The effect of tax avoidance and tax evasion on revenue generation
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The effect of tax avoidance and tax evasion on revenue generation
The effect of tax avoidance and tax evasion on revenue generationAbstract:
The
study aims to
evaluate the effect
of tax evasion
and avoidance on revenue
generation in Nigeria.
The population of
the study
comprised of
the federal Inland
Revenue, central bank
of Nigeria and national bureau of statistics of which a
period of Ten (10) years was used from
2006 - 2015. The data
generated from statistical bulletin and annual reports of the CBN, FIRS
and NBS were analyzed by means of
descriptive statistics, and
regression analysis using Eviews
8.0. The result
of the analysis
was tested at
0.05 (5%) level of
significance. The findings
of the study
show that tax
evasion and avoidance have
significant effect on
revenue generation and
the Nigerian economy. Therefore, the
study recommends that, Government should use media platforms
to enlighten citizens on the effects of tax evasion and avoidance on
socioeconomic development.
Furthermore, tax
rates should be
reduced to enhance
and boost revenue generation
which will increase the tax net to capture many individuals and
small businesses. Also,
the insignificance of
penalties and
tax authority bearing
should also be
tackled; Changes
in
tax legislations should
also be communicated
to citizens on
time via any available
media platforms. Qualified
personnel should be recruited
and trained to
enhance the efficiency
and effectiveness of tax
operations. Also, tax
authorities should engage
in practices that are capable of attracting public
confidence in eradicating the evasion and
avoidance of taxes,
Staff should be
motivated to increase
their
morale in
ensuring the insulation
of fraud and
corruption from tax operations. For example, good salary package should be
designed for tax officials to discontinue corrupt practices. In so doing,
evasion and avoidance of taxes will be minimal to ensure the socioeconomic development
of Nigeria.
INTRODUCTION
Tax evasion is one of the major social problems hindering revenue generation in developing
state and eroding the existing welfare in Oyo state. This has led to a growing attention among
policy makers and scholars. However, little attention has been placed on the issues of tax
evasion in Nigeria. Hence, an enviable society can only be visible when internally generated
revenue can be mobilized for her social obligations to the citizens. Tax evasion, in most
developing states is so rampant, and the scenario is much worsened by the fact that, not only
government of Oyo state has made an effort to measure the reasons that tax payers give. The
extents of this problem at the same time analyse its effects on revenue generation. Hence,
when required revenue for smooth operation cannot be raised, state will resort to increase tax
rates or borrowings which may not only crowd out the private sector but also leads to debt
traps as (Fagbemi, Uadiale & Noah (2010) and Chiumya, (2006). On the other hand, tax
evasion has the effect of distorting the principle of perfect market resource allocation and
income redistribution. This leads to economic growth stagnation and socio-economic
repercussions in Oyo state.
Thus, there is a need to understand the reasons for rising in tax evasion and establishing
mechanism to curb this problem. Several studies have been carried out in the past on this
subject. But the review of previous empirical literature revealed a lack of tax evasion and its
effect on government revenue generation in the research findings of past researchers whichindicated the existence of a research gap. For instance, Magesa, (2014) examined the impact
of tax evasion on revenue collection performance in Tanzania while Mehrara & Farahani
(2016) wrote on the effect of tax evasion and government tax revenues on economic stability
in OECD countries. Other research works carried out by scholars on the effects of tax
evasion and avoidance on tax revenue in Nigeria and other part of countries includes;
Onyeka, & Nwankwo (2016) Chiumya, (2006), McGee, ( 2005), Akinyele & Ogunmakin
(2016), Dalu, Maposa & Pabwaungana (2012), Ibadin & Eiya. (2013), Modugu & Omoye
(2014), Obafemi (2014) and Al Mustapha & Hamza (2016). However, in the course of this
unending argument so far, certain questions have been raised about this study. What are the
significant effects of tax evasion on government revenue generation in Oyo state? What are
the effects of perceived corruption of government on tax evasion?
Objectives of the Study
The main objective of this study is to identify the effects of tax evasion on government
revenue generation and suggest ways of establishing mechanism to curb the problem in Oyo
state. Other specific objectives include;
(i) To examine the effects of tax evasion on government revenue generation.
(ii) To ascertain the effects of perceived corruption in government on tax evasion
Research Hypotheses
The following hypotheses were formulated in the course of this study.
Ho1: Tax evasion has no significant effects on government revenue generation.
Ho2: There is no effect of perceived corruption in government on tax evasion.
Justification of the Study
This study would be of benefit to Revenue officials who are saddled with the responsibility of
ensuring that taxpayers are not negligent in paying their taxes. It will also assist in knowing
why taxes are evaded. The outcome of this research would enable them to have a better
understanding of why tax payers evade taxes. Therefore, when these reasons are adequately
appraised, it is expected that it will in turn translate to the provision of necessary
infrastructure for the society when the resources are judiciously utilized. This study would
be of great value to the Government, revenue officials and business taxpayers and to serve as
a resource based to other researchers.
The effect of tax avoidance and tax evasion on revenue generation
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The study aims to evaluate the effect of tax evasion and avoidance on revenue generation in Nigeria. The population of the study
comprised of the federal Inland Revenue, central bank of Nigeria and national bureau of statistics of which a period of Ten (10) years was used from 2006 - 2015. The data generated from statistical bulletin and annual reports of the CBN, FIRS and NBS were analyzed by means of descriptive statistics, and regression analysis using Eviews 8.0. The result of the analysis was tested at 0.05 (5%) level of significance. The findings of the study show that tax evasion and avoidance have significant effect on revenue generation and the Nigerian economy. Therefore, the study recommends that, Government should use media platforms to enlighten citizens on the effects of tax evasion and avoidance on socioeconomic development.
Furthermore, tax rates should be reduced to enhance and boost revenue generation which will increase the tax net to capture many individuals and small businesses. Also, the insignificance of
penalties and tax authority bearing should also be tackled; Changes
in tax legislations should also be communicated to citizens on time via any available media platforms. Qualified personnel should be recruited and trained to enhance the efficiency and effectiveness of tax .. accounting project topics
The effect of tax avoidance and tax evasion on revenue generation