tax evasion chpt 1-5

AN APPRAISAL OF TAX EVASION ON FINANCIAL CRIME IN NIGERIA

(A CASE STUDY OF OYO STATE BOARD OF INTERNAL REVENUE, GOVERNMENT SECRETARIAT, AGODI, IBADAN, OYO STATE, NIGERIA.)

BY

KAYODE OLADIPUPO OLAYEMIResearch Analyst (self employed)

LOCATED IN

THE POLYTECHNIC, IBADAN

NOVEMBER, 2010

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ABSTRACT

Tax evasion is a problem which seemed to have defied solution, had bedeviled the

Nigerian tax system right from the colonial times. While some have blamed the situation on the

tax authorities for not living up to expectation with regards to tax administration, others attribute

it to the unpatriotic attitude of the taxpayers. It was in the light of these contending positions that

this researcher carried out a survey involving state tax authorities and individual taxpayers in

Nigeria.

The study sought to identify the causes of tax evasion and avoidance amongst individual

taxpayers, the way through which it is perpetrated and the social and economic consequences

brought about by this problem. It was found, among others, that loopholes in the tax laws,

poverty and lack of adequate public enlightenment are responsible for the problem. The taxpayer

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perpetrates this unpatriotic act through such means as concealment of profit and interference

with the Revenue agents through bribery and corruption. The situation results in the inability of

government to render essential services adequately, creation of resentment among honest

taxpayers, and inequality in the society.

It was recommended that tax officials should be constantly trained and re-trained on the

job, a deliberate and more aggressive public enlightenment campaign be embarked upon by

government and the establishment of Revenue Courts by state governments having powers to

impose heavy monetary penalties and criminal sanctions.

CHAPTER ONE

1.1 INTRODUCTION

Tax evasion is a crime in almost all developed countries and subjects the guilty party to

fines and/or imprisonment - in China the punishment can be as severe as the death penalty. In

Switzerland, many acts that would amount to criminal tax evasion in other countries are treated

as civil matters. Even dishonestly misreporting income in a tax return is not necessarily

considered a crime. Such matters are dealt with in the Swiss tax courts, not the criminal courts.

However, even in Switzerland, some fraudulent tax conduct is criminal, for example, deliberate

falsification of records. Moreover, civil tax transgressions may give rise to penalties. So the

difference between Switzerland and other countries, while significant, is limited. It is often

considered that extent of evasion depends on the severity of punishment for evasion. Normally,

the higher the evaded amount, the higher the degree of punishment. (Allingham, and Sandmo

1972)

According to The desire to uplift one’s society is the first desire of every patriotic citizen.

Tax payment is a demonstration of such a desire. The payment of tax is a civic duty and an

imposed contribution by government on her subjects and companies to enable her finance or run

public utilities and perform other social responsibilities. Taxes, thus, constitutes the principal

source of government revenue. However, one of the greatest problems facing the Nigerian Tax

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System is the problem of tax evasion and tax avoidance. While tax evasion is the willful and

deliberate violation of the law in order to

escape payment of tax which is unquestionably imposed by law of the tax jurisdiction, tax

avoidance is the active means by which the taxpayer seeks to reduce or remove altogether his

liability to tax without actually breaking the law.

These “Twin devils” have created a great gulf between actual and potential revenue. The

government has for the umpteenth time complained of the widespread incidence of tax avoidance

and evasion in the country as companies and other taxable persons employ various tax avoidance

devices to escape or minimize their taxes or deliberately employ fraudulent ways and means of

evading tax altogether sometimes with the active connivance of the tax officials. As pointed out

by Reynoids (1963), 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 collections. This study is aimed at bridging this gap.

1.2 STATEMENT OF PROBLEM

Although tax evasion is a problem that faces every tax system, the Nigerian situation seems

unique when viewed against the scale of corrupt practices prevalent in Nigeria. 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, contractors, professional

practitioners like lawyers, doctors, accountants, architects and traders in shops among others. As

observed by Ayua (1999) these persons blatantly refuse to pay tax by reporting losses every year.

According to him, many of these professionals 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 added, many have turned the statutory personal allowances and

relief into a fertile ground for tax evasion.

Almost all Nigerian taxpayer is married with four children! Similarly, despite the tax

provision meant to plug loopholes through which taxable persons can minimize tax liability the

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self-employed persons employ all kinds of avoidance schemes to minimise or escape tax liability

and makes you wonder whether there are still any tax officials working in that capacity. Such

scenarios, no doubt, say a lot about tax administration system in Nigeria both in its design and in

the disposition of some taxpayers towards taxation. While it immediately presupposes that there

are legal framework put in place to punish tax evaders it perhaps raises a poser on the efficiency

and effectiveness of tax laws and tax administration in Nigeria. 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.

1.3 PURPOSE OF THE STUDY

The major focus of the study is an appraisal of tax evasion on financial crime in Nigeria.

Other needs of the study are:

To know the causes (reasons) of tax evasion

To Identify the problems militating against tax assessment and collection

To know the various ways through which tax evasion is being perpetrated

To assess the economic and social effects of Tax evasion

To evaluate the possible consequences of tax evasion on state’s tax revenue in Nigeria.

1.4 RESEARCH QUESTIONS

What are the causes of tax evasion?

What are the various ways through which tax evasion is being perpetrated?

What are the economic and social effects of Tax evasion?

1.5 SIGNIFICANCE OF THE STUDY

The impact of office automation on organizational productivity is a very important source

of study because of the following reasons:

To expand the knowledge on tax evasion so as to provide useful information to scholars,

practitioners and government that would assist them in understanding the causes, effects and

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consequences of tax evasion and possible ways of creating environment conductive for tax

administration in Nigeria.

It will enable accountancy students to understand the causes, effects and the usefulness of

tax the more.

To the management of Oyo State Board of Internal Revenue and other States Internal

Revenue Authorities in Nigeria. It is expected that management of the management of Oyo State

Internal Revenue Board would be guided by the findings of Tax evasion in order to curb

inequality in the society. Since this is one of the major driving force that enable government to

render essential services adequately.

To The Polytechnic, Ibadan for academic purpose, the study will be useful for providing

knowledge for all students at all levels and lecturers.

To any individual or group that may want to carry out research on similar issue in the

Nigerian environment and other part of the African continent with the overall objectives of

persuading tax payers (self-employed & salary earners) and organizations to be more committed

in tax payment.

1.6 DELIMITATION OF THE STUDY

The study will be carried out within Ibadan Metropolis with a focus on the Oyo State

Board of Internal Revenue, Government Secretariat, Agodi, Ibadan, Oyo state, Nigeria. This is to

enable the researcher draw relevant conclusion from the study. The study will make use of

questionnaires to draw data/information from the respondents which would be tested to ensure

validity and reliability.

1.7 LIMITATIONS OF THE STUDY

The results will be limited to Oyo State Board of Internal Revenue, Government

Secretariat, Agodi, Ibadan, Oyo state, Nigeria and other limitations are inadequate finance to

carryout an effective study and the limited time given for the completion of the research work

will not allow the researcher to visit other branches.

1.8 DEFINITION OF TERMS

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TAX: Tax can be defined as a compulsory levy by government on goods, services, income and

wealth primarily to obtain revenue.

Tax Policies: represent key resource allocator between the public and private sectors in a

country

VAT: Value Added Tax is a consumption tax levied at each stage of the consumption chain, and

is borne by the final consumer.

Tax Treaties: Nigeria has a number tax treaties referred to as double taxation agreements with a

number of countries, these are designed to ensure that the tax payable in Nigeria on the profits of

a Nigerian company being remitted into the country are reduced by the amount of foreign Tax

paid abroad and vice versa where an overseas company receives profits from Nigeria that have

already been taxed in Nigeria.

Capital Gains Tax: This accrues on an actual year basis and it pertains to all gains accruing to a

taxpayer from the sale or lease or other transfer of proprietary rights in a chargeable interest

which are subject to a capital gains tax of 10%, such chargeable assets may be corporeal or

incorporeal and it does not matter that such asset is not situated in Nigeria.

1.9 HISTORICAL BACKGROUND OF OYO STATE BOARD OF INTERNAL

REVENUE

The Nigerian Federal Inland Revenue Service, FIRS, was created in 1943. It was carved from the

erstwhile Inland Revenue Department that covered what was then the AngloPhone West Africa

(including Ghana, Gambia, Sierra Leone) during the colonial era. Tax provides revenue to fund

governance, ensures resource redistribution, streamlines consumption of certain goods and

services, reduces inflation and generates employment. The Federal Inland Revenue Service is

constitutionally empowered to collect taxes. In 1958, the Board of Inland Revenue was

established under the Income Tax Ordinance of 1958. The name was later changed in 1961 when

the Federal Board of Inland Revenue (FBIR) was established under Section 4 of the Companies

and Income Tax Act (CITA) No. 22 of 1961. FBIR operated then as a department in the Federal

Ministry of Finance.

A further transformation took place in 1993 when the Finance (Miscellaneous Taxation

Provisions) Act No 3 of 1993 established the Federal Inland Revenue Service FIRS as the

operational arm of FBIR. The Act also created the office of the Executive Chairman of the

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Board. In 2007, the Federal Inland Revenue Service Establishment Act, (2007), which granted

autonomy to the service, was enacted.

Board Of Internal Revenue Objectives are:

To administer the personal income tax decree, 1993 and any tax or levy shall be under the

care and management of the board;

Formulate from time to time, proposals, for the expansion and increase of the internal

sources of revenue for the State;

Identify sources of revenue available in the State;

Enlighten the public on the subject of taxation;

Appropriately assess all sources of revenue and taxes in the State;

Design an effective revenue collection and machinery and implement it;

Enforce all laws relating to taxation and revenue collection;

Keep proper account and records in relations to all tax and revenue collections made by

the board;

Monitor and co-ordinate the collections of taxes and revenue in the State by all agencies

of the Government such as the Ministries, Parastatals and Public Companies;

Do all such things as it may consider necessary or expedient for the assessment and

collection of taxes and revenue;

Ensure the effectiveness and optimum collection of all taxes and penalties due to

Government under the relevant laws;

Make recommendations, where appropriate to the joint tax board on tax policy, tax

reform, tax legislation, tax treaties and exemptions, as may be required from time to

time; and

Generally exercise control over the management of the State’s internal revenue service on

matters of policies.

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CHAPTER TWO

LITERATURE REVIEW

2.1 WHAT IS TAX?

Tax can be defined as a compulsory levy by government on goods, services, income and

wealth. Primarily to obtain revenue. In other word, it is levy or dues on the income of persons

and companies. It provides definite source of revenue of person for government expenditure. It is

the way by which government obtain extra money it spends from income of individual or

companies. The types of taxes will have are:

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http://bizcovering.com/accounting/the-problems-and-prospects-of-tax-collection/

1. Direct Tax

2. Indirect Tax

Direct taxes in Nigeria consist of the following:

o Company Income Tax (CIT)

o Personal Income Tax (PIT)

o Withholding Tax (WHT)

o Capital Gain Tax (CGT)

o Capital Transfer Tax (CTT)

o Petroleum Profit Tax (PPT)

Indirect taxes in Nigeria consist of the following:

1. Custom Duties

2. Excise Duties

3. Value Added Tax (VAT)

2.2 TAXES IN NIGERIA

Under current Nigerian law, taxation is enforced by the 3 tiers of Government, i.e.

Federal, State, and Local Government with each having its sphere clearly spelt out in the Taxes

and Levies (approved list for Collection) Decree, 1998. Of importance at this juncture however

are tax regulations pertaining to investors both foreign and Local. The importance of tax

regulations cannot be over-emphasized, as most transactions with any Ministry, department, or

government agency cannot be concluded without evidence of tax clearance. i.e. a Tax Clearance

Certificate certifying that all taxes due for the three immediately preceding years of assessment

have been settled in full. The following are some of the relevant tax regulations in the country.

1. Value Added Tax (Vat): This was introduced by the VAT decree No. 2 of 1993, to replace the

old sales tax. It is a consumption tax levied at each stage of the consumption chain, and is borne

by the final consumer. It requires a taxable person upon registering with the Federal Board of

Inland Revenue to charge and collect VAT at a flat rate of 5% (recently increased to 10%) of all

invoiced amounts of taxable goods and services. VAT paid by a business on purchases is known

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as input tax, which is recovered from VAT charged on company’s sales, known as output tax. If

output exceeds input in any particular month the excess is remitted to the Federal Board Of

Inland Revenue (FBIR) but where input exceeds output the taxpayer is entitled to a refund of the

excess from FBIR though in practice this is not always possible.

A Taxpayer however has the option of recovering excess input from excess output of a

subsequent period. It should be stated at this point that recoverable input is limited to VAT on

goods imported directly for resale and goods that form the stock-in-trade used for the direct

production of any new product on which the output VAT is charged.

2. Capital Gains Tax: This accrues on an actual year basis and it pertains to all gains accruing to

a taxpayer from the sale or lease or other transfer of proprietary rights in a chargeable interest

which are subject to a capital gains tax of 10%, such chargeable assets may be corporeal or

incorporeal and it does not matter that such asset is not situated in Nigeria. Where however the

taxpayer is a non-resident company or individual the tax will only be levied on the amount

received or brought into Nigeria. Computation of capital gains tax is done by deducting from the

sum received or receivable from the cost of acquisition to the person realizing the chargeable

gain plus expenditure incurred on the improvement or expenses incidental to the realization of

the asset.

3. Education Tax: An education tax of 2% of assessable profits is imposed on all companies

incorporated in Nigeria. This tax is viewed as a social obligation placed on all companies in

ensuring that they contribute their own quota in developing educational facilities in the country.

4. Personal Income Tax: The legal basis for this tax is found in the provisions of the Personal

Income Tax Decree [now Act]. 104 of 1993. Every taxpayer in Nigeria is liable to pay tax on the

aggregate amount of his income whether derived from within or outside Nigeria, the salaries,

wages, fees, allowances, and other gains or benefits, given or granted to an employee are

chargeable to tax. The Employers of labor are deemed to be agents of the tax authority for the

purposes of remitting taxes deducted from salaries due to employees.

However residency of the Taxpayer determines the extent of a taxpayer’s liability in

Nigeria. A person’s place of residence for this purpose is defined as a place available for his

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domestic use in Nigeria on a relevant day, excluding hotels and rest houses. A person is deemed

resident in Nigeria if he resides in Nigeria for 183 days in any 12-month period, expatriates

holding residence permits are liable to tax in Nigeria even if they reside in the country for less

than 183days in any 12-month period. Once residence can be established, the relevant tax

authority of the territory is the tax Authority in which the taxpayer has his place of residence or

principal place of business.

The following are however exempted from tax: -

1. Medical or Dental expenses incurred by the employee;

2. Retirement gratuities and compensation loss of office;

3. The cost of passage to or from Nigeria incurred by the employee;

4. Interest on loans for developing an owner-occupied residential house;

5. Leave allowance, which is computed as 10% of annual basic salary subject to a

maximum of N7, 500 per annum.

5. Withholding Tax: Nigerian law subjects certain activities and services to Withholding Tax.

This basically means that where during transactions in any of the specified activities or services,

a payment is due from one person to another, the person making the payment is expected to

deduct tax at the applicable rate and remit it to the relevant tax authority. This should be done not

later than 30 days after the deduction. This provision can be found in sections 68 to 72 of the

Personal Income Tax Decree No. 104 of 1993; Sections 60 to 64 of the Company Income Tax

Act (as amended), and Section 51(a) of the Petroleum Profits Tax Act (as amended). Some of

these activities and Services and their current applicable rates include:-

Payment %Corporate %Individual/PartnershipRent 10 10Construction 5 5Dividend 10 10Royalties 10 5Commission 10 5Professional Fees 10 5Technical 10 5Consultancy Fees 10 5

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6. Tax Treaties: Nigeria has a number tax treaties referred to as double taxation agreements with

a number of countries, these are designed to ensure that the tax payable in Nigeria on the profits

of a Nigerian company being remitted into the country are reduced by the amount of foreign Tax

paid abroad and vice versa where an overseas company receives profits from Nigeria that have

already been taxed in Nigeria. Some of these countries include the UK, France. The Netherlands,

Belgium, Canada and Pakistan.

7. Companies Income Tax: Tax is payable for each year of assessment of the profits of any

company at a rate of 30%. These include profits accruing in, derived form brought into or

received from a trade, business or investment. Also companies paying dividends to its

shareholders are first obliged to pay tax on it’s profits at the companies tax rate. Generally in

Nigeria company dividends or other company distribution whether or not of a capital nature

made by a Nigerian company is liable to tax at source of 10%, however dividends paid in the

form of bonus share or scrip shares to individual share holders are not subject to tax, where also

a company is a shareholder in another company then such dividends are excluded from the

profits of the company for the purposes of computation of the tax.

8. Nigerian Social Investment Trust Fund (NSITF): This is governed by the NSITF Decree,

and requires everybody employed in a Nigerian incorporated company to contribute a certain

percentage of their salary to the fund. This contribution is based on the assumption that the

maximum basic salary in Nigeria is N48, 000 per annum; Expatriates are excluded from this

requirement where they can show proof of a similar contribution in their home country. The rate

of contributions is defined as follows, where the contributor is an employee, 2.5% of his salary

subject to a maximum of N 1,200 per annum; where the contributor is an employer, 5% of basic

salary subject.

2.3 THE MEANING OF TAX EVASION AND TAX AVOIDANCE

Tax avoidance arises in a situation where the taxpayer arranges his financial affairs in a

way that would make him pay the least possible amount of tax without infringing the legal rules.

In short it is a term used to denote those various devices which have been adopted with the aim

of saving tax and thus sheltering the taxpayers income from greater liability which would have

been otherwise incurred (Kiabel, 2001). Ani et al (1978) had described tax avoidance as follows:

the taxpayers knowing what the law is decides not to be caught by it, arranges his business in

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such a manner as to escape tax liability partially or entirely. It is a lawful trick or manipulation to

evade the payment of tax.

The meaning of tax avoidance is vividly captured in the case involving Ayrshire Pullman

Motor Services and David M. Ritchin Vs Commissioner of Inland Revenue when the Lord

President, Lord Clyde held that: No man in this country is under the smallest obligation moral or

otherwise so to arrange his legal relations to his business or to his property as to enable the

Inland Revenue to put the largest possible shovel into his stores. 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

avoidance include:

(i) Seeking professional advice;

(ii) Reducing one’s income by submitting claims for expenses in earning the income;

(iii)Increasing the number of one’s children (in Nigeria the maximum allowable is four);

(iv)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 is the fraudulent, dishonest,

intentional distortion or concealment of facts and figures with the intention of avoiding the

payment of or reducing the amount of tax otherwise payable. Tax evasion is accomplished by

European Journal of Economics, Finance And Administrative Sciences - Issue 15 (2009)

deliberate act of omission or commission which in themselves constitute criminal acts under the

tax laws. These acts of omission or commission might include:

a) failure to pay tax e.g. withholding tax;

b) failure to submit returns;

c) omission or misstatement of items from returns;

d) claming relief (in Personal Income Tax), for example, of children that do not exist;

e) understating income;

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f) documenting fictitious transactions;

g) overstating expenses;

h) failure to answer queries.

The most common form of tax evasion in Nigeria is through failure to render tax returns

to the Relevant Tax Authority. A tax evader may be charged to court for criminal offences with

the consequent fines, 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 exists a cash economy of vast proportions over which the taxman has

no control and which is growing at several times the rate of the national economy. 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 196 companies listed on the exchange compared to the 30,000 companies

registeredwith the Corporate Affairs Commission. This is a serious indictment of the

administrative machinery and capacity of the tax authorities in Nigeria.

2.4 THE PROBLEMS OF TAX EVASION IN NIGERIA

a) Corruption by Tax Officials

Corrupt tax officials cooperate with the tax payers who intend to evade taxes. When they

detect an instance of evasion, they refrain from reporting in return for illegal gratification or

bribe. Corruption by tax officials is a serious problem for the tax administration in a huge

number of underdeveloped countries. (Spiro, Peter S. (2005),

b) Role of Middleman

It is often alleged that tax lawyers and chartered accountants help taxpayers including

firms and companies in evading taxes. In the same vein, the Clearing and Forwarding agents help

in evasion of Customs duties. It has been suggested that removal of human interface is a reliable

solution to this problem. (Spiro, Peter S. (2005),

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c) Tax Farming

Tax farming is an old means of collection of revenue when it is difficult to determine the

leviable amount taxes with certainty. Government leases out the collection system to a private

entity for a fixed amount who then collects the revenue and shoulders the risk of attempts at

evasion by the tax-payers. It has been suggested that tax farming may be a solution to the

problem of tax evasion seen in developing countries. (Alam. D (1999)

2.5 WHY PEOPLE EVADE TAX IN NIGERIA

The causes of tax evasion and avoidance are universal, as they are applicable in any

country that tax is imposed. Some are peculiar to different areas, however. In Nigeria some of

these causes as identified by Onuigbo (1986) include:

The Absence of a “Quid Pro Quo”

The average human being abhors the payment of tax. He sees taxation as a discredited

imposition and evidently obnoxious. This stems mainly from the absence of a “quid pro quo” i.e.

something of value given in return (by the Government) for the taxes paid. Taxes, it is commonly

argued, should not be paid as the authority do not provide amenities which are in any way

commensurate with the taxes paid. There is no guaranteed compensatory benefit.

Inequitable Distribution of Amenities

In many parts of Nigeria citizens are opposed to the payment of any form of taxes and

rates on the ground that government had been unfair in the distribution of amenities and other

good things of life. This thinking is often a root cause of most civil disturbances in parts of the

country.

Misuse or Mismanagement of Collections Made

More often than not there are reports in the news media of how government functionaries

misuse taxpayers’ money. Evidences of wastage of public funds abound in the form of inflated

contract prices, in unexecuted but paid contracts or in the criminal acts of using diverse methods

and loopholes to exhaust funds voted for ministries and governmental departments before the

financial year run out. The cumulative effect thereby produced is the resolve of many honest

taxpayers never to pay their due taxes again, or at most pay under compulsion.

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Remoteness of Taxpayers from the Government

There is this common belief which most taxpayers have about the nature of government.

The average Nigerian has an inborn bias or hatred against most government functionaries who in

most cases live apart from the taxpayers. It hurts, most taxpayers would reason, for one to part

with his hard earned resources for the upkeep of these (imagined) enemies. The creation of local

government councils, which is supposed to bring government closer to the people had not helped

matters. As argued by Kiabel (2001), a solution to the problem probably lies in the proper

education and orientation of the taxpayers towards government and its functionaries.

Absence of Spirit of Civic Responsibility

Most Nigerians probably due to illiteracy and ignorance fail to understand that they owe

certain responsibilities to government, one of which is the payment of tax. Even when the

government says it is poor they would rather argue that the government should print more money

to solve her problems. This lack of spirit of civic responsibility amongst the majority of

Nigerians is a major cause of tax evasion in Nigeria.

Some other authors have at one time or the other attributed the causes(s) of tax evasion and

avoidance to various reasons. For example Orewa (1957) had earlier investigated the

characteristics of evasion and found that complete evasion results from high degree of inter-

district mobility on the part of the taxpayers. According to him, due to mobility, evasion is more

pronounced on the part of self-employed taxpayers who move from compound to compound at

frequent intervals than it is with salary and wage earners with known and permanent address. He

contended also that partial evasion may be due to inadequate accounting records maintained by

traders, mistaken belief on the part of some illiterate taxpayers that only wages and salaries

represent taxable income.

Kiabel (2001) has argued that some businessmen do not see any reason why they should pay tax

irrespective of the fabulous profits made. This is the direct display of the spirit of unpatriotism.

Such people take the stand that no matter the income or revenue that was acquired during the

year nothing will be paid as tax or they may prepare their accounts in such a way that a loss will

be reflected. Generally tax evasion which is illegal achieves the same goal as tax avoidance.

2.6 WAYS BY WHICH TAX EVASION IS BEING PERPETRATED

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The taxpayer indulges in evasion by resorting to various abnormal practices. Some of

these are acts of omission and others are acts of commission. There are various refinements to

the blatant act of tax evasion which render detection difficult: secreted wealth may be siphoned

off to foreign countries through smuggling activities, refuge may be sought in foreign bank

accounts or in investment abroad to escape the reach of the local laws.

Other forms of tax evasion include claiming of fictitious deductions, improper utilization

may be made of temporary taxpayers status, fleeing the country to avoid payment of tax, failure

to pay or keep records or adequate records, failure to pay over to the revenue the estimated tax;

interference with the tax administration through bribery and corruption and any other unlawful

means employed which seeks to with hold tax which is otherwise payable.

According to Toby (1983) tax avoidance consists of manipulations of transactions by

resorting to various strategies. These include setting up subsidiaries or associated companies

while maintaining financial interests in the outcome of both with a view of facilitating

transactions as may be advantageous from the tax point of view, arranging the transfer of losses

of defunct business for the purpose of obtaining a set-off against profits of the other and

establishing tax haven entities in foreign countries.

2.7 EFFECTS OF TAX EVASION ON GOVERNMENT REVENUE

Tax evasion has adverse effects on government revenue. It generates investment

distortion in the form of the purchase of assets exempted from tax or under-valued for tax

purposes. Evasion takes the form of investment in arts collection, 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. Companies declare higher dividends and individuals have a high take

home profit. This increases the quantity of money in circulation but without a corresponding

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increase in the goods and services. This then build up what is known as inflationary trends where

large money chase few goods.

2.8 PUNISHMENT FOR TAX EVASION

Tax evasion is a FELONY and a very serious crime. A conviction for tax evasion can carry

with it up to a five-year prison sentence and/or fines up to $100,000.

Filing a false return: Prosecution for this crime is appropriate when a taxpayer has provided

the government with false or misleading information on the taxpayer's tax return. In such cases,

the government does not have to prove the taxpayer intended to evade tax laws. Rather, it merely

must prove that the taxpayer filed a false return. Filing a false return is a felony. Punishment for

this crime can consist of up to three years in prison and/or up to $100,000 in fines.

Not filing a tax return at all: Failing to file a tax return is the least serious of the three tax

crimes. It is a MISDEMEANOR. The consequences for being found guilty is a maximum of 1

year in prison and/or fines totaling up to $25,000 for each year a taxpayer failed to file.

2.9 POSSIBLE SOLUTIONS TO REDUCE FINANCIAL CRIME ON TAX EVASION

Aguolu, (1999) identified the following as a means through which government can

overcome tax evasion. They are;

The administration of tax collection will be strengthened to ensure more efficient tax

collection, through training of staff, awareness, campaigns & computerization.

Government should continue to ensure that the tariff policy enables our local industries to

be competitive.

Specifically, aggressive action should be taken to block revenue leakage on high duty

goods and bulk items.

VAT has become a veritable source of revenue earnings for the government and therefore

needs to be strengthened and expanded. To broaden the tax base and to bring the VAT

administration closer to the taxpayers, new local VAT offices should be established all over the

country.

19

Government should also ensure fair tax administration based on the principle of

derivation of tax proceeds; it is recommended that the tax law should be enacted.

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

20

This chapter contains explicit step by step procedures on what will be done by the

researcher and how it will be carried out. It is the blue print for the study. This chapter states the

source of the data, methods of data and types of data collection instruments and analysis,

sampling procedure and design as well as the basic approach applied in this work

3.1 RESEARCH DESIGN

The survey research design will be used in this study. It involves a self-designed questionnaire in

collecting data from the respondents. This is chosen in order to make reference to phenomena as

they exist in real life and it is relatively economical in terms of time and resources.

3.2 POPULATION AND SAMPLE SIZE

The population of this study will be based on 30 respondents to be drawn from the entire

staff of the Oyo State Board of Internal Revenue, Government Secretariat, Agodi, Ibadan, Oyo

state, Nigeria.

3.3 RESEARCH INSTRUMENT

Primary and secondary sources of data will be used for this research work.

Primary source of data will be through the use of questionnaire and they will be closed-

ended questions. The questionnaire will be in two parts. Part “A” will deals with the Bio-data of

the respondents, while part “B” will deals with data concerning the research hypotheses.

While Secondary source of data will be various textbooks, journals and internet materials

which will enable the researcher to get acquainted with the some empirically verified views of

some authorities on the research problem.

3.4 METHOD OF DATA COLLECTION

The main instrument to be used for this study is structured assessment questionnaire with

closed ended questions. The questionnaire will be designed carefully in line with the relevant

issue or problem to be raised in the research.

21

Thereafter, it will be distributed among the staffs of the Oyo State Board of Internal

Revenue, Government Secretariat, Agodi, Ibadan, and this will take me two week because of the

delay one might encounter from some of staffs of the company and the time to administer the

questionnaires filled. Thirty questionnaires will be served and hopefully expected to be fully

recovered and then administer.

3.5 METHOD OF DATA ANALYSIS

The data collected will be analyzed through the used of simple percentage, tables and descriptive

analysis.

REFERENCES

Alabi, Soji (2001) “Tax Planning” A Paper delivered at the Workshop on Nigerian corporate and

Personal Income Tax Management, Yaba, Lagos, August 15th.

Ariwodola, J.A. (1998) Personal Income Taxation in Nigeria including Capital Gains Tax, Lagos, JAA Nigeria.

Alex Cobham (2005): Tax evasion, tax avoidance and development finance, Finance and Trade Policy Research Centre, Queen Elizabeth House, University of Oxford

CHAPTER FOUR

4.0 PRESENTATION AND ANALYSIS OF DATA

22

4.1 INTRODUCTION

This chapter deals with the presentation and analysis of data collected during the research

work conducted. The effort here is to present the data collected from the different respondents in

a more meaningful ways to the readers. Hence, each responses is presented in percentage in

relation to the general or overall responses received in each particular case. This was done to

raise comparison among the variables involved and the guard the heart of the researcher into

proper findings.

4.2 QUESTIONNAIRE RESULTS

As formerly stated in chapter three, the questionnaires sent to the staff of Dansa Foods

Limited were all collected back with the following statistics of respondents.

Table 1: Questionnaire Administered and Returned

Number of Questionnaires Distributed

Number of Responses Received

Percentage of Responses

30 26 87%

Field Survey

The table one above shows that 30 questionnaires were distributed among the sampled staff in

University of Ibadan. However, the responses receive was 26 representing 87% of the total

questionnaires distributed. The rest four questionnaires were also received back but they are not

fill. The statistics reported in this chapter were all based on the above responses and interviews

conducted.

23

Table 2: Personal Data Of The Respondent On Sex

Variables Numbers of the responses Received

Percentage

Male

Female

20

6

77

23

Total 26 100

Field Survey

From the above table 2, the total of male who responded to the

questionnaires were 20(77%) while 6(23%) represent female.

Table 3: Age Distribution Of The Respondents


Percentage

21-30yrs

31-40yrs

41yrs & above

21

3

2

81

12

7

Total 26 100

Field Survey

In the table 3 above, it is revealed that majority of the respondents

aged 21-30yrs filled 21[81%] of the questionnaires compare to aged 31-

40yrs that filled 3[12%], while aged 41yrs above filled 2[7%].

Table 4: Marital Status Of The Respondents


Percentage

Single

Married

Divorced

18

8

-

69

31

-

Total 26 100

Field Survey

24

The above table 4 shows single at 18[69%], married at 8[31%] and 0% for

respondents who were divorced.

Table 5:Educational Background of the Respondents


Percentage

ND

HND/BSc

Professional

11

12

3

42

43

12

Total 26 100

Field Survey

Only 11(42%) of the total possess National Diploma (ND), 12(46%) possess

HND/BSc, While 3(12%) possess professional qualification in addition.

Table 6: Length of Services


Percentage

Below 5yrs

5-10yrs

11yrs & above

2

15

9

8

58

34

Total 26 100

Field Survey

Table 6 shows 2[8%] are below 5yrs, 15[58%] are below 5-10yrs while

9[34%] of the respondents have been in the organisation for more than

11yrs.

Table 7: Position Head Of The Respondents


Percentage

Management staff 2 69

25

Senior staff

Junior staff

13

11

31

-

Total 26 100

Field Survey

The above table shows that 2[8%] were at management level 13[50%] were

senior staff while 11[42%] were junior staff of University of Ibadan.

SECTION B

4.3 DATA ANALYSIS AND INTERPRETATION

4.3.1 Hypothesis One

Ho:- Lack of good internal control is not a major cause of fraud in educational

institution using University of Ibadan as a case study.

Hi:- Lack of good internal control is a major cause of fraud in educational

institution using University of Ibadan as a case study.

Question ‘10’ & ‘11’ in the questionnaire reveal answers to the above hypothesis one.

Table 8: Question 10:Lack of Good internal control leads to fraud perpetration.


Percentage

Strongly AgreeAgreeUndecidedDisagreeStrongly disagree

204-2-

7715-8-

Total 26 100Field Survey

26

From the above table 8, it is revealed that 20(77%) of the respondents which is the

highest were of the opinion that lack of good internal control leads to fraud perpetration. 4(15%)

of the respondents agreed to the opinion while 2(8%) disagree with the opinion.

With the oral interview made with some of the respondents, it was deduced that there is

no specific system on ground that will ensures all types of checks and balances for both

operational and financial as expected of the institution.

Table 9: Question 11:Lack of attractive pay packages leads to fraud perpetration.


Percentage


26----

100----


The above table 9 depicts that, 26(100%) which represent the total sample size of the

respondents strongly agreed on the fact that Lack of attractive pay packages leads to fraud

perpetration.

Some of the respondents claimed that prompt and attractive pay packages will enable

average lecturers to live above poverty level. Hence, he or she will shun the temptation to

defraud his/her employer.

One of the respondents suggested that, there should be maintenance of a rewarding

workmen compensation scheme. This will encourage hardworking, discipline of staff and

improve the standard of living of such lecturer or professor in question.

4.3.2 Hypothesis Two

Ho: - Establishment of effective internal control department has negative impact on

27

efficiency of Educational Institutions

Hi: - Establishment of effective internal control department has positive impact on

efficiency of Educational Institutions

Question ‘12’ in the questionnaire reveals answer to the above hypothesis two.

Table 10: Question 12:Effedtive internal audit department helps to guard against fraud

in educational institutions


Percentage


233---

8812---


From the above analysis in table 10, it was deduced that 23(88%) of the respondents

which is the majority gave their consent that effective internal audit department helps to guard

against fraud in educational institution. The remaining 3(12%) of the respondents sampled also

gave their support on the opinion.

With the help of the oral interview, one of the respondents suggested that educational

institutions should try as much as possible to have an effective internal audit department. This

will be headed by a qualified accountant and the accountant should be responsible to the Vice

chancellor of the institution or higher authority in the institution.

Some respondents say management by example, should be the watch word of every staff,

be it lecturer, professor, or management staff of the institution. Every one should comply with

the laid down policies and procedures in the performance of any of their function.

28

4.3.3 Hypothesis Three

Ho: - Educational institution with good internal control system cannot prevent the

menace of fraud

Hi: - Educational institution with good internal control system can prevent the

menace of fraud

Question ‘15’ in the questionnaire reveals answer to the above hypothesis two.

Table 11: Question 15: Educational institution with good internal control system can prevent

the menace of fraud


Percentage


26----

-----


The above table 11 revealed that 26(100%) which represent the total sample size strongly

agreed on the fact that educational institution with good internal control system can prevent the

menace of fraud.

The researcher also deduced from the personal interview made with some of the subjects

that, it is the responsibility of the management to installed good internal control system. Other

said that, keeping of adequate records, putting operating procedures manual in writing, observing

the attitude of the staff in audit department towards work and their spending habit whether

amount spent is commensurate with the come earned etc. if the aforementioned measures are

strictly adhered to, the ever increasing menaces of fraud, which has ruined many Nigerian

29

educational institution financially, will be drastically reduced to its barest minimum and

eventually eradicated.

4.3 DISCUSSION OF FINDINGS

The empirical results indicate that accountants performed crucial roles in local

government administration.

The results of questions 7 & 8 of hypothesis one revealed that 16 (76%) of the

respondents which is the highest were of the opinion that accountants are primary contributors to

national building and in question 8, 21(100%) which represent the total sample size of the

respondents strongly agreed on the fact that it is the duty of an accountant to safeguard local

government. assets against loss, mismanagement, misappropriation and theft..

With the help of the oral interview, some of the respondent claimed that “Accountants

have crucial roles in development and national building. Once they discharge their responsibility

with integrity and accuracy, there will be growth and improvement in the standard of living. One

of the accountant says, “Part of my duty is to safeguard and protect national assets against loss,

mismanagement, misappropriation and theft and I will be very happy if ‘The Game of Politics’

among the public officers stop and allow us to practice our profession independently”.

From the available information gathered by the researcher, it is very cleared that

accountant in local government are not allow to discharge their obligation effectively and

efficiently due to party politics and Godfatherism which often prevented them from working for

the development and improvement of their areas. Sometimes, there is mismanagement of fund

for which the council is not punished. Therefore, the researcher ignore null hypothesis and

accepted alternative hypothesis which says that, role of accountants in local government enhance

national development

The results of questions 10 & 11 of hypothesis two revealed that 16 (76%) which

represent majority of the respondents claimed that poor revenue administration among the

stakeholders hinder the growth and development of local government and in question ‘11’, 21

(100%) strongly agreed on the fact that Inadequate Statutory allocation from federation account

is one of the problem of local government accounting system.

30

During the oral interview, one of the respondents says that, the effective management of

the finance of the local government authorities in Nigeria is often affected by shortage and

sometime by total lack of resources.

With the help of the oral interview, Some respondents say that local government

authority usually incurred a lots of capital expenditure and this is usually settle out of recurrent

fund. The result of such settlement is that there is either no or little money available to meet a

minimum acceptable level of recurrent expenditure.

One of the subjects suggested that qualified accountant should be employed to oversee

and give advice on financial issues in the local government authorities.

Therefore, the researcher ignore null hypothesis and accepted alternative hypothesis

which says that, financial problem hindered the growth and development of the local

government.

The results of questions 12 & 15 of hypothesis three revealed that 15(71%) which

represent majority of the respondents claimed that the quality of financial officer in the local

government determine the quality of the accounting system and in question ‘15’, 20 (95%) of the

respondents strongly agreed to the fact that corrupt finance officers constitute a problem in the

local government system.

During the oral interview, one of the respondents opined that, ‘quality of financial officer

is a problem to the accounting system in the local government. The son of the soil syndrome and

neglecting of professionalism is the order of the day. They prefer employing inexperience and

unexposed staff who cannot render meaningful service to the local government, there

employment is based on political ground, for monetary reward and on connection basis.

Mediocre who cannot manage effectively are even worse compare to educated people who are

inexperience in accounting practice and procedures.

One the subjects advise that the government to always employ staff base on qualification

not with connection to politics or personal interest. Internal and external auditors should be

allowed to perform their duties independently.

From the analysis above the researcher could conclude that, the quality of the finance

officer determine the quality of the accounting system. Therefore, the researcher ignore null

hypothesis and accepted alternative hypothesis.

31

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

SUMMARY

The research work has been able to reveal that the end total of tax evasion is less revenue

to the taxing authority. It is an undesirable phenomenon because it tends to shift the burden on

the less fortunate members of the community.

It is convincing now that Tax evasion said to be partial or total bad when a taxpayer

under-declares his income for tax purposes and total evasion of income tax occurs when a

taxpayer who is already qualified to pay tax refuses to get his name registered in the tax roll.

During the cause of the research, it is cleared that tax evasion of income tax is an illegal

activity and it is difficult to obtain in any country. In the words of M.C. Taylor, ‘it is not very

different from trying to determine the consumption of Indian hemp or the degree of illegal

gambling’. The only known research on tax evasion in Nigeria was made by G.Oka Orewa

several years ago. He deposed that evasion is more pronounced on the part of self-employed

taxpayers viz market women, businessmen, and professionals (the very people who enjoy

government infrastructures) who move from place to place at frequent intervals, than it is for

salary and wage earners with known and fixed addresses.

Understandably, also, there is much less evasion on the part of taxpayers who pay their

tax in instalments. In view of the aforementioned, it is irresistible to say that evasion of the

income tax is a serious problem in Nigeria, more so, as there appears to be a big gap between

actual and potential income tax collections by the various levels of government.

Finally, in the course of the research it was made known that the criminal act of tax evasion is

perpetrated in a number of ways. These include among others:

(a) Unbearable high tax rates which make evasion more attractive and economical;

(b) Lack of faith in the ability of the government to use the money well;

(c) Total ignorance of the law;

(d) Absence of any visible benefit accruing to the taxpayers;

(e) The inefficiency of tax administration which gives room for tax evasion; (f) The ridiculously

low penalties prescribed in the Tax Laws for late payment or non-payment of tax; and

(g) Outright unwillingness to contribute towards the upkeep of one’s society.

32

5.2 CONCLUSION

Tax evasion and avoidance is a very serious societal problem that is causing much

concern and major set back on revenue collection in Nigeria. From all indications it is now clear

that if government engages in a complete re-organization of the tax administrative machineries,

the twin problems of tax evasion and avoidance will be reduced to a tolerable limit. It is equally

important for the various state governments to make frantic efforts aimed at educating the tax

illiterates of their civic responsibilities.

Such enlightenment on tax evasion and avoidance will go a long way to reduce the states’

over dependence on federal allocation. It is hoped that if the measures prescribed in this study

are implemented, it will go some way in reducing the problem of tax evasion and avoidance to

reasonable dimensions.

RECOMMENDATIONS

For the various State Governments to meet their revenue targets especially now that the

services of tax consultants have been discontinued it would be appropriate to take a look at the

factors responsible for the incidence of tax evasion and avoidance since a check on these factors

will go a long way in reducing if not eradicating the problem. In the light of this, the following

recommendations are made:

1. 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.

2. The tax authorities should properly review and evaluate the assessment and collection

procedures so as to encourage compliance by the taxpayers. The usual practice of reprinting parts

of the tax laws and sending same to the taxpayers expecting that they would understand is not

encouraging since these laws are written in legal jargons or terms that are not easily understood.

Moreover, tax forms should be made less complex. Vast improvement can be made by

improving the design of the forms.

33

3. 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 insulate them from fraud and other corrupt practices.

4. The setting up of Revenue Courts should be embraced by the various state governments.

These Courts should be made to impose heavy monetary penalties and criminal sanctions.

5. 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 Authority

should be strengthened to always audit tax remittance by collectors at all levels. This measure

will go a long way to curb corrupt practices among tax officials.

6. A legislation compelling banks to inform the tax authorities, on request, of any income

standing in the account of any taxable person (especially the self-employed taxpayers) should be

put in place by the various state governments.

7. Government should endeavour to provide social amenities to all nooks and crannies of the

state (not just the state capitals alone), provide employment opportunities to all by the judicious

use of tax proceeds. In this way all will feel belong thereby encouraging voluntary compliance.

8. A census of the taxable population should be conducted throughout the various states. This

will now update the tax register so that at any given point in time the tax office can give details

of taxable adults and businesses thus reducing the incidence of tax evasion.

9. 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.

(10) The issuance of national identity card should be accelerated so that it will be used to identify

those who have not fulfilled their civic duties.

Finally, it is my considered view that the social evil known as tax evasion should be

attacked in all its ramifications if we are to have any meaningful tax administration in the

country.

BIBLIOGRAPHY

Ayua, I.A. (1999) The Nigerian Tax Law, Ibadan Spectrum Law Publishing.

Alabi, Soji (2001) “Tax Planning” A Paper delivered at the Workshop on Nigerian corporate and Personal Income Tax Management, Yaba, Lagos, August 15th.

34

Ariwodola, J.A. (1998) Personal Income Taxation in Nigeria including Capital Gains Tax, Lagos, JAA Nigeria.

Aguolu, Osita (1999) Taxation and Tax Management in Nigeria, Enugu, Meridian Associates.

Baiyewu, F.A.(2000) Nigerian Taxation: A Practical Approach Egbe Kogi; Bhoti International Publishing Ltd.

Faseun L. A.(2001) “Tax Planning” Lagos Tax the Newsletter of CITN-Lagos District Society Vol. No.1

Farayole, G.O(1987) Guide to Nigerian Taxes Lagos All Crowns Nig. Ltd.

Kiabel, B.D. (2001) Personal Income Tax in Nigeria Owerri, Springfield Publishers.

Orewa, G.O. (1957) Taxation in Western Nigeria London Oxford University Press.

Ogunedele E.A. (1999) Elements of Taxation Lagos, Libri Services Nig. Ltd.

Onuigbo, O. (1986) Banking and Finance for Professional Examinations Aba Yonkee Standard Press Ltd

Personal Income Tax Decree No.104, 1993.

Reynolds, L.G. (1963) Government Finance and Economic Analysis Heineman Publications.

Sosanya, S.O.A. (1981) Taxation Reform in Nigeria.

Toby, R. (1983) The Theory and Practice of Income Tax Macmillan Press Ltd.

THE POLYTECHNIC, IBADANDepartment of Accountancy

P.M.B 22, U.I Post Office

August, 2010 Tunde O. OUndergraduate Student The Polytechnic, IbadanP.M.B 22, U.I Post [email protected]

35

Dear Participant,

I am undergraduate student of the above named institution. I am conducting a research on the

topic: “AN APPRAI SAL OF TAX EVASION ON FINANCIAL CRIME IN NIGERIA

(A CASE STUDY OF OYO STATE INLAND REVENUE, IWO RD, IBADAN)”, I therefore

solicit for full cooperation in answering all the questions to the best of your knowledge and

ability. It is honestly assured that this study is only for academic purpose, and it shall be treated

in strict confidence for the above purpose.

Thank you for your time. Your information is extremely valuable to this study.

Sincerely,

TUNDE O. O

Undergraduate Student.

QUESTIONNAIRE

SECTION ADEMOGRAPHIC DATA

MARK ( ) WHERE APPLICABLE.

1. Sex: Male Female

2. Age: 21-30yrs 31-40yrs 41yrs above

3. Marital Status: Single Married

4. Educational Ground: WASSEC HND/BSc Professional

5. Length of Service: Below 5yrs 5-10 yrs 11yrs & Above

36

6. Position Head: Management level Senior Junior

SECTION B

Research Question One

7. High Tax rate is one the reason why people evade tax

Strongly Agree Agree

Undecided Disagree Strongly Disagree

8. Lack of adequate tax incentives lead to tax evasion



9. Lack of public enlightenment campaign resulted to tax evasion



Research Question Two

10. Tax evasion is being perpetrated by organization through Concealment of profits



11. Organizations evade tax by their Failure to keep adequate records



12. Claiming of fictitious deductions is one of the ways through which organization evade tax.

Strongly Agree

37

Agree Undecided Disagree Strongly Disagree

Research Question Three

13. The consequence of not paying tax is that government find it difficult in the provision of

social services.



14. Tax evasion leads to low revenue.



15. Tax evasion leads to Inequality in the society



38