An Empirical Study of Tax Evasion and Tax Avoidance: A Critical Issue in Nigeria Economic Development

Abstract

The revenue generated by the government from taxation forms a major source of finance to the federal government capital expenditure which is crucial to sustainable economic development. A major challenge to the government in generating this revenue has been the increasing rate of tax evasion and tax avoidance. Therefore tax evasion and tax avoidance are important factors to be considered as they affect both the volume and nature of government finances which is the key to economic development. This paper considers the effects of tax avoidance and tax evasion on Nigeria economic development. This paper considers the effects of tax avoidance and tax evasion on Nigeria economic development. A survey research design was adopted and responses were obtained through the use of a well structured questionnaire administered to 150 Nigerians, out of which are tax payer and tax evader. Findings from the analysis using statistics techniques reveal that tax evasion and avoidance have adversely affected economic growth and development in Nigeria, and also, that lack of good governance and unpatriotic act of tax payer, is the basis for which tax evasion and tax avoidance activities is perpetrated. The study therefore recommends that the government should embrace and promote good governance so as to encourage voluntary compliance of tax liability by the tax payers.

Key words: Tax evasion, tax avoidance, economic development, tax hostility.