The Impact Of Tax Evasion And Tax Avoidance In Nigeria Economy



The purpose of this chapter can therefore be seen as the introduction of practical constraint upon the free choice of tax policy.  The subject that has so far been left unmentioned is the important uses of tax evasion and tax avoidance.  The twin problem of an tax.  The accepted definition are that if the scope from or reduction of tax result from deliberately nus informing the tax authority, it is evasion.

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It is legitimate it is a avoidance. Innocent error when it is really case of evasion as tax legislation and administration try very hard to ensure that it is not easy to make an error that is entirely innocent.

Thus, am reelect fall into the same category for some purpose as deliberate fraud even though the result of discovery may be less uncomfortable.

Tax Evasion consist of tax decision of consumers, the decision over labour supply since the choice of occupation can determine opportunities or evasion and the role of public goods and social rooms.  Also in tax avoidance it stresses on the three streams of avoidance.  The analysis predict the relationship between the level of evasion, avoidance, tax rates and punishment.



Definition:  It means that a tax payer is doing something against the low and it is discovered he/she will be dealt with under the law.  It is also a deliberate attempt not to pay taxes, it is therefore an illegal act usually the income earner has the capacity to pay tax, but he is not willing to pay ever stern laws against tax evasion should be made.

Also the canons of tax evasion should be followed while this may lead to stop tax evasion and or prosecution. For instance conversion of an individual business into a limited company giving birth to more children or taking on more commission from returns e.g. of tax evasion.



It is a means whereby a tax payer arranges his affairs legally so that the pay less tax can he might otherwise pay.  It is also the organization of economic activity, possibly at some most, to lower tax payment.  The trouble with tax avoidance, not withstanding its legality is the it become the order of the day, it may be though of as a natural right of the citizen, but no one is under the smallest obligation moral or otherwise to arrange his afford so as to enable the inland revenue to put the largest possible should in his stores, even though this is not a commendable exercise of erogeneity.

The Inland Revenue is to and quit rightly to take every advantages is open to t under the taxing status for the purpose of detecting the ax payer’s pocket.  And the tax is in like manner entitled to be astute to prevent so far as he honest can be depletion f his means of revenue.


When someone is doing something which morally may be forbidden and which may be unethical, the cunt do not shown much sympathy when a scheme of avoidance fails as it is seen in those words.

The people who run those three companies were paying with fire.  It scarily lie to complain of burnt finger.  No sympathy need be wasted on the commission of customs and exercise V. Top ten promotions Ltd. 1968s ALL E.R. 3a).



The decision to evade taxation fits naturally into the frame work of choice under risk since not all tax evades are caught by the tax authority, risk arises since an individual who evades tax stands a chance of succeeding with the evasion and hence having increased wealth or a chance of baring caught and punished.

According to YITZHAKL (1974) he said that the tax avider will pay a fine F>1



This is being applicable to industries or companies.  Evasion by firm is in practice in many firm that are in operation.

Evasion by firm it means that firm are evading tax by either misreporting sales or profit or by making false declaration about input use.



Firstly, tax avoidance involving the creating of artificial transaction with tax saving in mind.

This involving nothing else than creating transaction which have no meaning except in the concept of time serving.

Secondly, it deals with avoidance that is deliberately encourages as part of the policy shined the legislation where of instance, tax relief are offend to firm which develop their activities in depressed areas they are avoiding tax in taking advantage of their relief and this is with was indented for e.g. in U.K.  This stream of avoidance lies in the taxes payable on death i.e. when a man dies the value of his wealth is aggregates and tax is paid there on.

Thirdly, is when a spread income in a particular way to minimize tax viability.  It may be vital to choose the right data for the source of income to commence the right accounting date white the source existed the right date when these source is to be solid.



  1. According to Christainsen 1990, he said that tax evasion will be reduced by in crease in the fine so that the fine is the more efficient deterrent.


  1. Koskela 1983, also said that eh level of fine may not be under the direct control of the tax collected but may be determined by the crime reactive to punishment for other crimes.
  2. For one to eliminate the two, the government should deduct the amount of tax each individual should pay before giving or paying him/she income.


  1. The canoes of taxation should be followed when making tax law to stop tax lead to hypositions of penalties or prosecution.


  1. Tax evasion/avoidance may direct economic resource depending on the elasticity of demand for relevant product e.g. if there is purchase tax on butter and price of butter goes up, people may like to purchase margarine and hence resource may be diverted tot eh products of margarine.


  1. tax evasion/avoidance may lead that home industry may not be protected die to that, the money which the government receive is no more coming.


  1. Due to escape from paying tax, it resumed provide to the people, that there is no enough money to be providing it gain back to us inform of amenities, due to tax evader there will be no means of getting it again.


  1. Another impact to the economy is that it makes incentives for industry investment e.g. granting of allowance for research work and investment of allowance for capital investment is not provided.


  1. Due to tax evasion and tax avoidance from people it made that government saving is no more up to date because when there is no enough money in circulation there will be no encouragement in saving. It rate is very high.


  1. Another impact is that it has on the economy is that it reduces tax revenue that the board of Inland Revenue collect from individual and companies.


  1. Population movement and extent of business caries on. In this a state of low income tax rate, will find that more people are moving to that state while the trader will level state with high income tax and move to the one with low income.


  1. The impact of production and distribution. Tax best system of taxation is that which has the best or the least bad economic effect.  Tax avoidance/evasion effect production and distribution in the seen that tax influence on the ability and desire to work to save and to invest can affect the volume or production by curbing consumer demand, person ability to work will be reduced by the taxation which reduces his efficiency.  It also lead the proceed are not well spent and there is no normal distribution and commodities  of wide.  Consumption are generally restive since the lager the person’s income, the similar the proportions of it and this effect the poor people and this makes them to run a ways from paying tax.


  1. Tax evasion also made that economic planning are not assisted e.g. not encouraging exports or stimulating specific industries.


  1. On income taxation, tax evasion has the impact of lettering the elasticity of labour supply due to the possibility of working in the shadow economy.



Trade is a question of fact not of law as has held in

Balagowme Land Trust Limited Inland Revenue commissioners (1929), the fact that a trade is unlawful does not prevent it profits from being taxed as shown below.

In Mann V. Nash (1932), it was held that the illegality of the use of a gambling machines did not prevent the taxability of the income did not render the gains legal, the law empowers the revenue to tax gain or profit.

Southern V. AB (1933), also decided that although street batting was illegal, income derived there from was obliviously taxable.

The word trade must be given it ordinary meaning. Income from prostitution is taxable ever though prostitution is illegal.

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2 Comments on “The Impact Of Tax Evasion And Tax Avoidance In Nigeria Economy”

  1. Please. I need materials on the implication of tax avoidance and tax evasion in Nigeria economy

  2. I was curious if you ever thought of changing the page layout of your website?

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