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1.0 INTRODUCTION:
Taxes, and tax systems, are fundamental components of government revenue generation.
Brautigam, (2008) has noted, taxes underwrite the capacity of states to carry out their
goals; they form one of the central arenas for the conduct of state-society relations, and
they shape the balance between accumulation and redistribution that gives states their
social character. Thus, taxes build capacity to provide security, meet basic needs or foster
economic development and they build legitimacy and consent helping to create
Bahi and Bird, (2008) states that no tax is better than its administration, so tax
the maximum possible compliance by taxpayers of all types with their taxation obligations.
extensive evasion, corruption and coercion. In many cases overall tax levels are low, and
large sectors of the informal economy escape the tax net entirely (Brautigani, Fjelftand and
Moore, 2008).
A nation’s tax system is often a reflection of its communal values and the values of those
in power (Ross, 2007). Thus, to create a system of taxation, a nation must make choices
regarding the distribution of the tax burden and how the taxes collected will be spent. In
democratic nations GFwhere the public elects those in charge of establishing the tax
system like Nigeria, these choices reflect the type of community that the public or
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Parkin, (2006) states that in countries where the public does not have a significant amount
of influence over the system of taxation, that system may be more of a reflection on the
values of those in power as governments use different kinds of taxes and vary the tax rates.
This is done to distribute the tax burden among individuals or classes of the population
individuals or classes in the population in addition, taxes are applied to fund foreign aid
In a report of the Federal Inland Revenue Services (FIRS) and presented to the federal
executive council on National Tax Policy for 2009, it says that sustainable development is
development that meets the needs of the present without compromising the ability of future
generations to meet their own needs thus, in this context sustainable development refers to
the pattern of revenue generation, which is able to meet the needs of the present generation
of Nigerians, without negatively impacting the ability of future generations to meet their
due to the stability and certainty of the tax system (Aguolu, 1999). Unlike other sources of
revenue, taxes are constantly available in so far as economic activity is carried on in the
However, recent developments in the global and local economy which have significantly
income (FIRS, 2009). It is in line with this that the National Tax Policy intends to create
awareness on the importance of the role, which taxation can play in securing a stable flow
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with significant reliance on oil revenue due to historical developments in the Nigerian
However, taxation has been identified as an alternative to oil revenue and a more reliable
source of’ revenue (McKerchar, 2003). The tax policy shall therefore promote and
encourage a shift in focus from non-tax revenue to tax revenue by Governments at all
levels of the Nigerian economy (FGN, 2009). Following from the above, the tax policy
shall also promote and encourage healthy competition amongst tax and revenue authorities
in Nigeria at the Federal and State level to facilitate rapid development of the tax sector in
Nigeria. The focus of the competition shall be to maximise tax revenue within the
expected that there would be increased collaboration as a result of the need to grow tax
revenues by each level of Government and that improved collaboration would enhance tax
Under direct personal taxation as practiced in Nigeria, the major problem lies in the
collection of the taxes especially from the self-employed such as the businessmen,
blatantly refuse to pay tax by reporting losses every year and many of them live a lifestyle
inconsistent with reported income, which is usually unrealistically low for the nature of
their businesses. Civil Servants and other salaried workers are the only class of people that
actually pay tax in Nigeria. However, even among the salaried workers, he observed, many
have turned the statutory personal allowances and relief into a fertile ground for tax
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
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administration in Nigeria (Uche and Ugwoke, 2003). Some state governments in an effort
towards solving this problem had even gone to the extent of engaging the services of tax
consultants. This government effort, notwithstanding, the problem of tax evasion and
avoidance still persists (Alabi, 2001). There is no doubt that revenue due any government
will be reduced by the unpatriotic act of tax evaders which can be attributed to corruption.
Tax avoidance and evasion have adverse effect on government revenue. Tax avoidance
and evasion generates investment distortion in the form of the purchase of assets exempted
from tax or under-valued for tax purposes (Klabel and Nwokah, 2009). Avoidance and
evasion takes the form of investment in arts collection, emigration of persons and capital.
And as observed by Toby (1983) the taxpayer indulges in evasion by resorting to various
practices. These practices erode moral values and build up inflationary pressures. This
point can be buttressed with the fact that because of the evasion of tax, individuals and
companies have a lot of money at their disposal and companies declare higher dividends
and individuals have a high take home profit. This increases the quantity of money in
circulation but without a corresponding increase in the goods and services, this then build
up what is known as inflationary trends where large money chases few goods (Toby,
1983).
government mostly in developing economy seeks to achieve. The pursuit of this goal
underlines the rationale behind the identification of ways of raising revenue. Nigeria just
like every numerous countries through which revenue is sourced in order to finance
Olu, (2005) states that “the history of taxation in Nigeria dated back to 1861 when the
British government first entered into Nigeria”. Since then, there have been different tax
reforms and laws in Nigeria both during the British rule and after independence in 1960.
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Tax apart from being a major source of revenue to government serves as a mechanism for
correcting inflation and deflection, balance of payment deficit and redistribution of income
among others. (Ola, 2005). Between 2005 and 2008, it was noted that tax revenue
expenditure within these periods stood at 45.89% and 76.8% respectively (Obinna, 2004).
Despite the huge amount of money generated by government through tax revenue,
living and poor infrastructural facilities still remain at a very high rate. The essence of
economic and social benefits to the public and for the purpose of controlling the economy.
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. Therefore, this study seeks to investigate the
effect of tax avoidance on Nigeria’s economic growth a case study of Taraba State.
It has been noted that tax system in Nigeria has come to play a significant role, as a major
act of evading and avoiding tax by most registered companies and some individuals has
however affected the revenue base of the government especially in providing essential
services in the society. People naturally prefer to reduce their tax liabilities by deliberately
overstating their expenses and make false entries and fictions in their books of account.
Thus, their act however, causes tremendous reduction in the revenue accruable to the
government which eventually shrinks revenue to the treasure of government. The inability
of the revenue board to collect substantial amount of money from tax is as a result of
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evasion and avoidance of tax. This research work examines the problems facing the
revenue department in collecting taxes and levies under their jurisdiction with a view to
identifying possibilities at minimizing or even eradicating tax evasion and avoidance. This
study thus becomes imperative for it seek to investigate on the effect of tax avoidance to
The aim of the study is to investigate and identify the effects of tax avoidance and evasion
ii. To examine the effects of tax avoidance on the economy of Taraba State
iv. To identify how to control and curb tax avoidance in the study area.
ii. What are the effects of tax avoidance on the economy of Taraba State?
iii. What are the determinants of tax avoidance in the study area?
iv. How to control and curb tax avoidance in the study area?
This research work would be relevant to various tax authorities; the Federal Board of
Inland Revenue, State Board of Internal Revenue and Local Government revenue
committee as well as their tax officials who are responsible to collect tax on individual or
corporate bodies. It gives them insight on how to improve the tax administration. The
research would also help the professional bodies like the chartered institute of taxation of
Nigeria and the institute of chartered accountants of Nigeria as well as their members to
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see the areas of deficiency in the collections and call for improvement in tax revenue.
Findings from this study will add to existing literatures on the topic of study. More so, this
research would also be relevant to the future researchers and the dents of accounting,
economic, business administration and other social and management sciences as well as
the legislations which will also benefit immensely from this research because it will form
basis of tax policy formation, implementation and administration. Finally, findings from
and so on, for it seek to unveil the effects of tax avoidance on economic development.
Since no single research can validly cover all areas of the topic the researcher tends that
thrust of this project will be limited within the scope of how tax payers performance on tax
are influenced by the choice of its tax system. The study will focus primarily on Taraba
subject. The state to be studied is Taraba State. It will be limited to time, insufficient fund,
bad transport network from the researcher to the study areas. Some of the limitations
includes: - lack of cooperation from the respondents, delay in the questionnaire retrieval
and so no.
In order to aid understanding of this research work by the user, special term used in this
corporate bodies for the use of government to provide facilities or service in the nation.
Tax Avoidance: This is a legal way by which a tax payer reduces his tax liabilities. Tax
avoidance is a way of identifying the loop-hole in the tax law and then taking advantage of
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Tax Liability: This is the amount that is borne by the tax payer
Paye (Pay As You Earn): This type of tax is based as the earning of the tax payer.
Capital Gain Tax: This is the type of tax that is based on the gain realized from the sale of
capital goods.
Corporate Tax: This is the type of tax that is based on the profit of a company.
Tax Evasion; Tax evasion is a deliberate act on the part of taxpayer not to pay tax due.
Tax Avoision; Tax avoision is a situation where the tax law might be unclear, thereby,
Social Norms: A set of behavioural models and rules or standard of behaviour shared by
synonymous with tax abatement, tax subsidy or tax reduction. Governments usually create
The chapter has covers the general introduction of the topic, background to the study
which includes meaning of tax, taxation, reasons for taxation for both the individuals, firms,
industries and government. The statement of the problem, objectives, research questions and
significance of the research to be studied, as well as scope and limitation which the study is
likely to encounter was also captured in the chapter one. Finally, the chapter also has discussed
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CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter highlighted the recent literature on the following sub-headings namely:
literatures.
The term tax has been defined in various ways by different authors. Udu and Agu (2005)
defined tax as a compulsory payment made by each eligible citizen towards the
expenditure. They added that tax is levied by the specific benefit that individual tax
Tax is a civic contribution imposed by the government on her subject (individuals and
corporate bodies) with a view to finance its core responsibilities of ensuring optimum
public welfare socially, economically and politically (Kiable and Nwankwo, 2009). A
system in many states around the globe. In particular, tax evasion is argued to be the most
tax laws to avoid payment of taxes. The phenomenon of tax evasion is found in all
societies (countries),indeed, no matter the control measures put in place, some people
maneuver their ways and break government’s rules and regulations relating taxes.
The practice of manoeuvring tax laws is considered illegal which needs to be checked
addressing tax evasion became necessary for many reasons, including, enhancing
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government’s revenue, regulating macroeconomic variables, redistributing inequality of
income and other benefits derivable from a good tax system (Dandago and Alabede,
2000).
In fact, a good tax system is said to be an instrument for regulating and stabilizing
erected behaviors in an economy (Ezeoha and Ogamba, 2010 and Toby, 1983). Equally,
tax has been argued to be a significant tool of government fiscal policy via increase or
Nwankwo, 2009). Engagement with literature on Nigerian tax systems showed that the
authorities responsible for managing taxes have not been transparent neither
appropriately accounts for the accrued revue in an open manner (Olayinka et al., 2010).
This has been a global phenomenon as evidence shows that accountants and tax
professionals who are expected to promote transparency of the practices and detect fraud
use their expertise to facilitate tax evasion (Sikka and Willmott, 2010; Ezeoha and
Ogamba, 2010 and Sikka, 2008). No doubt, even in Nigeria, the nontransparent attitude
of tax professionals, accountants and other stakeholders exposes the weaknesses of the
As the Nigerian economy is in the recession period, there are inconsistencies in our tax
laws which had made it difficult for the tax body to administer and even for the tax payer
to follow. The federal government had the intension to maintain a uniform tax system but
the economy condition of each state as given room for divergence system. The most
important thing one should have in mind is that taxation is supposed to be an instrument
Nigeria. The impact of tax payment is not felt by payee and some do not understand
some tax laws and this indeed has put them into doubt and confusion and has definitely
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Every modern state or nation requires a lot of revenue to be able to provide and maintain
essential services for its citizen. One ready means of revenue for the government is
through the imposition of tax. The imposition of tax by the government is not a new
phenomenon. There is hardly any government today that does not rely on taxation.
However, apart from the complications that has crept into the taxation system in modern
times, the reason for the imposition of tax in fact ceased to be only for the generation of
revenue for the state. It has also become the avenue for the redistribution of wealth and
Therefore, the tax system is one of the most powerful levies available to any government
to stimulate and guide its economic and social development. The FBIR (Federal Board of
Inland Revenue) which is vested with the power to administer the act and carry out all the
act which may be deemed necessary and expedient for the assessment and collection of
tax ,and shall for all amount so collected in a manner to be prescribed by the Federal
Minister of Finance. The Board has certain reserved power which shall not be delegated
to other person to perform, e.g. power to acquire, hold and dispose properties of any
company in satisfaction to tax or any judgment debt, and to specify the forms of return
The main forms of tax collected are direct and indirect taxes. For the direct taxes, it is
levied on individuals, and factors of productions e.g. Personal Income Tax (PIT), Capital
Gain Tax (CGT). However, indirect taxes are levied on goods and services e.g. import
and export duties. Thus, the consumers bear the ultimate burden. Having realized that
taxation is one of the most important sources of revenue for the various tiers of the
government and a major way of sourcing financial support to the Nigeria government at
large, it is of paramount importance that tax evasion and avoidance is discouraged with
every conceivable means. It is quite worrisome that despite numerous tax reforms in
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Nigeria no remarkable change has been recorded in Nigerian economy with regards to
economic development and adequate utilization of tax revenue. Consequently, many tax
payers in Nigeria have argued that tax revenue has not been adequately utilized in the
interest of the general public over the years. Hence, this paper is designed to investigate
Anyamuocha (2003) said that taxation as a concept involves more than mere imposition
of the compulsory payment of sum of money by the government or its agents. It involves
the assessment of tax, imposition of compulsory sums of money by the government or its
agents on individuals, firms, the collection and auditing of tax records. Ugwuanyi (2004)
the exact amount of service rendered to the taxpayer in return. He added that it involves a
compulsory levy from a person to the government to defray the expenses incurred on the
Basically, taxes are classified into: direct and indirect taxes.Udu and Agu (2005) states
that when taxes are classified according to the method of payment, they are grouped into:
Direct Tax
This is a tax levied directly on the tax payer or tax which is imposed directly on the
individuals’ income is called direct tax. They include income tax, estate tax, stamp duties
Indirect Tax
This is a tax that is imposed and collected indirectly from those who pay the taxes.
Indirect taxes may be specific or ad volerem. It is specific if the tax is levied based on the
unit of the commodities produced. While it is advolerem when it is levied based on the
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value of goods or services produced (Anyanwu, 1993). Indirect taxes include: export
duties, excise duties import duties, sales tax, purchases tax, value added tax (VAT).
System of Taxation
or groups of persons are made to contribute in some agreed quantum and method for the
Soyode and Kajola (2006) explained tax as a compulsory exaction of money by a public
contribution imposed by the government. And Kohonen and Alemayehu, (2011) defined
tax is a compulsory levy on privately held assets, work, transactions and other activities
According to Nwite (2004), there are three systems of taxation: proportional, progressive
and regressive.
Proportional Tax
In this system of taxation, the payers pay the same percentage or proportion of their
income as tax. In other words, the tax rate is the same irrespective of the level of income
or wealth. A proportional tax according to Nwite (2004) is one whose percentages rate
Progressive Tax
A progressive tax is one whose percentage rate increases as the tax base increases. In
other words, as the income of the person increases, the tax also increases gradually and
vice versa. Those with a higher income pay a higher proportion. Progressive taxation is
usually the system adopted with the taxation of personal income e.g. pay as you earn
(PAYE).
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Regressive Tax
A regressive tax is one whose percentage rate decreases as the base increases. The burden
of taxation falls more heavily on the lower income groups than on the higher income
group.
Udude, (2005) discussed incidence of tax and conditions under which tax could be
shifted from one person to another. She defined tax incidence as the distribution of tax
burden in terms of who pays the tax. The person whom the burden of payment eventually
falls on is the person who bears the incidence of the taxation. Whereas, the person who
initially pays the tax incurs its impact. The incidence of tax lies on the person on whom it
rest after further shifting. The effect on prices, income output, employment, capitals and
technological advances are regarded as economic effects which can be both direct and
indirect in nature that is responses from tax payers and their result. She also discussed the
short run (immediate incidence) and run (ultimate incidence). (Anyanwokoro, 1999)
Obinna (2004), defines tax shifting as the process by which market adjust tax. He
backward shifting to producers and partial shifting (forward and backward). Tax is
shifted forward when someone else pays the tax on product rather than the producer.
According to Anyanwuocha (2005) “the incidence of taxation refers to the burden of tax
Lawal (2005) discussed explicitly the Adam smith’s cannon of taxation which include:
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Equality
People in the same income level and having equal responsibilities ought to pay the same
amount that tax should be just and equitable based on their ability to pay.
Economy
A tax system should make tax collection economical. The cost of collecting tax should be
relatively small compared to the total revenue derived from the tax.
Certainty
The tax payer should be fully aware of the rate of tax he is to pay and should also know
when he is to pay. This helps to prevent tax avoidance and tax evasion.
Conveniences
This means that the amount of tax, the tax payable by a person and the timing of its
payment should be made to suit the tax payer. The tax system should not pose much
Flexibility
These cannon emphasized that tax system should not be rigid. It should be easy to change
Neutrality
The tax system should interfere very little with the demand for and supply of goods and
services. The tax system should not hamper production, willingness to work, save, or
A good tax according to Udude (2005) must posses the following features:
Stability
A good tax system should be stable and not to be subjected to unnecessary changes due
to political changes. That each new government should not repeal a whole sets of tax
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laws which have been introduced by its predecessors and introduce a whole set of new
tax law.
Flexibility
A good tax system must be able to accommodate differences in the exercise of political
income redistribution.
Incentive Effect
A good tax system should provide incentive to work, to save, to invest in capital
Efficiency Effect
A good tax system should be capable of encouraging people to use resources efficiently
and allocate them to uses which best serve the needs of society.
Income effect: A good tax system should be capable of inducing a tax payer to work
Redistribution Effect
A good tax system must be structured in such a way to encourage a vertical redistribution
of income between the poor and the rich. At some time it should maintain a horizontal
equality, that is “treating like with like”. Thus the distribution of tax burden should be
equitable.
Simplicity
The tax payer should be in a position to comprehend the nature of his liability through an
Minimum Sacrifice
A good tax system should always aim at minimizing the sacrifice on the part of taxpayer
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Problems of tax collection in Nigeria
Subsistence production
It is difficult to estimate the income of many people in Nigeria who do not produce in a
Inadequate Records of Incomes and Business Transactions: The literacy level in Nigeria
is still low; this makes it difficult for many to keep records of income and business
Corruption
Some tax assessors and collectors are dishonest. There are cases where there has been
bribery and corruption, sometimes they purposefully misappropriate fund, over-tax their
There is a high incidence of tax evasion and tax avoidance in Nigeria: Many people make
false declaration of income. This is very common with self-employed individuals. This is
also true of some firms, especial the small ones. While some try to avoid tax payment
This is a major problem militating against tax collection in Nigeria. Lack of qualified
personnel in the Federal and State Inland Revenue Offices is also a major problem facing
Lack of necessary working facilities; The federal and state offices lack necessary
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2.2.2 Concept of Taxation and Economic Growth
Eugene and Skimmer (1996) in their study titled “Taxation and Economic Growth in
Washington revealed that higher tax can discourage investment on the net growth in the
capital through high statutory tax rates on corporations and individual income”.
More so, the study showed that tax policy influences the marginal productivity of capital
and labour by distorting investment from heavily taxed sectors into more highly taxed
According to Solow (1996), heavy taxation on labour supply can distort the efficient use
of human capital by discouraging workers from employment in sectors with high social
Moreover, a number of recent studies have used endogenous growth models to stimulate
effects of a fundamental tax reforms on conclude that reducing the distorting effects of
current tax structure would permanently increase economic growth. At one extreme,
Lucca (1990) calculated that a revenue neutral income tax raise labour income taxes and
increase growth rates negligibly. At the other side, Jones et al. (1993) calculated that
eliminating all distorting taxes would raise average annual growth rates by a whopping 4-
8 percentage points. In addition, another study concluded in Britain in early 1960s; not a
single executive out of the 181 replied that they abandoned the introduction of tax
More recent studies suggested a larger impact of taxation on the discount rate used to
evaluate private investment projects (Potherb and Summers, 1995). In general studies of
taxation using cross-country data suggest that higher taxes have a negative impact on
output growth although these results are not always robust to tax measures used.
Skimmer (1988) used data from African countries to conclude that income, corporate and
import taxes led to greater reductions in output growth than average export and sales
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taxes. The above review shows no evidence of Nigerian case. Therefore, this study will
Jhingan, (2002) defines economic development as a process where by the real per capita
and qualitative changes that expand the country’s capacities. According to him, economic
development is measured in four ways using four indicators. This includes Gross
National Product (GNP), Per Capita Income and Welfare. For an economic development
to occur there must be an increase in real national income which is possible through
increased investment. Also there must be changes in the standard of living of the people.
Standard of living is determined using per capita income, because per capita income
country. Dowrick (1992) said that a country may have high Gross National Product with
low standard of living and economic welfare. The further factor that measures economic
development is social indicator. This includes health condition of the people nutritional
particular society. The extent to which this will occur depends on a great extent on
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 in short it is a term used to denote those various devices which have been
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adopted with the aim of saving tax and thus sheltering the taxpayer’s income from greater
Tax avoidance is the legitimatize use of the tax loopholes in order to minimize/reduce
ones tax liability (Brown, 1983) and (Pyle, 1989). (Mponguliana, 2002), Explains tax
evasions as unlawful act of dodging the statutory tax obligations, tax avoidance takes
advantages of any hoop any loop holes and weakness, deficiencies, and loose or vague
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. The Inland Revenue is not slow and quite
rightly to take every advantage, which is open to it under the taxing statutes for the
purpose of depleting the taxpayer‘s pocket. 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
Thus, 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. Examples of tax
claims for expenses in earning the income: increasing the number of one’s children (in
Nigeria the maximum allowable is four) and taking additional life assurance policies.
Tax avoidance is thus considered to be a matter of being sensible. While the law regards
tax avoidance as a legitimate game tax evasion is seen as immoral and illegal. Tax
evasion is an outright, dishonest action whereby the taxpayer endeavours to reduce his
tax liability through the use of illegal means. According to Farayola (1987), tax evasion
with the intention of avoiding the payment of or reducing the amount of tax otherwise
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payable. Tax evasion is accomplished by deliberate act of omission or commission which
in them constitutes criminal acts under the tax laws. These acts of omission or
commission might include: failure to pay tax e.g. withholding tax; failure to submit
returns; omission or misstatement of items from returns; claiming relief (in Personal
Income Tax), for example, of children that do not exist; understating income;
(Aguolu, 1999).
Olabisi, (2010) defined tax evasion as a deliberate and wilful practice of not disclosing
full taxable income so as to pay less tax and as a contravention of tax laws whereby a
taxable person neglects to pay tax due or reduces tax liability by making fraudulent or
untrue claims on the income tax form. This is not new to the world, but it differs from
country to country.
Tax avoidance and tax evasion brings with it a lot of economic challenges, for instance
tax avoidance causes investment distortions and thus companies and individuals would
undervalue or even have some of their assets exempted from tax purposes. Whereas tax
evasion on the other side would cause twists in business morals or ethics are destroyed as
DFID, (2009) emphasized that the obtainable knowledge on tax revenue losses in
developing countries caused by tax evasion and tax avoidance is very limited. This is
partially due to the lack of data and partially due to methodological shortcomings of
existing studies. Some of the existing evaluations of tax revenue losses due to tax
avoidance and evasion by firms systematically overestimate the losses. Other theories are
based on assumptions which are so restricting that the results are difficult to interpret.
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
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offences with the consequent fines, penalties and at times imprisonment being levied on
him for evading tax (Faseun, 2001). And as observed by Sosanya (1981): Tax evading
has become the favourite crime of the Nigerian, so popular that it makes armed robbery
seem like minority interest. It has become so widespread that there now exist 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. No doubt, tax evasion and avoidance
had robbed the Nigerian government of substantial tax revenue. According to the
Nigerian Stock Exchange, 85 percent of corporate tax revenue in the country accrues
from the 257 companies listed on the exchange compared to the 30,000 companies
registered with the Corporate Affairs Commission. This is a serious indictment of the
In general refers to illegal practices to escape from taxation. To this end, taxable income,
profits liable to tax or other taxable activities are concealed, the amount and/or the source
credits are deliberately overstated (Alm and Vazquez, 2001). According to Chiumya,
(2006) tax evasion refers to the willful or deliberate refusal of the tax payer towards
his/her tax obligation (Malkawi and Haloush, 2008). It is the deliberate distortion of facts
and figures relating to an assessment after tax liability has been incurred with the
intention of reducing the liability. Deliberate refusal to disclose one’s tax sources of
income to the tax authorities with the intention of paying nothing or something less in
terms of one’s tax liability is an attempt to evade tax. Tax evasion is an offense as
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2.2.5 Reasons for Tax Evasion and Tax Avoidance
The definition of tax evasion and tax avoidance seems to contradict many scholars and
tax practitioners. The demarcating line between tax evasion and tax avoidance is always
not clearly put forward as one may be thinking of avoiding tax but end up with evading
There are various reasons for tax evasion and tax avoidance. In order to develop methods
and instruments for fighting tax evasion and avoidance, it is important to foremost
establish a broad understanding of the different reasons underlying these problems. These
reasons can be filed in two categories. The first category comprises factors that
negatively affect taxpayers’ compliance with tax legislation. These factors can be
subsumed either contributing to a low willingness to pay taxes (low tax morale) or to
The second category contains reasons for the low ability of tax administration and fiscal
courts to enforce tax liabilities (Kirchler et al., 2007). These factors can be summarized
weak capacity in auditing and monitoring tax payments which limit the possibility to
detect and prosecute violators. These facilitating factors are discussed below: -
Taxpayers’ willingness to pay taxes differs widely across the world. It cannot be viewed
as simply depending on the tax burden. Rather, Alm et al., (2007) indicates that taxpayers
throughout the world pay more taxes than can be explained by even the highest feasible
levels of auditing, penalties and risk aversion. These high levels of tax compliance result
from the tax morale of society that fosters self-enforcement of tax compliance. Tax
morale is, however, not easy to establish. Especially countries without a deep-rooted
23
‘culture’ and habit of paying taxes find it difficult to establish tax morale (Alm et al.
1992). This “willingness to pay” of the taxpayer is influenced by the following factors:
Low quality of the service in return for taxes: In general, citizens expect some kind of
service or benefit in return for the taxes paid. If the government fails to provide basic
public goods and services or provides them insufficiently, citizens may not be willing to
pay taxes and tax evasion and avoidance will be the consequence (Pashev, 2005).
Tax system and perception of fairness: Some studies suggest that high tax rates foster
evasion. The intuition is that high tax rates increase the tax burden and, hence, lower the
disposable income of the taxpayer (Chipeta, 2002). However, the level of the tax rate
may not be the only factor influencing people’s decision about paying taxes. In fact, the
structure of the overall tax system has an impact as well. If, for example, the tax rate on
corporate profits is relatively low, but individuals are facing a high tax rate on their
personal income, they may perceive their personal tax burden as unfair and choose to
declare only a part of their income. Similarly, large companies can often more easily take
system. Tax rates and the overall structure of the tax system, therefore, have a significant
accountability in the use of public funds contributes to public distrust both with respect to
the tax system as well as the government. This, in turn, increases the willingness to evade
High compliance costs, these are the costs the taxpayer has to bear to gather the
necessary information, fill out tax forms etc, can be an additional reason for tax evasion
and avoidance. The World Bank’s 2008 World Development Indicator for “time to
24
prepare and pay taxes” shows huge differences between countries: While preparing and
paying taxes requires 210 hours on average in high income OECD countries, the required
time extends to 1080 hours in Bolivia and Vietnam and even 2600 hours in Brazil.
which found over 1500 different taxes, licenses and fees covering various bases at
different rates. This situation led businesses to worry more about the administrative
burden than about the actual tax burden. In such a situation it can be assumed that
compliance costs are very high and the probability of the taxpayer complying with such a
Particularly small and medium sized enterprises (SME) suffer from high compliance
costs. A survey among South African firms on the regulatory costs of doing business
revealed that taxes, in particular VAT, are perceived as the most problematic set of
regulations followed by labor regulation (SBP, 2005). Above all it is the paperwork that
has to be mastered to comply with tax legislation which is deterring firms from paying
their taxes appropriately. When asked on their strategy to cope with regulatory costs of
running their business about 18 percent responded to simply try to avoid or evade
taxation.
Regarding tax collection, many developing countries face difficulties with respect to
identifying and administering those citizens and firms that are liable to tax payments.
Although there has been progress, tax administrations’ capacity to introduce and sustain
e.g. well-functioning tax registers still pose severe difficulties in many developing
25
countries. Problems of insufficient capacity may also occur due to the organizational set
In general, there are two approaches for the organizational set up of tax administration.
The first option is where the ministry of finance itself assumes the tax administration
function and departments within the ministry of finance collect taxes. The second option
ministry of finance into a separate entity. Often, tax administration and collection by
ministries of finance were considered inefficient and suffering from corruption and high
Moreover, one has to bear in mind that tax administration and tax policy are intertwined
spheres. Tax policy directly affects the costs and the organization of the tax
administration. Additionally, the capacities of tax administration influence the way tax
policy is implemented. Thus, both areas tax policy as well as tax administration have to
be taken into consideration when designing successful tax reforms. Otherwise, the proper
functioning of the overall system is affected. For this reason, the tax system should be
aligned to the administrative and legal prerequisites of the respective country (Moore,
2009).
Qualified, well trained and motivated tax officials are crucial for the collection of taxes
and the performance of tax administration bodies as a whole. In order to motivate tax
officials to work in accordance with the interests of the government and to reduce their
Finally, insufficiencies in tax collection according to Moore, (2009) also result from the
fact that economies of most developing countries are characterized by a large informal
26
sector. Firms and individuals active in the informal sector usually do not pay direct taxes
on personal or business income, and they do not charge consumption taxes or excises on
their sales. The state loses these potential tax revenues and, as a consequence, lacks
necessary funds to provide goods and service. Often, the reasons to be active in the
informal economy are not directly related to attempts to avoid taxation but rather to
excessive costs of labour regulations. However, there are also cases where individuals
and companies choose to be active in the informal sector with the intention to escape
their tax liabilities. Nevertheless, tax evasion does not need to be the primary reason why
A well-functioning body of tax investigation is essential for the detection and prosecution
of cases of tax fraud. The lack of sufficient capacities in tax administrations reduce the
evade or not. Additionally, the legal framework is an important prerequisite for any
enforcement activity. For example, the size and nature of penalties that are incurred after
evasion has been detected is directly connected to the level of tax compliance (Fishlow
c) Source of Income
Source of income has a significant effect on tax compliance. Bruce (2000) argues that
some individuals inter to self-employed to avoid tax. This may due to cash receipts, or
the weak of tax information reporting. Furthermore, the lack of visibility of income for
Finally, tax laws in many countries, especially in developing countries, changes rapidly,
thus producing instability and low transparency of the tax code. As a result, complicated
27
tax legislation and on-going changes of the tax code confuse tax administrators and
taxpayers alike. This produces ample opportunity for tax avoidance (Mo, 2003).
Furthermore, it results in tax evasion which is not intentional, but occurs due to lack of
knowledge, that is ignorance. In extreme cases, tax evasion and avoidance even become
inevitable when the tax system becomes too complex and/or contradictory to follow.
As stated earlier, taxes, and tax systems, the theoretical basis for this research is based the
taxes underwrite the capacity of states to carry out their goals; they form one of the
central arenas for the conduct of state-society relations, and they shape the balance
between accumulation and redistribution that gives states their social character. Thus,
taxes build capacity to provide security, meet basic needs or foster economic
development and they build legitimacy and consent helping to create consensual,
Thus, as revealed by Okafor (2012), tax revenue and growth of the economy have
positive and significant relationship. This is consistent with the findings of this study that
Again as observed by Okafor, (2012) that over the years that income tax revenue has
generally been grossly understated due to improper tax administration arising from under
assessment and inefficient machinery for collection. This fact has been collaborated by
Ola (2001), Oluba, (2008) and Adegbie and Fakile, (2011) when they state that in Nigeria
revenue derived from income taxes has been grossly understated due to improper tax
administration, assessment and collection. This could be due to persons and companies
are known to routinely evade and avoid taxes due to corrupt practices and the existence
of various loopholes in the tax laws. Thus, according to Naiyelu (1996), the success or
28
failure of any tax system depends on the extent to which it is properly managed; the
extent to which the tax law is properly interpreted and implemented. The finding of this
study again is consistent with the assertion of Okafor (2012), Ola (2001), Oluba, (2008)
Tax evasion and avoidance is an illegal act of intentionally reducing accrual taxes or
completing skipping the payment of such taxes by under reporting income, overstating
serious problem in Nigeria which arises from many sources including outright ignorance
of extent tax laws, lack of faith in the ability of government to utilize tax revenue well
and high tax rates which make evasion very attractive and economical. Thus, as stated by
Kiabel and Nwokah (2009), the problem of tax evasion and avoidance have reduced
A nation’s tax system is often a reflection of its communal values and the values of those
in power (Ross, 2007). Therefore, to create a system of taxation, a nation must make
choices regarding the distribution of the tax burden and how the taxes collected will be
spent. In democratic nations where the public elects those in charge of establishing the
tax system like Nigeria, these choices reflect the type of community that the public or
Parkin, (2006) states that in countries where the public does not have a significant
amount of influence over the system of taxation, that system may be more of a reflection
on the values of those in power as governments use different kinds of taxes and vary the
tax rates. This is done to distribute the tax burden among individuals or classes of the
between individuals or classes in the population in addition, taxes are applied to fund
29
foreign aid and military ventures, to influence the macroeconomic performance of the
Tax evasion and avoidance have adverse effect on government revenue. Tax avoidance
generates investment distortion in the form of the purchase of assets exempted from tax
or under-valued for tax purposes (KIabel and Nwokah, 2009). Avoidance takes the form
Toby, (1983) the taxpayer indulges in evasion by resorting to various practices. These
practices erode moral values and build up inflationary pressures. This point can be
buttressed with the fact that because of the evasion of tax, individuals and companies
have a lot of money at their disposal and companies declare higher dividends and
individuals have a high take home profit. This increases the quantity of money in
circulation but without a corresponding increase in the goods and services, this then build
up what is known as inflationary trends where large money chases few goods (Toby,
1983).
Tax avoidance and evasion has been defined by Soyode and Kajola (2006) as deliberate
and wilful practice of not disclosing full taxable income in order to pay less tax. This
behavior is portrayed as criminal act of violating the provision of tax laws which will
eventually lead to reduction in total government revenue (Kay, 1980). Hence, in general,
paying less tax or not at all than what one is legally obliged to, described the concept of
tax avoidance and evasion. Eboziegbe, (2007) posited that the act of tax evasion
remained one of themost serious threatsto the revenue and indeed entire economy of the
Nation. Feld and Frey (2002) asserted that in most cases tax avoidance and evasion arises
in a situation where a taxpayer arranges his financial affairs in a way that would make
him not to pay or pay the least possible amount of tax by infringing the legal rules.
30
Faruyola, (1987) is of the opinion that tax evasion can be accomplished through
deliberate act of omission or commission which might include: Failure to pay tax, failure
in personal income tax which do not exist, understating income, documenting fictitious
transactions, overstating expenses and/or failure to answer queries. Although these acts
are more or less ways through which tax evasion are perpetrated but in themselves
constitute criminal act under tax laws and of all these failure to render tax returns is the
Respecting rule of law is one of the obligations of every good citizen of a country.
However, governments have a bigger obligation to ensure that those laws are respected
and followed. In case of tax collection and administration, authorities are obliged to
ensure taxes are properly paid and evaders are bringing to book (Schneider and Enste,
2002 and Brunetti and Wader, 2003). Supporting this view earlier, Kiabel (2001) posited
that tax evasion became rampant in Nigeria because there is little or no legal enforcement
in place and indeed, weak and arbitrary enforcement of tax laws encourage the evader
and fraud starts. Nwachukwu (2006) further stressed that the only way to reduce tax
of law. Not only in Nigeria, tax evasion in most developing countries is so rampant and
worsens by day due to the fact that governments have not made required effort to
arresting the situation. Hence required revenue for the governance of the countries cannot
be raise, these countries (developing states) often resort to borrowing public debt (both
internal and external) which may not only crowd out the private sector including self-
employed individuals of their economies but also lead them to debt traps (Chiuma, 2006).
31
In similar vein, Sikka and Hampton (2005) and Olatunde (2007) identified tax evasion as
one of the major social problems inhabiting development in developing countries and
eroding the existing welfare nature even in developed economies of the world. This has
led to a growing attention among policy makers and stakeholder across the globe to call
governments and tax authorities must resort to enforcing laws for proper implementation
Nigerian informal sector is described as any commercial activities from all sector of the
economy that operate outside the purview of government regulation (Ekpo and Umoh,
wide range of small and medium scale activities largely self-employment activities, most
of subsistence nature or retail trade, transport repair services and household or other
personal sources. Activities of the informal sector in Nigeria are difficult to measure.
This is because they are highly dynamics but contribute substantially to the general
The informal sector contributes significantly to national economy in terms of output and
employment. The government must therefore encourage and empower their activities
through the provision of conducive environment and policies to enhance their operations
(Alm and Martinez, 2008). The informal sector has no tendency to be missed out; it must
therefore be sustained for optimal contribution to the growth of the economy. In response
to this, the Nigerian government have attempted severally to positively impact on the
32
operation of informal sector like family economic advancement programme (FEAP) in
1997 whose objective is to serve as a catalyst to stimulate and encourage the growth of
informal sector, capacity building and credit support through peoples bank.
Hanousek and Palda (2007), in their study on Displacement Deadweight Loss from Tax
Evasion, found that in the presence of the underground economy taxes give rise to a
considered an economy in which a producer faces two types of costs: the cost of
production and taxes. If the ability to evade taxes is inversely proportional to the ability to
keep production costs low, high tax rates may cause inefficient producers to crowd out
efficient producers. They estimated this deadweight loss from surveys of 426 Czech firms
taken in 2004 and 2005. They further found that the deadweight loss due to this crowding
out could be several times as large as the deadweight losses from discouraged
consumption.
In another vein the study by Sookram and Watson (2005) had two main objectives. The
first objective was to determine the extent of tax evasion in Trinidad and Tobago during
the period 1960-2000. This was done using estimates of the hidden economy based on a
variant of Tanzi’s monetary model. The second objective was to determine if, and to what
extent, any relationship exists between certain key macroeconomic variables and the level
of income tax evasion in Trinidad and Tobago. The bounds testing procedure to
address the issue. The study established a long-run relationship between tax evasion, per
33
Cerqueti and Coppier, (2009) explored tax revenues in a regime of widespread corruption
in a growth model. They develop a Ramsey model of economic growth with rival but non-
excludable public good which is financed by taxes which can be evaded via corrupt tax
inspector. They show that the relationship between the tax rate and tax collection, in a
dynamic framework, is not unique. The study revealed that growth rates - both of income
and of tax revenues - decrease, as the tax rate increases but they differed in how the growth
Mironov, (2010) examines the effect of tax evasion on firm growth using a unique set of
data that contains 236 million banking transactions of 1.7 million Russian firms over the
period 2003 to 2004. The study estimated income diversion in Russia to be 11.3% to 3.1%
Fisman and Svensson (2000), study the relationship between bribe payments, taxes, and
firm growth in Uganda for the period 1995-97. Using industry-location averages to
circumvent the potential problem of endogeneity and to deal with issues of measurement
error, they find that both the rate of taxation and the rate of bribery are negatively
correlated with firm growth. For the full data set, a one percentage point increase in the
bribery rate is associated with a three percentage point reduction in firm growth-an effect
about three times that of taxation. Moreover, after excluding outliers, the authors find that
bribery has a much greater negative impact on growth, and taxation a considerably smaller
one. This provides some validation of firm-level theories of which posit that corruption
The issue of tax evasion has received a considerable attention from researchers and policy
making institutions such as the International Monetary Fund, United Nations and various
organisations involved in the collection of revenue over the past decades. Various studies
have been conducted on tax evasion and tax avoidance, to analyse developments in various
34
economies such as tax evasion, income inequality and opportunity costs of compliance
studies by Bloomquist (2003) and possible causes of tax evasion by Wallschutzky (1984),
whereas Davies and Rattso (1996) analysed the impact of government regulations on the
economy.
As pointed out by Reynolds (2009), that since tax is a principal source of government
revenue, 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, the theoretical equity of the
tax to a large measure is lost. Tax evasion and avoidance no doubt deny any government
the tax revenue due to her, which results in a gap between the potential and actual tax
A precursor of the tax evasion was the change in the mix of financing flows between
commercial banks, multilateral lending agencies and companies. In doing so, it raises a
number of longer-term questions about international public policy, the role of multilateral
lending agencies, and the economic policies of the country (Pommerehne et al., 1994).
In seeking to identify how much tax each person pays, it is important to distinguish
between the ‘statutory incidence’ (the legal liability to pay the tax) and the economic
incidence, which in practice is often the belief regarding who ultimately bears the burden
of the tax. Tax evasion affect the ability of those legally liable for various taxes to shift
these as traditionally assumed. Tax evasion does affect incidence but is difficult to
The resulting tax revenue loss may cause serious damage to the proper functioning of the
public sector, threatening its capacity to finance its basic expenses, Franzoni, (1999).
Provision of public services offers a rationale for taxation. Hitherto, taxation and tax
evasion, in turn, influence public expenditure and capital accumulation, which affect
35
Some of transactions that are part of our daily routine are, either deliberately or
accidentally, concealed from the tax authority Russo, (2010). Tax evasion and fiscal
corruption have been universal and persistent problems throughout history with many-
sided important economic consequences Fjeldstad, (1996). Hence, Gillman and Kejak
services sector. The consumer pays a competitive market price for the service and as
representative agent, owns shares in the corruption sector and receives its dividend profits
(kickbacks).
Tax evasion has had a variety of fiscal effects and there are at least three reasons for
concern. According to Fjeldstad (1996), in the first place, revenue losses from non-
deficit. Second, horizontal and vertical equity suffer because the effective tax rates faced
by individuals may differ because of different opportunities for tax evasion, Alm et al.,
(1991). Again, Shome (2005) stress that, an important adverse effect of tax evasion is
perhaps on equity. There is horizontal and vertical inequity where in both forms of
inequity, the higher-taxed person pays for the lower-taxed person since, had there been no
tax evasion; the tax rates would have been lower under the premise of revenue neutrality.
Russo (2010) reported that, in Italy, one of the effects of tax evasion is loss of revenue to
the government. Estimates from the Ministry of Finance indicate that roughly 20% of the
income earned within the national border is not reported, resulting in a loss of more than
300 million euros every year in forgone tax revenue. This example is not an exception
because it is prevalent across the globe. Marion and Muehlegger, (2008) have added that
lack of compliance with tax laws are likely to alter the distortionary costs of raising a
given level of government revenue and may affect the distributional consequences of a
36
given tax policy. Furthermore, resources spent evading taxes represent a deadweight loss
to the economy.
The role of tax administration in maximizing revenue generation and minimizing tax
every stage of development of a tax administration. This is because it is not just a matter
The strategies which could be utilised by governments to address the problem of tax
evasion, can be categorised into those which define and criminalise tax evasion (for
example, anti-avoidance legislation), those which punish evasion (revenue powers), those
which forgive tax evaders and allow them to re-enter the formal economy (settlements
and amnesties), and those which appeal to, or seek to, create group norms of compliant
behaviour (naming and shaming) Oberholzer, (2007). Shome, (2005) also stated that,
there has to be a genuine threat and actual carrying out of audit, scrutiny, investigation,
However, regarding this issue, Lewis (1982) cited in Oberholzer, (2007) is of the opinion
that two major policy initiatives remain: increasing the deterrence capabilities of tax
the government and tax authorities. He believes that what is required is compliance to
Further, Shome (2005) summed up modalities in order to keep tax evasion in check, the
tax administration must: (i) incorporate genuine threat of penalty but ensure due process;
in order to do this, of course the tax administration should be adequately financed and
interface between taxpayer and tax official; and (iii) not remain aloof from tax policy but
37
assist in every way possible to help design, in reflection of its field experience, a simple
Green, (2009) also simplified the how to control tax evasion in his research on the topic
‘What Is Wrong with Tax Evasion?’ stating that, there are presumably many potential
i. Simplify the tax code, making clearer the distinction between lawful and unlawful
behavior (though we should recognize how difficult this would be, particularly in
the context of taxes paid by large businesses); and distinguish more clearly
ii. Change our political rhetoric, attempting to educate people about the importance
iii. Make the Code more equitable, from both a vertical and horizontal perspective;
iv. Rethink the requirements of mens rea (criminal intent; the thoughts and intentions
behind a wrongful act (including knowledge that the act is illegal); and increase
Chiumya (2006) has therefore stated that, counteracting tax evasion is one of the most
complex activities in tax Administration. This is because tax evasion takes many forms
and facets. One of the major keys to successfully carry out such activities is to first and
foremost understand the behavior of taxpayers and the reasons that cause such specific
behavior. Thus, taking into consideration the emphasis by Vogel (1974) cited in
well as the technical reasons for tax laws and regulations are necessary preconditions to
both positive attitudes about the tax system and appropriate fiscal behaviour.
38
2.5 Theoretical Framework
Harley (1943) explained the ability to pay as an influential in the modeling of income
tax policy. This theory has some relation to the tax evasion, by means of not convincing
the taxpayers to go tax authorities in order to compute the tax due, but the tax payer
goes tax offices only when he/she is afford, this can simplify the taxpayer to evade or
Palao, (1976) criticized this theory saying the ability to pay principle alone is not
enough to achieve tax justice, but it is obvious that this inclusion would frequently lead
amount of income received is commonly regarded as the best indicator of ability. In the
case of the property tax, all non-income producing property is assessed and taxed.
This ability theory focuses that the taxation should be charged only according to an
individual’s ability regardless of the income and his business’s activities. According to
this theory public expenditure should come from those can afford to pay tax. This is
actually the basis of progressive tax as the tax rate increases by the increase of the
taxable amount. This principle on other hand is the most reasonable tax system, and has
been widely used in industrialized economics. The common and most maintained
which they would have used for their own personal use. However, there is no concrete
approach for the measurement of the equity of sacrifice in this theory, as it can be
39
2.5.2 Benefit Theory
The benefit theory is one of the theories of taxation from public finance. It is based on
taxes to pay for public- goods expenditures on willingness to pay for benefits received
(Knut and Erik, 1919). The theory also been put on to such subjects as tax progressivity,
corporation taxes, and taxes on property or wealth, the benefit principle approach shows
user fees for highways and business license fees for regulatory services are used today.
The theory offer priority to the grounds of fairness to individuals, with respect to their
ability to pay the current basis for business taxation, this theory points the benefits
individuals receive should be based on the tax system, but on other hand the benefit is
compared. We express the equality of two or more areas, of two bodies in length,
taxes must be equal and uniform. Not only does that mean geographically, but in
presentation to people. That is, one set of procedures cannot apply to one individual and
another set of rules apply to another. All people are assumed to be equal before the law,
Appah, (2010) stated that without the rule of equality and uniformity, people tend to
believe it’s not fair, and then avoid and evade tax systems, Basically, without the rule of
equality and uniformity, many people influence other people to bear the burden of
taxation. What happens is those people who enjoy the so-called benefits of a political
40
system, the protection of rights and property will avoiding the cost of that protection.
Such tax patterns inherently violate the concept of equal protection of the laws.
Furthermore, when some people are forced to pay the liability of other people directly
Gregory and Mathew (2011), discussed the standard theory of optimal taxation and
proposes that a tax system should be chosen to exploit a social welfare function subject
to a set of constraints, in order to solve social problems this theory highlight social
problems and solves social hardships, since tax evasion is social problem this theory has
some relation to the topic, and as justified below this theory states the taxpayers should
be the same according to paying tax whether rich or poor. This theory is based on the
To simplify the problem facing the social planner, it is often assumed that everyone in
society has the same preferences over, say, consumption and leisure (Mirrlees, 1971).
Sometimes this homogeneity assumption is taken one step further by assuming the
to choose the tax system that maximizes the representative consumer’s welfare,
knowing that the consumer will respond to whatever incentives the tax system provides.
simplification.
2.6 Summary
In summary, this chapter has discussed the literature review (both theoretical and
reviewed other authors work such as Tax Avoidance and Evasion, Effects of Tax
Avoidance and Evasion on the economy of Nigeria and other developing countries.
41
Works of Kiable and Nwankwo, (2009), Olayinka et al., (2010), and (Sikka and
Willmot, 2010; Ezeoha and Ogamba, 2010 and Eigen, 2002). Other authors cited on
their contribution on tax avoidance and evasions are Mponguliana (2002), Brown
(1983), Farayola, (1987), Aguola (1999), Dalu et al., (2012), Olabisi (2010) and
42
CHAPTER THREE
METHODOLOGY
3.1 Introduction
This chapter discusses how the research is carried out. It comprises the following sub-
headings; the research design, the study area, population, sample and sampling technique,
data collection instruments, validity and reliability of the instrument, research procedure
The researcher adopted a case study as the type of research design for the study in which a
survey technique and a questionnaire is being used to establish the tax evasion and its
effects on the Nigerian economy. The argument for better construct validity is based on the
fact that case studies can use more and more diverse indicators for representing a
theoretical concept and for securing the internal validity of causal inferences and/or
Taraba state lies between latitude 60 30’ and 9o 36’ north of the equator and longitude 9o
10’ and 11o 50’ East of the Green meridian (Taraba State government Diary, TSGD,
2014).
The state has a land area of 54,473km2 with a population figure of 2,300,736 people
(NPC, 2006). The state shares common boundary with Gombe state in the North – east and
Bauchi state in the North, Plateau state in North West and Adamawa state in the east. It is
also bounded to the west by both Nasarawa and Benue states. It shares an intentional
boundary with the republic of Cameroon to the south and south east (TSGD, 2014). It has
sixteen (16) local government areas with a tropical climate marked by two (2) distinct
seasons (the wet or rainy season and the dry season). The rainy season lasts from April to
43
October with an August break. The wettest months are August and September. The mean
annual rainfall ranges from 800mm in the north to 1800mm in the south. The dry season
begins in November and ends in March with a dust laden spelt, the harmattan wind that
blows from across the Sahara. Mean temperature fluctuates between 14.8oC and 34.4oC
(TADP, 2014)
The population of the study comprises of all the tax payers in Taraba State and the
For the purpose of this study the researcher employed the use of the simple random
technique of sampling respondents and purposive sampling as per the location of the
second hand Timber sellers. So for this study purposive sampling was employed.
Purposive sampling is virtually synonymous with qualitative research, Palys, (2008). Palys
(2008), further stated that, in Critical Case Sampling: ‘the researcher might be looking for
a decisive case that would help make a decision about which of several different
useful choice because of the generalizations it allows’. Thus, the decision is informed by
the nature and purpose of the study as well as making sure that respondents have equal
A total of 50 Timber Wood marketers were selected from about 215 Madrid dealers,
Taraba State, (2017). This is being sampled by means of random sampling and purposive
sampling techniques to ensure that each person used as in the sampling frame has an equal
44
3.6 Data Collection Instruments
are the main instruments being used for data collection. Sections B and C of the
questionnaire contain questions and statements which addressed tax avoidance and its
effects on the Nigerian economy. The items on the questionnaire has options from which
respondents have options that is best suited to the extent to which they agree with the
For the purpose of this study, both primary and secondary data collection were employed.
By using primary data, a survey of the study area was conducted to collect and collate
information on the tax evasion and its effects on the Nigerian economy. A primary source
of data involved first-hand information from the field or the study population through the
use of structured questionnaires. Secondary sources are primarily the works of other
researcher and authors which are in the form of books, articles from journals and
newspapers, in addition to the use of electronic information especially from the internet,
where related articles to the topic is being accessed for the purposes of the study.
Data collected from the field were analyzed by means of descriptive statistical tools. Mean
and frequency tables will be used for data representation. Data collected will be quantified
and analysed thematically in relation to the objectives of the study using statistical package
for social science (SPSS). After the frequency tables are derived and interpreted, they will
be analyzed with reference to the literature that was reviewed. Attempts are made to draw
45
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Introduction
This chapter highlights the data collected from demographic characteristics and the three
research questions. The demographic shows the sex, age, marital status, educational
background, daily sales deductions and status of membership tax payer registration. The
questions includes: how tax are avoided in Taraba State, causes of tax avoidance, effects of
tax avoidance and solutions to tax avoidance in the study area. The results are presented in
Table 1 above shows the age of the respondents. Data revealed that 34 respondents
representing 68% are aged between 30-39 years, 11 respondents representing 22% are aged
between 20-29 years while few (5) representing 10% are 40-49 years of aged.
46
Table 2: Sex of the respondents
Male 47 94
Female 3 6
Total 50 100%
Table 2 above shows the sex of the respondents. Data revealed that 47 respondents representing
94% are male while only few (3) of the respondents representing 6% are females.
Single 14 28
Married 30 60
Separated/Divorce/Widowed 6 12
Total 50 100%
Table 3 above was designed to elicit information on respondents’ marital status. Data revealed
that majority (30) of the respondents representing 60% are married, 14 respondents
representing 28% are single while only few respondents representing 6(12%) are either
47
Table 4: Educational Qualification of the Respondent
No formal education 10 20
Primary 8 16
Secondary 30 60
Tertiary 2 4
Total 50 100%
Table 4 was focused on getting respondents educational attainment. The data above disclosed
that majority of the respondents representing 30(60%) have completed their secondary
representing 16% have attained primary education while only few (2) of the respondent
48
SECTION ‘B’ Research Questions
2. Smuggling 29 14 7 2.71 A
Table 5 present analyses of responses base on research question 1. From statement 1 it shows
that majority of the respondents 33(66%) agreed that tax is avoided through over stating of
expenses and fiction on the account, 12 respondents representing 24% disagreed while few
respondents representing 5(10%) have no response on the statement. From research statement
2, majority 29(58%) of the respondents agreed that tax is avoided through smuggling, 14
respondents representing 28% disagree while only few (7) representing 14% gave no response.
Also, statement 3 in table 5 disclosed that 38 respondents representing 76% agreed with the
49
statement that tax collectors reduce the amount of burden of the payers through collection of
pocket money, 10 respondents representing 20% disagree while only few of the respondents
Moreso, statement 4 in table 5 above showed that majority of the respondents 31(62%) agreed
with the statement that tax can be avoid through false report by the tax collectors (corruption
from tax administration; 11 respondents representing 22% disagree with the notion while few
Finally, statement 5 in table 5 shows respondents on views on if tax payers reduce tax rate as a
result of low income. Data revealed that majority of the respondents representing 41 (82%)
agreed, 7 respondents representing 14% disagree while only few of the respondents
representing 2(4%) have no opinion on the statement. Based on the analysis it can be asserted
that all the statements in the table have mean rating of 2.50 and above which shows that tax can
be avoided through the above mentioned statements. This finding is in agreement with the
findings of Gupta (2007), Tahseen and Eatzaz (2009), who asserted that corruption, has a
avoid tax because they think the system is corrupt and taxes collected are not used properly.
Similar findings also highlighted that the ambiguity in implementation costs businesses time
and increases the scope for corruption' (Briefing Papers, 2011). And Tahseen and Eatzaz
(2009) argued that low wages of tax administrator foster corruption. Shome (2005) could very
well be an increase in tax rates, or the imposition of distortive taxes, thereby initiating a vicious
50
Table 6: Research Question 2. What are the Causes of Tax Avoidance in Taraba State?
20% 74% 6%
Table 6 present analysis of responses base on research question 2: it shows from statement 6
that 86% (43 respondents) agree that a large proportion of taxes is used by the government for
meaningless purposes, 10% (5 respondents) have no opinion about the above statement, while
51
only few 2(4%) disagree with the statement. In response to question 7 of table 6, it shows that
96% (48 respondents) agree with the statement that a lot of people do not pay tax that is why
they don’t pay tax while only few respondents representing 2(4%) disagree. This indicated that
Furthermore, question 8 of table 6 show that 58% (29 respondents) agree that the burden of tax
is so heavy that many people are forced to avoid it in order to survive, 26% (13 respondents)
disagree with the statement while 16% (8 respondents) have no opinion about the statement.
Thus the majority of the respondents that the burden of tax made tax payers avoid tax.
Also question 9 of table 6 shows that 70% (35 respondents) disagree with the statement that
government receive enough tax so it does not matters if some people avoid tax, 22% (11
respondents) agree that some people believed that government have received enough tax so it
does not matters if they avoid tax while only few 8% (4 respondents) gave no response to the
statement in question 9. Thus the majority of the respondents disagreed with the statement that
some people avoid tax because they think government has enough tax.
Nevertheless, table 6 above disclosed that in question 10, majority of the respondents
representing 41(82%) agree with the statement that the reasons why they avoid tax is because
tax agents do not collects the right amount of tax from them. 5 respondents representing 10%
disagree while only few (4) representing 8% of the respondents gave no response on the
agree with the statement that waste and corruption in government is high so they avoid paying
tax while only few respondents representing 2(4%) disagree with the statement.
37(74%) disagree with the statement that it is unfair to pay tax, 10 respondents representing
20% disagree while only few 3(6%) have no opinion on if it is unfair to pay tax.
52
Finally question 13 of table 6 shows that 94% (47 respondents) agree that with statement that
government does not provide enough information about how they use tax payer money while
only few 3(6%) disagree. From the table 6 above it could be revealed that the respondents
agree with the statement except statement 9 and 12 which are less than 2.50 mean rating.
This finding is in agreement with the finding of Richardson, (2006), that an increased
knowledge of tax evasion opportunities has a negative influence on tax compliance as it assists
non-compliance. On the other hand, the vast majority of studies examining the impact of
education on tax evasion use a taxpayer's general education level as the approach to measure
education. This seems to suggest that as tax payers are faced with complexities in calculation,
they tend to find ways to evade tax. And also confirmed with the findings of Tahseen and
Eatzaz (2009) who noted that the primary function of a tax system is to raise enough revenue to
finance essential expenditures on the goods and services provided by government but the
reverse is the case where tax payers think the taxes they paid are not used meaningfully.
53
Table 7: Research Question 3. What are Effects of Tax Avoidance to the Economic
Table 7 was designed to sought respondents views on the effects of tax avoidance on the
economic development in Taraba State. Data revealed that statement 14 in table 7 above
revealed that 32 respondents representing 64% agreed that if they do not pay taxes government
project,10 respondents representing 20% disagree white only few gave no response on the
statement. Also statement 15 in table 7 depicted that 30 (60%) agree that if they don’t pay tax
government would not be able to pay if workers; 15(30%) disagree with the statement while 5
54
(10%) gave no response. This indicates that majority of the respondents agree with the
Moreso, statement 16 in table 7 highlighted that majority (28) respondents representing 56%
agree with the statement that if they do not pay tax government would not be able to provide
infrastructure to its citizens, 14 respondents representing 28% have no opinion on the statement
while only few (8) representing 16% disagree with the statement nevertheless, statement 17 in
gable 7 was designed to know if tax avoidance would decree government revenue. Data
revealed that majority of the respondents representing 45(90%) agree that tax avoidance and
evasion would decrease government revenue; 3(6%) disagree while 2 (4%) have no opinion on
the statement.
Finally, statement 18 on able 7 revealed 26(52%) respondent and tax burdens on others,
16(28%) disagree while 8 respondents representing 16% agree with the statement. Result
therefore indicated that majority of tax payers doesn’t have any idea if tax avoidance cause any
inequality and the tax burden on others. Based on the analysis it can be asserted that all the
statements except statement 18 in the table have mean rating of 2.50 and above which shows
This finding concurred with the findings of Brautigam et al., (2008), Cobham, (2005), and
Cummings (2005), who asserted that tax avoidance, has negative effect on the economic
development of any nation. They further disclosed that taxation is the most important of all
sources of revenue to any state and to its economic development. Annual expenditure, budgets
are based largely as the projected tax revenue of any state. Where tax is avoidance and evasion
are the order of the day relevant tax authorities finds it very difficult to meet their target
collection resulting in less revenue to the state and which in turn has serious effect on the
state’s economy. Also, this finding is in agreement with the findings of Russo (2010) cited in
55
Magesa, (2014) who discovered that tax avoidance and evasion has negative impact on the
level of tax collection performance. He argued that the countries with high rate of tax evasion
also has low rate of revenue collection and vice versa. Russo, (2010) in Magesa (2014) further
reported that, in Italy, one of the effects of tax evasion and avoidance is loss of revenue to the
government. Estimates from the Ministry of Finance indicate that roughly 20% of the income
earned within the national border is not reported, resulting in a loss of more than 300 million
euros every year in forgone tax revenue. This example is not an exception because it is
Moreso, the finding above on the effects of tax avoidance corroborates with the findings of
Adebisi and Gbeji (2013) who discovered that effects of tax evasion and avoidance manifest in
two ways: i) Inadequate supply of service: the government finds it difficult to execute its socio-
economic programme like the provision of social amenities such as portable water supply,
constant power supply, security for the general wellbeing of the people. ii) Decrease in
Revenue: this implies that when tax are avoided or evaded there is drastic decrease in the
amount of money that would have been realized by the government as revenue through
taxation.
56
Table 8: Research Question 3. What are the Solutions to Tax Avoidance in Taraba State?
Table 8 present analyses of responses base on research question 4. From statement 19 it shows
that majority of the respondents 43(86%) agreed that tax avoidance can be corrected if tax rate
is reduce, 5 respondents representing 10% disagreed while few respondents representing 2(4%)
have no response on the statement. Also, from research statement 20 in table 8, majority
57
24(48%) of the respondents agreed that to correct tax avoidance enforcement of penalties for
tax default should be made clearer and public, 18 respondents representing 36% disagree while
only few (8) representing 16% gave no response. Moreso, statement 21 in table 8 disclosed that
majority (30) respondents representing 60% agreed with the statement that one of the solutions
to tax avoidance is for government to point more priorities on tax education, 15 respondents
representing 30% disagree while only few of the respondents representing 5(10%) gave no
response.
Nevertheless, statement 22 in table 8 above showed that majority of the respondents 35(70%)
agreed with the statement that to solve the problem of tax avoidance government spending
disagree with the notion while only few respondents representing 5(10%) have no opinion on
the statement. Data in table 8 statement 23, also revealed that majority of the respondents
representing 28(56%) disagreed with the statement that tax administration structure should be
computerized to eliminate corruption, 18 respondents representing 36% agree while only few
(4 or 8%) have no opinion on the statement. This finding is in agreement with findings of
Alfred et al., (2012) who suggested that that tax payers would not appreciate computerization
of tax administration in order to reduce corruption though this is in sharp contrast with Shome
processes as possible to minimize the interface between taxpayer and tax official.
made available to the public. Data revealed that majority of the respondents representing 35 or
70% agree, 12 respondents representing 24% disagree while only few of the respondents
representing 3(6%) have no opinion on the statement. Based on the analysis it can be asserted
that all the statements except statement 23 in the table have mean rating of 2.50 and above
58
which shows that tax avoidance problems can be solved through the above mentioned
statements.
This finding is in agreement with the findings Alfred et al., (2012) whose findings seem to
imply that more emphasis should be put into education and the provision of information on tax.
Thus, as Vogel (1974) cited in Oberholzer, (2007), puts it on the importance of education and
information in the process of opinion formation. 'A deeper understanding of the benefits
provided for by taxes, as well as the technical reasons for tax laws and regulations are
necessary preconditions to both positive attitudes about the tax system and appropriate fiscal
behaviour'.
It also concurred with the findings of Alfred et al., (2012) The who suggested that when laws
on defaulting in tax obligations are well publicized and enforced to the letter, tax payers would
not find means of avoiding and evading tax. It also confirmed Shome, (2005) as stated that,
there has to be a genuine threat and actual carrying out of audit, scrutiny, investigation, penalty
Major findings of this research work from above includes overstating of expenses and fiction
on the account, smuggling, burden reduction of the taxpayers by the collectors through
collection of pocket money, false report by the tax collectors (corruption from tax
administration),tax payers reduce tax rate as a result of low income. This finding is in
agreement with the findings of Gupta (2007), Tahseen and Eatzaz (2009), who asserted that
corruption, has a significant negative effect on revenue performance. Therefore people would
be motivated to avoid tax because they think the system is highly corrupt.
Another finding of this work are a large proportion of taxes is used for meaningless purpose,
enough of people do not pay tax that is why I don’t pay tax, the burden of tax is so heavy that
59
many people are force to avoid tax, tax agents do not collects the right amount of tax from
payers, waste and corruption in government is high, government does not provide enough
information about how they used tax money. This finding is in agreement with the finding of
Richardson (2006), that an increased knowledge of tax avoidance and evasion opportunities has
a negative influence on tax compliance as it assists non-compliance. Also confirmed with the
finding of Tahseen and Eatzaz (2009), who noted that the primary function of a tax system is to
raise enough revenue to finance essential expenditure on the goods and services provided by
government but the reverse is the case where tax payers think the taxes they paid are not used
meaningfully.
Finding also show that tax avoidance would cause government not to be able to carry out
development project, failure to pay tax would lead to poor infrastructure, tax avoidance and
evasion reduce government revenue, inequality. This finding is similar with the finding of
Brautigan et al.,(2008), Cobham (2005), and Cummings (2005), who asserted that tax
avoidance, has negative effect on the economic development of any nation. They further
disclosed that taxation is the most importance of all source of revenue to any state and it
economic development. Annual expenditure, budget are based largely as the projected tax
revenue of any state where tax avoidance and evasion reduce revenue of the state. More so, this
finding on the effects of tax avoidance correlates with the finding of Adebisi and Gbeji (2013),
which discovered that effects of tax avoidance and evasion manifest in two ways.
i. Inadequate supply of service: the government finds it difficult to execute its socio-
economic programmes like the provision of social amenities such as portable water supply,
constant power supply, security for the general wellbeing of the people.
ii. Decrease in revenue: this means that when tax are avoided, it drastically decrease
60
Another important finding of this research work is that, tax rate should be reduce to enable
everybody to pay, enforcement of penalties for tax default should be made clearer and public,
information on tax should be made available to the public, government spending should be
developed oriented to encourage tax payers. This finding agrees with the findings of Alfred et
al., (2012) whose findings seem to imply that more emphasis should be put into education and
Overstating of expenses and fiction on the account: tax payers reduce tax liability by
Smuggling: tax payers reduce tax liability through smuggling in this research field; it is
asserted that, most of the timbers are diverted into illegal road in order to avoid tax.
Burden reduction of tax payers by the administrators: the tax administrators collected
pocket money from the tax payers as bribe to enabling the tax payers reduce their liability and
avoid tax corruption of the tax administrators when money are collected by the tax collectors, it
is only part of the collected money that are sent into the government account, some of the
Large proportion of taxes are used by the government for meaningless purpose: social
amenities and facilities, infrastructural project are short coming, the tax payers felt
marginalized as the government use tax money in buying cars, travelling outside countries for
Burden of tax are so heavy that many people are forced to avoided tax: Udude, (2005)
discussed tax incidence as conditions under which tax could be shifted from one person to
another. She defined tax incidence as the distribution of tax burden in terms of who pays the
tax. The person whom the burden of payment eventually falls on is the person who bears the
61
incidence of the taxation whereas; the person who initially pays the tax incurs its impact. The
incidence of tax lies on the person on whom it rest after further shifting.
Information: the tax payers have no information on the priorities of taxes. Information about
how government uses tax money is also not coming. Information regarding all laws on tax are
Development Project: failure of tax payment, would lead to poor development project
development project such as building of hospital, schools, provision of energy supply and
Infrastructural Project: tax avoidance lead to poor infrastructural project such as building of
public tenement, construction of road and bridge, irrigation and drainage system, dams etc.
Reduction of Government Revenue: According to Brautigan et al., (2005), Coham (2005) and
Cummings (2005) who asserted that tax avoidance, has negative effect on the economic
development of any nation, they disclosed that taxation is the most important of all source of
62
CHAPTER FIVE
5.1 Summary
This research work entitled “Effects of Tax Avoidance on the Economic Development of
Taraba State” was carried out to investigate how taxes are avoided in Taraba State,
examine the effects of tax avoidance on the economy of Taraba State, identify the
determinants of tax avoidance in the study area; and suggest how to control and curb tax
avoidance in the study area. Descriptive statistic was adopted for the study. Data for the
study was subjected to primary source of data collection. Three-Point Likert-type scale
close-ended questionnaire and an open-ended questionnaire are the main instruments being
used for data collection. A total of 50 Timber Wood marketers were selected from about
215 Madrid dealers, Taraba State, (2017). This is being sampled by means of random
sampling and purposive sampling techniques to ensure that each person used as in the
sampling frame has an equal chance of being selected. Data collected from the field were
analyzed by means of descriptive statistical tools. Mean and frequency tables will be used
for data representation. Data collected will be quantified and analysed thematically in
relation to the objectives of the study using statistical package for social science (SPSS).
After the frequency tables are derived and interpreted, they will be analyzed with reference
to the literature that was reviewed. Attempts are made to draw relations as to whether a
demographic characteristics revealed that majority of the respondents are adults, married
and have attained at least secondary educational level. Findings on the four research
questions revealed that taxes are avoided through various means such as overstating of
expenses and fiction on the account, smuggling, collection of pocket money by tax
63
administrators etc. On the causes of tax avoidance it was disclosed that waste and
information on how tax are utilized, lack of people’s knowledge on the use of tax etc.
Furthermore, findings depicted that tax avoidance has diverse effect on the economic
government and decrease in revenue generation. Finally, it was suggested that tax should
be publicize through the media; more priorities should be placed on tax education and
government should use the tax collected to develop the state rather than sharing it into
personal accounts.
5.2 Conclusion
Tax evasion is extensive, always has been, and almost certainly always will be.
Differences in educational level and the capacity to calculate tax returns can explain some
of the across- individual and, perhaps, across-country heterogeneity of evasion. But the
revenue by the government, publicity and the education of the general public on their tax
obligation and its effects on the national economy and the penalties on the default on non-
compliance.
Using the cognitive theory as a basis where the assumption is that humans are logical
beings making choices that make the most sense to them, tax payers would make decisions
on fulfilling their tax obligation based on what make sense to them. Thus, if tax payers
agree that taxes are used for meaningless ventures by government and the system of tax
collection is fraught corruption, they would devise innovative ways of evading tax. And
secondly, if tax payers lack the necessary information and the capacity to compute tax
64
Finally, the study characterized the importance of publicizing penalties on defaulting tax
payment and enforcing punishment, tax defaulter would be inclined to fulfill their
5.3 Recommendations
i. Taraba State Government should embark upon other means of publicity such as radio
messages, television advertisement, post bills as well as the use of town criers to inform
taxpayers of changes in tax legislation and need for compliance. Suitable personnel
should be recruited and Revenue personnel generally trained and retrained to cope with
the demands of the job. Staff should also be motivated through good salary package to
ii. The tax authority should properly review and evaluate the assessment and collection
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, tax forms should be made less complex.
Vast improvement can be made by improving the design of the forms. Since majority of
the people are poor tax evasion becomes inevitable. Government should therefore
aggressively tackle the inflationary trend and also ensure that the poor pay very
minimal tax.
iii. The handling of tax clearance certificates should be well decentralized such that neither
the assessor nor the collector can issue tax clearance certificates. The Audit Unit of the
levels. This measure will go a long way to curb corrupt practices among tax officials.
65
iv. A legislation compelling banks to inform the tax authorities, on request of any income
standing in the account of any taxable person (especially the sell-employed taxpayers)
should be put in place by Taraba State Government. Taraba State Government should
endeavour to provide social amenities to all nooks and crannies of the state’ (not just
the state capital alone), provide employment opportunities to all by the judicious use of
tax proceeds. In this way all will feel belong thereby encouraging voluntary
state. This will now update the tax register so that at any given point in time the tax
office cart give details of taxable adults and businesses thus reducing the incidence of
tax evasion.
penalties for tax default, and these penalties should be made clearer and public. This
will create real threat and actual carrying out of audit, inspection, inquiry, penalty and
vi. The government should resource Taraba In-Land Revenue Authority to prioritize tax
education for the informal sector by organizing periodic workshops on the calculation
and deductions on taxes. And during these workshops, the Information Service
importance of taxes and what the revenues accrued are used for. This bring about a
deeper understanding of the benefits provided for by taxes, as well as the technical
reasons for tax laws and regulations are necessary preconditions to both positive
66
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APPENDIX I
Department of Economics
Dear Respondent,
LETTER OF INTRODUCTION
I am a final year student of the above mentioned department currently undergoing a
research work on “Effects of Tax Avoidance on the Economic Development of Taraba
State”
I am soliciting for your assistance to help me answer the following questions in
Appendix II below. All information retrieved will be treated confidentially and for the
purpose of this research work only.
Thanks
Yours Faithfully,
Dauda Zaphaniah
TSU/FAS/ECO/13/1072
72
APPENDIX II
QUESTIONNAIRE
INSTRUCTION:
Please tick [ ] the appropriate box and where necessary supply an answer.
SECTION A: PERSONAL INFORMATION
1. Please indicate your age group. (A) 20yrs-29yrs [ ] (B) 30yrs-39yrs [ ] (C) 40yrr and
above [ ]
2. Please indicate your sex:
(A) Male [ ] (B) Female [ ]
3. What is your marital status?
(A) ingle [ ] (B) Married [ ] (C) Separated [ ] (D) Divorced [ ] (E) Widowed
4. Please indicate your educational background:
(A) No formal education [ ] (B) Primary education [ ] (C) Secondary education [ ]
(D) Tertiary [ ]
SECTION ‘B’ RESEARCH QUESTIONS
INSTRUCTION:
Please indicate whether: Agree, Disagree or No response on the statements on the box provided
below.
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RESEARCH QUESTION 2: WHAT ARE THE CAUSES OF TAX AVOIDANCE IN
TARABA STATE?
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RESEARCH QUESTION 4: WHAT ARE THE SOLUTIONS TO TAX AVOIDANCE IN
TARABA STATE?
S/N Statements VR QR FR M IR
19. Tax rate should be reduce to enable
everybody to pay.
20. Enforcement of penalties for tax default
should be made clearer and public.
21. Priority should be placed on tax
education.
22. Government spending should be
development oriented to encourage tax
payers.
23. The tax administration structure should be
computerized to eliminate corruption.
24. Information on tax should be made
available to the public.
25. do you have any further comment with regard to tax avoidance in Taraba state (for
example, would you like to more informed about tax by receiving brochures, pamphlets, etc).
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Thank You
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