Lack of faith in the ability of the government to use the money well. The only known research on tax evasion in Nigeria was made by G. 5. more so.Oka Orewa several years ago. (d) Absence of any visible benefit accruing to the taxpayers. also. and professionals (the very people who enjoy government infrastructures) who move from place to place at frequent intervals. than it is for salary and wage earners with known and fixed addresses. businessmen. These include among others: (a) Unbearable high tax rates which make evasion more attractive and economical. there is much less evasion on the part of taxpayers who pay their tax in instalments.2 CONCLUSION 32 . It is an undesirable phenomenon because it tends to shift the burden on the less fortunate members of the community. Taylor. Finally.
It is hoped that if the measures prescribed in this study are implemented. The tax authorities should properly review and evaluate the assessment and collection procedures so as to encourage compliance by the taxpayers. Government should embark upon other means of publicity such as radio messages. Vast improvement can be made by improving the design of the forms. the following recommendations are made: 1. television advertisement. Such enlightenment on tax evasion and avoidance will go a long way to reduce the states’ over dependence on federal allocation. The setting up of Revenue Courts should be embraced by the various state governments. Suitable personnel should be recruited and Revenue personnel generally trained and retrained to cope with the demands of the job. post bills as well as the use of town criers to inform taxpayers of changes in tax legislation and need for compliance. Staff should also be motivated through good salary package to insulate them from fraud and other corrupt practices. 2. the twin problems of tax evasion and avoidance will be reduced to a tolerable limit. The usual practice of reprinting parts of the tax laws and sending same to the taxpayers expecting that they would understand is not encouraging since these laws are written in legal jargons or terms that are not easily understood. Moreover. From all indications it is now clear that if government engages in a complete re-organization of the tax administrative machineries. 3. In the light of this. it will go some way in reducing the problem of tax evasion and avoidance to reasonable dimensions. COMMENDATIONS For the various State Governments to meet their revenue targets especially now that the services of tax consultants have been discontinued it would be appropriate to take a look at the factors responsible for the incidence of tax evasion and avoidance since a check on these factors will go a long way in reducing if not eradicating the problem. 4. It is equally important for the various state governments to make frantic efforts aimed at educating the tax illiterates of their civic responsibilities. 33 . These Courts should be made to impose heavy monetary penalties and criminal sanctions.Tax evasion and avoidance is a very serious societal problem that is causing much concern and major set back on revenue collection in Nigeria. tax forms should be made less complex.
Since majority of the people are poor tax evasion becomes inevitable. Ibadan Spectrum Law Publishing. This measure will go a long way to curb corrupt practices among tax officials. (1998) Personal Income Taxation in Nigeria including Capital Gains Tax.A. Osita (1999) Taxation and Tax Management in Nigeria. August 15th.(2000) Nigerian Taxation: A Practical Approach Egbe Kogi. Government should therefore aggressively tackle the inflationary trend and also ensure that the poor pay very minimal tax.5. it is my considered view that the social evil known as tax evasion should be attacked in all its ramifications if we are to have any meaningful tax administration in the country. 7. 6. J. The Audit Unit of the Authority should be strengthened to always audit tax remittance by collectors at all levels. A census of the taxable population should be conducted throughout the various states. JAA Nigeria. Lagos. provide employment opportunities to all by the judicious use of tax proceeds. 9. Bhoti International Publishing Ltd. BIBLIOGRAPHY Ayua. Enugu. Baiyewu. Aguolu. on request. Meridian Associates.A. Finally. 8. Yaba. A legislation compelling banks to inform the tax authorities. (1999) The Nigerian Tax Law. Soji (2001) “Tax Planning” A Paper delivered at the Workshop on Nigerian corporate and Personal Income Tax Management. Government should endeavour to provide social amenities to all nooks and crannies of the state (not just the state capitals alone).A. of any income standing in the account of any taxable person (especially the self-employed taxpayers) should be put in place by the various state governments. This will now update the tax register so that at any given point in time the tax office can give details of taxable adults and businesses thus reducing the incidence of tax evasion. F. Lagos. (10) The issuance of national identity card should be accelerated so that it will be used to identify those who have not fulfilled their civic duties. In this way all will feel belong thereby encouraging voluntary compliance. 34 . Ariwodola. Alabi. I. The handling of tax clearance certificates should be well decentralized such that neither the assessor nor the collector can issue tax clearance certificates.
(1981) Taxation Reform in Nigeria.O(1987) Guide to Nigerian Taxes Lagos All Crowns Nig. S. R. (1957) Taxation in Western Nigeria London Oxford University Press. O.A. (1986) Banking and Finance for Professional Examinations Aba Yonkee Standard Press Ltd Personal Income Tax Decree No.D. No.com Dear Participant.(2001) “Tax Planning” Lagos Tax the Newsletter of CITN-Lagos District Society Vol. U. IBADAN Department of Accountancy P. Ltd. I am undergraduate student of the above named institution. Ltd. Onuigbo. (2001) Personal Income Tax in Nigeria Owerri. U.O.M. B.A. Orewa. THE POLYTECHNIC. Springfield Publishers.I Post Office tunde2009@yahoo. Sosanya. IBADAN)”. Reynolds. Ibadan P.104.G. (1999) Elements of Taxation Lagos. Ogunedele E. (1983) The Theory and Practice of Income Tax Macmillan Press Ltd.I Post Office August.B 22.M.Faseun L. I therefore solicit for full cooperation in answering all the questions to the best of your knowledge and 35 . 2010 Tunde O. L.1 Farayole. Toby. G. I am conducting a research on the topic: “AN APPRAI SAL OF TAX EVASION ON FINANCIAL CRIME IN NIGERIA (A CASE STUDY OF OYO STATE INLAND REVENUE. Kiabel.B 22. 1993.O. A. Libri Services Nig. O Undergraduate Student The Polytechnic. IWO RD. (1963) Government Finance and Economic Analysis Heineman Publications. G.
Length of Service: 6. High Tax rate is one the reason why people evade tax Strongly Agree Agree 36 . Sex: 2. Sincerely. Educational Ground: 5.ability. QUESTIONNAIRE SECTION A DEMOGRAPHIC DATA MARK ( ) WHERE APPLICABLE. Thank you for your time. and it shall be treated in strict confidence for the above purpose. TUNDE O. 1. Position Head: Male 21-30yrs Single WASSEC Below 5yrs Management level Female 31-40yrs Married HND/BSc 5-10 yrs Senior Professional 11yrs & Above Junior 41yrs above SECTION B Research Question One 7. Marital Status: 4. O Undergraduate Student. It is honestly assured that this study is only for academic purpose. Age: 3. Your information is extremely valuable to this study.
Lack of public enlightenment campaign resulted to tax evasion Strongly Agree Agree Undecided Disagree Strongly Disagree Research Question Two 10. Lack of adequate tax incentives lead to tax evasion Strongly Agree Agree Undecided Disagree Strongly Disagree 9. The consequence of not paying tax is that government find it difficult in the provision of social services. Tax evasion is being perpetrated by organization through Concealment of profits Strongly Agree Agree Undecided Disagree Strongly Disagree 11. Organizations evade tax by their Failure to keep adequate records Strongly Agree Agree Undecided Disagree Strongly Disagree 12.Undecided Disagree Strongly Disagree 8. Claiming of fictitious deductions is one of the ways through which organization evade tax. 37 . Strongly Agree Agree Undecided Disagree Strongly Disagree Research Question Three 13.
Strongly Agree Agree Undecided Disagree Strongly Disagree 14. Strongly Agree Agree Undecided Disagree Strongly Disagree 15. Tax evasion leads to Inequality in the society Strongly Agree Agree Undecided Disagree Strongly Disagree 38 . Tax evasion leads to low revenue.
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