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  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.

  1. Statement of the problem

Tax evasion in Nigeria has been a cause for a serious concern; this is because it has led to the depletion in the internally generated revenue which has by extension adversely affected our economic growth and development.

  1. Objectives of the study

The following are the aims and objectives of this study

  1. To examine the major causes of tax evasion in Nigeria.
  2. To examine the relationship between tax evasion penalty and tax evasion in Nigeria.
  3. To examine the relationship between high tax rate and tax evasion in Nigeria.
  4. To know if many business owners pay tax.
  1. Research questions
  1. What are the major causes of tax evasion in Nigeria?
  2. What is the relationship between tax evasion penalty and tax evasion in Nigeria?
  3. What is the relationship between high tax rate and tax evasion in Nigeria?
  4. Do many Nigerian business owners pay tax?

1.5   Research hypotheses

Ho: There is no significant relationship between high tax rates and tax evasion in Nigeria

Hi:There is no significant relationship between high tax rates and tax evasion in Nigeria

Ho: There is no significant relationship between weak penalties and tax evasion in Nigeria.

Hi:There is no significant relationship between weak penalties and tax evasion in Nigeria.

  1. Significance of the study

This study would be important to tax authorities in Nigeria as it would unravel the main causes of tax evasion in Nigeria with a view to creating tax policies that would encourage more people to pay tax.

1.7   Scope/Limitations of the study

This study on causes of tax evasion in Nigeria with Ikeja LGA in Lagos state serving as the case study

Limitations of study

  1. Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
  2. Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8   Definition of terms

Tax: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.

Evasion:To escape or avoid (someone or something), especially by guile or trickery.

Revenue:The income generated from sale of goodsor services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted.



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

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.

Farayole, G. O (1987) Guide to Nigerian Taxes Lagos All Crowns Nig. Ltd. Personal Income Tax Decree No. 104,1993.

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

Toby, R.(1983) The Theory and Practice of Income Tax Macmillan Press Ltd See CIR v Duke of Westminster (1930) TC.490 Alm, J. and J.

Martinez- Vazquez, (2001) ” Societal Institutions and Tax Evasion in Developing and Transition Countries” . A paper prepared for a public Finance in Developing and Transitional Countries Conference; Georgia State University.

Asada, D. (2005) The administration of personal income tax in Nigeria: Some problem areas. Working paper, University of Jos.

Eboziegbe, M.O. (2007) “Tax Evasion Hinders Local Governments.” The Saturday Tribune, October: 13. Farayola, G.O. (1987) Guide to Nigerian Taxes, Lagos: All Crowns Nig. Ltd

Nwachukwu I. (2006) “Institutions indulge in Tax Evasion Despite Huge Profits they make in Nigeria” The Tribune. September:

Oboh, C.S; O. Yeye and E.F. Isa (2012) An Empirical Investigation of Multiple Tax Practices and Taxpayers’ Compliance in Nigeria. (unpublished research work) .

This material content is developed to serve as a GUIDE for students to conduct academic research


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