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 1.1       Background to the Study

Tax is a means by which governments finance their expenditure by imposing charges on citizens and corporate organization. Governments use taxation to encourage or discourage certain economic decisions (Yisa, 2018).

Taxes are fundamental components of government revenue generation. Taxes underwrite the capacity of states to carry out their goals; they form one of the central arenas for the conduct of state-society relations, and they shape the balance between accumulation and redistribution that gives states their social character. Thus, taxes build capacity to provide security, meet basic needs or foster economic development and they build legitimacy and consent helping to create consensual, accountable and representative government. A key component of any tax system is the manner in which it is administered.


Oyejide And Bankole (2001) define tax as a compulsory levy on income, consumption and production of goods and services as provided by the relevant legislation. Tax is a charge imposed by government authority upon property, individuals, or transactions to raise money for public purposes. This definition is however imperfect. The study of the teachings of Christianity, Islamic and other prominent religions in the world shows that tax is a religious duty based on social and civil responsibilities.

Naiyeju (2010) described tax as a compulsory levy imposed by the government authority through its agents on its subjects or his property to achieve some goals. They all support and encourage tax imposition either to redistribute wealth or to finance government project. The Nigerian tax administration is in line with the British model of tax administration since 1960 and has been operating this up to 1990 when the self-assessment scheme came into play which seems similar to the American model of tax administration system (Brautigam, 2008). The British model of tax administration assumes tax payers are incompetent as to tax process and tax authorities do not rely on information supplied by tax payers.


1.2       Statement of Problem

Lack of proper tax awareness in the suburb of Ikorodu is one of the major causes of non compliance with the payment leading to increased tax evasion and avoidance.

Inspite of the ever increasing number of taxable adults and firms, the standard of living of the people at Ikorodu Local Government are at deplorable condition. The poor state of roads, ineffective function of the public facilities (hospitals, schools etc), and uncountable number of abandoned projects are some of the clear pointers to the pathetic state of things in the Nation.

A widely held opinion had it that the taxable adults and establishments in the nation (at all level of the tiers) evade and avoid tax payment, therefore resulting to the realization of less revenue from tax to Local Governments. This places the governments in a helpless situation towards the provision of those socio-economic life made easy facilities. The inability of various tax system in Nigeria to yield the needed revenue, made the nation to rely solely on revenue from oil for the provision of public goods, utilities and services.

Local Government Chairmen do not take internal revenue serious, hence the agencies responsible for the collection were allow to do what they like. Some Local Government Chairman sees internal generated revenues as part of their wife’s domestic expendable money, and cannot be accounted for.

Though the problems of tax evasion on revenue generation administration is a global phenomenon. But in developing country like Nigeria the problem is more compounded due to the following reason: Inadequate staff, Illiteracy on the part of the tax payer, Corrupt practices of tax administration, Lack of qualified personnel and Insufficient working facilities.

In view of the above listed problems, it is a global believes that there is no policy or scheme that has been implemented free from problem. Therefore tax evasion on revenue generation is surrounded with certain problems in Lagos State internal revenue, therefore it is the researcher intention to explore its contribution based on findings and making recommendation and suggestions to the organization concerned.

Kiabel and Nwokah (2009) say although tax evasion are problems that face 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) self-employed persons blatantly refuse to pay tax by reporting losses every year and many of them 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 observed, 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 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 (Uche and Ugwoke, 2003).

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 which can be attributed to corruption. Tax evasion and avoidance have adverse effect on government revenue. Tax avoidance generates investment distortion in the form of the purchase of assets exempted from tax or under-valued for tax purposes (Klabel and Nwokah, 2009). Avoidance 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 and companies declare higher dividends and individuals have a high take home profit. This increases the quantity of money in circulation but without a corresponding increase in the goods and services, this then build up what is known as inflationary trends where large money chases few goods.

 1.3       Aims and Objectives of the Study

The main objective of this study is to examine the challenges of tax evasion to revenue generation of Ikorodu Local Government. Other specific objectives include:

(i)  To examine the relationship of tax evasion on Local government revenue generation.

(ii) To investigate perceived corruption by Local government officers’ on tax evasion.

(iii)  To examine the challenges posed by tax evasion as it affect revenue generation in the LGA.

1.4       Research Questions

(i) What is the relationship of tax evasion on Local government revenue generation?

(ii) What are the perceived corruptions in Local government on tax evasion?

(iii) What are the challenges posed by tax evasion that affects revenue generation?

 1.5       Research Hypotheses

The following hypotheses were formulated in the course of this study.

Ho1: Tax evasion has no significant effects on government revenue generation.

Ho2: There is no effect of perceived corruption in government on tax evasion.

 1.6    Significance of the Study

It will enable the Ikorodu Local Government  to evaluate the performance of tax evasion on revenue generation and it contribution to the economic development of the Local Government and the State in global.

The study will enable the organization in question to compare the actual performance in line with the standard set for management decision making purpose.

Future researchers; the study will serve as a sources or material for future researchers since the subject to matter is subjected to more enlightenment to the public.

1.7       Scope of the Study

The study will examine the challenges of tax evasion to revenue generation of Ikorodu Local Government. The scope of the study is also limited to Federal Inland Revenue Service, Lagos State.

1.8       Definition of Terms

 Tax: Tax is a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.

Revenue Generation: Revenue generation is complete amount of money that is generated during a specific time period.

Tax evasion: Tax evasion is an illegal action in which a person or entity deliberately avoids paying a true tax liability.

Tax levy: Tax levy is the amount of money charged as taxation on particular assets or goods.

FIRS: Federal Inland Revenue Service


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