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ABSTRACT
The purpose of this study was to investigate the perception of tax
evasion to the payment of tax on ethical reasons. A case study of some
selected Local Government Area in Akwa Ibom State. Extensive review of
the existing literature was made and relevant information was extracted.
The Design of the study is descriptive field survey and observation
method and the study was conducted at the selected Local Government Area
in Akwa Ibom State. The instrument for data collection is structured
questionnaire and the source of data used was primary and secondary
sources. The data collected were analyzed using Chi-square test (X2).
Based on the analysis of this research, the researcher discovered the
following as her data findings, that there is widespread ethical support
for tax evasion, the study showed varying degree of justification for
tax evasion, that tax evasion is ethical sometime and also found that
the perceived government corruption can make respondent to evade tax.
Therefore, until those underlying cause are addressed, tax evasion may
continue to be widespread.
CHAPTER ONE
INTRODUCTION
1.1 HISTORICAL BACKGROUND OF THE STUDY
The word tax first appeared in the English language only in the 14th
century, it is derived from the Latin word tax are, which means to
“Assess” before that, English used the related word task derived from
old French, for a while task and tax were both in common use, the first
requiring labour, and the second money.
In the Stone Age, tax was collected in Nigeria long before the coming of
Europeans; it was collected by the local Chief for the purpose of
administration and defense. Every one was expected to give part of his
or her proceeds from cultivation of land to the state, those who were
not cultivating were required to give their human (labour) sources for
public work such as clearing the bush, digging the pit latrine, wells
etc. for the benefit of the community, as a whole. Failure to render
such services usually resulted in loss of property which might be
reclaimed after payment. With the coming of the Europeans, taxes were
collected from individuals through local chief in 1964; a legislative
council was set for the whole country which obliged the regional council
with a large measure of financial responsibility. After independence,
state government were to fine out other sources of generating revenue
which is today known as pay as you earn (PAYE).
Tax is a levy imposed by the federal board of Inland Revenue (federal
government) on the chargeable income generated by individuals,
organizations and other corporate bodies for the betterment of the
society as a whole.
Taxation is the act of taxing, it is also the amount assessed as a tax,
it is revenue raised from taxes. Taxation is the means of progress
through which the government generate revenue for national development
through the contribution by the citizens.
According to Ogundele (1999) taxation is defined as a process or
machinery by which communities or group of persons are made to
contribute in some agreed amount of money for the propose of the
administration and development of the society. It can be inferred that
the payment of tax will in turn be beneficial to the entire community of
they pay their tax properly.
Tax constituted an important source of revenue to the government of any
country both direct and indirect taxes that are collected by the
government inform of income tax, excise duty, import and export duties,
purchase and sales tax and so on help the government to generate a lot
of revenue for the smooth administration of a nation. There are two
elements in every form of taxation and that is the base and rate
element. The tax base is the object which is taxed or a measure of the
private sector income or wealth that can be taxed. The tax rate is the
percentage of the measured amount taken from the tax base. As earlier
stated, taxation is one of the most important and major source of
government revenue, in this case the money realized from is used to
provide social goods and services so that both the rich and the poor
will have equal chance of making use of them through the provision of
social amenities such as good roads, electricity, pipe borne water,
hospitals welfare organization, schools and so on.
In spite of these benefits from tax, most people still run away from tax
indulging themselves in what is called tax evasion and avoidance.
Attempt to avoid some portion of inability or not to pay tax will affect
the revenue generation of the government and that is the most condition
why government frowns at the issue of tax evasion and uses its
authority to enforce compliance. But in spite of the frown by the
government of Nigeria, there have not been adequate and sincere efforts
towards enforcing the tax evaders on the need for them to pay their tax
instead, they concentrated on the revenue from oil sector,
while overlooking the taxes on agriculture which is supposed to yield revenue to the country as a whole.
Arowomole and Oluwalayode (2006:39) define tax evasion as a deliberate
act on the part of the tax payer to reduce their tax liability through
illegal means or an attempt not to pay tax due. While tax avoidance is
defined as a legal way by which a taxpayer reduces his or her tax
liabilities. Tax evasion is considered as a criminal offence.
1.2 STATEMENT OF THE PROBLEM
The researcher has observed that tax evasion has become rampant in Akwa
Ibom state, individuals and firm manover or try to evade paying tax
based on their perceptions of tax.
The researcher has through this investigation observed that most people
formulate their tax in order to underpay tax while some companies and
individuals as well smuggle goods into the country in order to evade tax
payment.
Most people see tax paying as government exploiting them while some try
to bribe government officials in order that they may evade tax payment.
It has been observed to that most people fail to register their company
or goods in order to equally avoid tax payment. This is as a result of
ignorance or an attempt to cheat the government.
Finally, it has been observed by the researcher that as tax payment is
one of the ways government generate revenues, tax evasion would only
trigger off lack of revenue for development and tax evasion is
detrimental to the government. Hence, the decision of the researcher is
to investigate the stated problem, the reason why individuals and firms
indulge in tax evasion and to offer suggestion for solving the problem.
1.3 OBJECTIVES OF THE STUDY
i. To investigate the perception of tax payers to the payment of tax on ethical reasons.
ii. To identify specific key areas that tax payer link to tax evasion.
iii. To examine the effect of perceived corruption in government on tax evasion.
iv. To state the seriousness of tax evasion according to the Nigerian constitution.
1.4 RESEARCH QUESTIONS
i. Is tax evasion ethically justifiable?
ii. What are the reasons for tax evasion?
iii. What is the attitude of tax payer when government is perceived to be corrupt?
iv. What is the most rampant ethical justification for tax evasion?
1.5 RESEARCH HYPOTHESIS
Because of the above research questions, the following hypothesis was formulated;
i. Tax evasion is not ethically justifiable
Tax evasion is ethically justifiable
ii. There is no reason for tax evasion
There are reasons for tax evasion
iii. There is no rampant ethical justification for tax evasion
There is rampant ethical justification for tax evasion
1.6 SIGNIFICANCE OF THE STUDY
This research work would be referred to various tax authorities, the
federal board of Inland Revenue, local government revenue committee as
well as their tax officials who are responsible of collecting tax on
individuals 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 chattered accountant of Nigeria as well as the members to
see the areas of deficiency on tax collection and call for improvement
in tax revenue. This research would also be relevant to the future
researchers and students of economics, business administration,
accounting 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.
1.7 SCOPE OF THE STUDY
This research is premised on obtaining evidence on the ethics of tax
evasion, by obtaining responses from business owners, professional
bodies, tax officials, the federal board of inland revenue,
organizations and others in Akwa Ibom state, thus the study was
restricted to some selected local governments in Akwa Ibom state.
1.8 DEFINITION OF TERMS
TAX EVASION: An illegal practice where a person, organization or
corporation intentionally avoid paying his or her true tax liability.
TAX ETHICS: It is the rule and regulations governing or guiding the payment of tax.
You either get what you want or your money back. T&C Apply
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