Accounting and the Social Implications of Tax Avoidance and Evasion in the Economy

Reference code: C036

ABSTRACT

This research project was aimed at investigating the accounting and social implications of tax avoidance and tax evasion in the economy. In order to achieve the objectives of the study, three hypotheses were formulated and data collected through the issue of one hundred and fifty questionnaires to respondents who were chosen through random sampling. data collected was analysed using Pearson product moment coefficient of correlation. the data analyses showed that: Tax avoidance has a negative and significant correlation with the performance of the economy.  Findings also showed that tax evasion has anegative and significant correlation. Finally, our findings showed that there is a positive but statistically insignificant correlation between tax avoidance/evasion and the role of accounting/ accountants. Given our findings, we concluded that tax avoidance is a serious social and economic malaise. We also conclude that tax evasion has debilitating effect on the economy by not only reducing the funds in government coffers, it also reduces the ability of the government to embark on developmental projects.
Finally, we conclude that accounting and accountants play a role in tax avoidance and tax evasion albeit a minor role. On the basis of our findings, we make the following recommendations: The government should find a proactive way of solve the problem tax avoidance and tax evasion. This could be in terms of giving incentives to tax payers to encourage them to pay their taxes duly. We also recommend that the government institute stiffer punishments for tax defaulters and also ensure that such punishment is strictly and publicly meted out to offenders in order to serve as deterrent to intending and potential tax defaulters. Finally, we recommend that the government should embark on public enlightenment campaigns to educate the populace of the benefits and consequences of not paying their tax or evading to pay their taxes.

INTRODUCTION

............ The desire to uplift one’s society is the first desire of every patriotic citizen (Allingham & Sandmo, 1972). 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 Nigerian Tax System as well as Africa is the problem of tax evasion and tax avoidance. While tax evasion is the wilful 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 state 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 Rynoids (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.

There is a clear cut difference between tax avoidance and tax evasion. One is legally accepted and the other is an offence (Skanda and Kumarasingam, 2002 as cited by James and Nobes, 2008). Tax avoidance is the legal utilization of the tax regime to one’s own advantage, to reduce the amount of tax that is payable by means that are within the law. By contrast, tax evasion is the general term for efforts not to pay taxes by illegal means (Sharma and Dang 2011 as cited by Mohammed and Mohammed, 2012). 

It is also perceived that both tax avoidance and tax evasion are linked with shadow economy and Schneider and Enste (2000) as cited by Faseun (2001) reported that shadow economy is that economy in which people do not show their real income and taxable income that they have earned through legal activities including batter and monitory activities in order to avoid paying tax. According to Muhammed and Muhammed (2012), government has protested against these two above mentioned evils for number of times but corporations and all other persons whose income is taxable, they make use of tax avoidance strategies to get away or curtail the taxes or they willfully employ fake techniques with the support of tax officials to evade the total tax. ............... 

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TABLE OF CONTENT

CHAPTER ONE
INTRODUCTION
1.10 BACKGROUND OF THE STUDY 1
1.11 STATEMENT OF RESEARCH PROBLEM 5
1.12 PURPOSE OF THE STUDY 7
1.13 STATEMENT OF RESEARCH QUESTION 7
1.14 RESEARCH HYPOTHESES 8
1.15 SIGNIFICANCE OF THE STUDY 8
1.16 SCOPE AND LIMITATION OF STUDY 9
1.17 ORGANIZATION OF STUDY 10
1.18 DEFINITION OF TERMS 11
CHAPTER TWO
REVIEW OF RELEVANT LITERATURE
2.0 INTRODUCTION 13
2.1 THEORETICAL FRAMEWORK 14
2.2 CONCEPTUAL FRAMEWORK 16
2.3 REVIEW OF RELEVANT EMPIRICAL LITERATURE 29

CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION 38
3.1.RESEARCH DESIGN 38
3.2 RESEARCH POPULATION 39
3.3 SAMPLE SIZE DETERMINATION 39
3.4. DATA COLLECTION TECHNIQUES 40
3.4.1.   PRIMARY SOURCES OF DATA 41
3.4.2. SECONDARY SOURCES OF DATA 41
3.5.   DESIGN AND ADMINISTRATION OF QUESTIONNAIRE 42
3.6 DATA ANALYSIS TECHNIQUE 43

CHAPTER FOUR
RESULTS AND DISCUSSION
4.0 INTRODUCTION 45
4.1 DEMOGRAPHIC ANALYSIS 46
4.2 DESCRIPTIVE ANALYSIS 52
4.3 HYPOTHESIS TESTING 55

CHAPTER FIVE
SUMMARY CONCLUSIONS AND RECOMMENDATIONS
5.2 SUMMARY FINDINGS 59
5.2 CONCLUSIONS 60
5.3 RECOMMENDATIONS 60
BIBLIOGRAPHY 62

Reference code: c036
Reference code: c036

92 Pages
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