Tax Evasion and Governance Challeneges in the Nigerian Informal Sector

SANI SAIDU^1, and UMAR DAUDA²

¹Aberdeen Business School, Robert Gordon University, United Kingdom

²Debt Management Agency, Bauchi State, Nigeria

Cite this paper:
SANI SAIDU and UMAR DAUDA. Tax Evasion and Governance Challeneges in the Nigerian Informal Sector. Journal of Finance and Economics. 2014; 2(5):156-161. doi: 10.12691/jfe-2-5-4

Abstract

Tax evasion has been an issue of concern in the Nigerian tax system for decades. Tax evading attitude is argued to have an adverse effect on government’s socio-economic and political programs.Many commentators and analyst blamed the situation on the tax authorities, for not living up to expectation with regards to tax administration; others attribute the case to the unpatriotic attitude of the taxpayers. In light of these contending positions, this study therefore, assessed the operation of the informal sector in Bauchi State of Nigeria, where tax evasion assumed to be a normal practice due to high level of informalities in the conduct of businesses within the sector. Primary and secondary data were collected and analyzed. Spearman rank order correlation test was employed to test the relationship between ethics of tax evasion and performance of government and the rho (r) value was fortified in assessing the extent of the relationship. The study findings reveal among other findings that, although its ethical to pay tax but individuals refuse to, due to bad governance and other factors (religious, political and socio cultural) and high level of illiteracy to some extent. It was recommended therefore, a deliberate and more aggressive public enlightenment campaign be embarked upon by the state government on the importance of taxes economically and otherwise.

Keywords:
governance informal sector tax evasion

This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

References:

[1]	Ayua L. A. (1999). The Nigerian Tax Law. Ibadan. Spectrum Law Publishing.
[2]	Boyland A. and Burckhardt T. (2002) “Buriers in Self-Employment for Disable People. Available at: www.berr.gov.uk/files/files38359.Accessed on 21/05/2014.
[3]	Brunetti A. and Wader A. (2003) A Free Is Bad News for Corruption: Journal of Public Economics. Vol. 97, Pp. 180 182.
[4]	Chiuma C. (2006) Counteracting Tax Evasion in Malawi: An Analysis of the Method and Quest for Improvement. Munich Personal Archive. Pp. 1-42.
[5]	Dandago K.I and Alabde J. O (2000) Taxation and Tax Administration in Nigeria, Kano; Triumph Publishing Co. Ltd, Kano, Nigeria.
[6]	Ebozieybe M. O (2007) Tax Evasion Hinders Local Government. The Saturday Tribune, October 13, 2009.
[7]	Eigen P. (2002) Measuring and Combating Corruption. Journal of Policy Reforms. Vol. 5. Pp. 187-201.
[8]	Ekpo I. and Umoh, J.(1996) Operations of informal sector in Nigeria; Challenges and prospects: http//:www.onlinenigeria.com
[9]	Ezeoha, A. E, Ogamba, E. (2010) Corporate Tax Shield or Fraud? Insight from Nigeria. International Journal of Law and Management. Vol, 52(1), 5-20.
[10]	Faruyola G. O (1987) Guide to Nigerian Taxes Lagos: All Crown Nigeria. Ltd.
[11]	Feld L. P and Frey B. S (2002) Trust Breed Trust: How Taxpayers Are Treated. International Journals of Economics and Governance. Vol. 3, Pp 87-99.
[12]	Kay G. (1980) The Anatomy of Tax Avoidance in Income Distribution: Limits to Redistribution Proceeding of the 31st Symposium of the Colstor Research Society, University of Bristol, John Write and Sons Ltd. Pp.135-1484.
[13]	Kiabel B. D and Nwankwo N. G (2009) Curbing Tax Evasion and Avoidance in Personal income. Owerri Springfield Publishers
[14]	Kiable B.D (2001) Personal Income Tax in Nigeria. Owerri Springfield Publishers.
[15]	Norman, L. (1999) World Bank Policy Research WP No. 1727 Nov, 30 1999.
[16]	Nwachukwu I. (2006) Institutions Indulge in Tax Evasion Despite Huge Profit they Make in Nigerian. The Tribune, September, 1, 2006.
[17]	Olatunde J. O (2009) Tax Evasion, Tax Avoidance and Corruption: An Interface with Source of Finance for Development in Nigeria. Journal of Critical and Applied Economics: Romania.
[18]	Oluyinka M. U. Temitope, O. F and Jumoke, O. O (2010) An Empirical Study of the Relationship between Culture and Personal Income Tax in Nigeria European Journal of Economics, Finance and Administrative Science. Issue 20.
[19]	Onuihbo O. (1986) Banking and Finance for Professional Examination: Aba, Nigeria Yonkee Standard Press Ltd.
[20]	Scheinder F. and Enste D. (2000) Shadow Economics around the World: Size Censes and Consequences IMF Working Papers WP/00/26, Pp.1-56.
[21]	Sikka P. and Hampton M. P (2005) The Role of Accountancy Firms in Tax Avoidance Some Evidence and Issues: Accounting Forum 29 (3) Pp. 325-343.
[22]	Sikka P. (2008) Enterprise Culture and Accountancy Firms: New Masters of the Universe. Accounting, Auditing and Accountability Journal, Vol, 21(2), Pp. 268-95.
[23]	Sikka P. and Willmott H. (2010) The Dark Side of Transfer Pricing: It’s Role in Tax Avoidance and Wealth Retentiveness. Critical Perspectives on Accounting. Vol. 21(4): 342-56.
[24]	Soyede L. and Kujola S. O (2006) Taxation Principle and Practice in Nigeria; 1st Edition Silicon: Ibadan.
[25]	Tax Administration: A Study of the South- South states of Nigeria “European Journal of economic, finance and administrative sciences issue 15 (2006).
[26]	Toby R. (1983). The Theory and Practice of Income Tax. Macmillan Press Ltd.
[27]	Uvima A. (2009) Imperative of Tax Payment Being a Paper Presented at the 1stAkwaIbom State Revenue Summit April 6, 2009.