ETHICS OF TAX EVASION PERCEPTUAL EVIDENCE FROM NIGERIA (A Case Study Of Some Selected Local Government Area In Akwa Ibom State)
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ETHICS OF TAX EVASION PERCEPTUAL
EVIDENCE FROM NIGERIA (A Case Study Of Some Selected Local Government Area In
Akwa Ibom State)
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.
TABLE OF
CONTENTS
Title page
Approval
page
Certification
Dedication
Acknowledgement
Abstract
Table of
Contents
List of
tables
CHAPTER ONE
1.0
INTRODUCTION
1.1
Historical background to the study
1.2
Statement of the Problems
1.3
Objective of the study
1.4 Research
Questions
1.5 Research
Hypothesis
1.6
Significance of the study
1.7 Scope of
the Study
1.8
Definition of Terms
CHAPTER TWO
2.0
LITERATURE REVIEW
2.1
Empirical investigation of tax evasion
2.2 Overview
of taxation system in Nigeria
2.3 Taxation
as a tool for fiscal policy
2.4 Problem
of effective tax administration in Akwa Ibom State
2.5 Tax
administration bodies in Nigeria
2.6
Objective of taxation
2.7 Tax
effects
2.8 Agents
of tax administration
2.9 Three
opinions on the ethic of tax evasion
2.10 Reasons
for tax evasion
2.11 Forms
of tax evasion
2.12
Comparison of tax evasion and tax avoidance
2.13
Different between tax avoidance and tax evasion
CHAPTER
THREE
3.0 RESEARCH
METHODOLOGY
3.1 Research
Design
3.2 Sources
of data
3.3 Area of
the study
3.4
Population of the study
3.5 Sampling
size determination and sampling technique
3.6
Reliability Test
3.7 Validity
Test
3.8 Method
of data analysis
3.9 Decision
criterion for validation of hypothesis
CHAPTER FOUR
4.0 RESULT
4.1
presentation of data
4.2 Test of
Hypothesis
CHAPTER FIVE
5.0 SUMMARY,
CONCLUSION AND RECOMMENDATION
5.1 Summary
5.2
Conclusion
5.3
Recommendations
References
Questionnaire
CHAPTER ONE
HISTORICAL
BACKGROUND OF THE STUDY
1.1
INTRODUCTION
The word tax
first appeared in the English language only in the 14th century, it is derived
from the Latin word taxare, 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.
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