INVESTIGATION INTO THE CAUSES OF TAX EVASION IN LAGOS STATE (A CASE STUDY OF SELECTED SMES IN IKEJA LGA)

INVESTIGATION INTO THE CAUSES OF TAX EVASION IN LAGOS STATE (A CASE STUDY OF SELECTED SMES IN IKEJA LGA)

CHAPTER ONE
INTRODUCTION
1. Background of the study
The concept of taxation has been a concern of global significance as it affects every economy irrespective of national differences (Oboh etal., 2012). According to Omotoso (2001), in his definition of the modern taxes, defined tax as a compulsory charge imposed by a public authority on the income of individuals and
companies as stipulated by the government decrees, acts or cases laws irrespective of the exact amount of services rendered to the payer in return. A more recent and comprehensive definition was given by Dr. Ekenze Oliver of Buitas Consultancy to the effect that tax is: “a compulsory levy imposed by an organization or Government on its member citizens, for the sole purpose of providing common goods and services for the benefit of all members”. He continued: “tax is designed to raise revenue required for the expenditure authorized in a government budget expectation. It is also a veritable instrument of promoting social and economic justice and equality amongst citizens of a state or members of an organization”. As could be gleaned from the above definitions, a tax is not therefore a voluntary payment; it is a compulsory pecuniary burden placed upon the subjects of a given country to support the people. Thus, taxes constitute the principal source of government revenue and the beauty of any government is for its citizen to voluntarily execute their tax obligations without much coercion and harassment. The greatest puzzle facing the Nigerian tax system is the threat of tax evasion and tax avoidance. It is widely believed that there is a substantial difference between estimated revenue from taxation every year and what is actually collected. Tax evasion is a major problem plaguing many emerging economies across the globe and Nigeria situation seems unique when viewed against the scale of corrupt practices evident in the country. Under the 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, contractors, professional practitioners like lawyers, doctors, accountants, architects and traders in shops among others (Kiabel and Nwokah, 2009). As observed by Ayua (1999) cited in Kiabel and Nwokah (2009) these persons blatantly refuse to pay tax by reporting losses every year. Ayua (1999) further asserts that many of these professionals live a lifestyle inconsistent with reported income, which is usually unrealistically low for the nature of their businesses. The only categories of individuals who fulfill their tax obligation in Nigeria are civil servants and other salaried workers

INVESTIGATION INTO THE CAUSES OF TAX EVASION IN LAGOS STATE (A CASE STUDY OF SELECTED SMES IN IKEJA LGA)