ABSTRACT
Sustainable infrastructural development as a key ingredient for sustained economic
growth has thus far received poor attention in Ado-Odo Ota local government area.
The intense shortage of infrastructure constitutes a huge threat to survival in the
study area. Despite the efforts made to enhance this “Social Overhead Capital”, it
still currently does not meet the requirement of economic development. The study
emphasizes on the extent the tax irregularities hinder sustainable infrastructural
development, the short and long-run effects and the possible causes of tax evasion
and avoidance, drawbacks of tax revenue, in the study area. The opinions of the
population of study comprising tax payers and authorities were not left out as a
structured questionnaire was used to elicit the opinions of seventy (70) respondents
in the study area, after then analyzed using the simple percentage method and the
formulated hypotheses were later on tested using the chi-square goodness of fit
technique at 0.05 level of significance. After a statistical analysis of results, it was
concluded amongst others that the practice of tax evasion and avoidance has
negative effects only, on sustainable infrastructural development ranging from short
to long-run effects. A lot still needs to be harnessed towards improving the quality
and condition of infrastructures. It was recommended amongst others that we
should always pay our tax correctly and as at when due because greediness and
selfishness constitutes one of the major causes of tax evasion and avoidance on the
part of the tax payers.
TABLE OF CONTENTS
COVER PAGE ………………………………………………………………..………..
TITLE PAGE ……………………………………………………………………………….
CERTIFICATION ……………………………………………………………………
DEDICATION …………………………………………………………………….….
ACKNOWLEDGEMENTS ………………………………………………………….
ABSTRACT ……………………………………………….…………………………..
TABLE OF CONTENTS …………………………………………………………………
LIST OF TABLES ……………………………………………………..…………….
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY…………………………………………….
1.2 STATEMENT OF THE PROBLEM …………………………………………..
1.3 RESEARCH QUESTIONS ……………………………………………………..
1.4 AIM AND OBJECTIVES OF THE STUDY ………………………………..
1.5 STATEMENT OF HYPOTHESES ………………………….……………..
1.6 SIGNIFICANCE OF THE STUDY ……………………………………………
1.7 SCOPE OF STUDY ……………………………………………………………..
1.8 STUDY AREA ………………………………………………………………………
1.9 LIMITATION OF STUDY ………………………………………………………
1.10 DEFINITION OF TERMS ………………………………………………………
CHAPTER TWO
LITERATURE REVIEW
2.1 UNDERSTANDING TAX AS A TERM ……………………………………….
2.2 THE PRINCIPLES OF TAXATION ……………………………………………
2.3 TYPES OF TAX …………………………………………………………………..
2.4 HISTORICAL ACCOUNT OF TAXATION IN NIGERIA ………………..
2.5 TAX ADMINSTRATION IN NIGERIA …………………………………………
2.6 REASONS FOR TAXATION ……………………………………………………
2.7 TAX AVOIDANCE AND EVASION ……………………………………………
2.7.1 TAX EVASION …………………………………………………………………….
2.7.2 TAX AVOIDANCE ………………………………………………………………..
2.8 DIFFERENCES BETWEEN TAX EVASION AND TAX AVOIDANCE …
2.9 TECHNIQUE OF TAX AVOIDANCE AND EVASION …………………….
2.10 CAUSES OF TAX AVOIDANCE AND EVASION ………………………….
2.11 SUSTAINABITY AND SUSTAINABLE DEVELOPMENT ………………..
2.12 IMPACT OF TAX EVASION AND TAX AVOIDANCE ON THE…………
ECONOMY
2.13 OVERVIEW OF EXISTING INSTITUTIONAL RESPONSIBITIES ..……
FOR THE CONSTRUCTION AND MAINTENANCE OF
INFRASTRUCTURE AND SERVICES IN NIGERIA
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 RESEARCH DESIGN ……………………………………………………………
3.1.1 SOURCE OF DATA …………………………………………………………
3.1.2 POPULATION OF STUDY ……………………………………………………….
3.1.3 SAMPLE SIZE AND SAMPLING TECHNIQUE ……………………………
3.1.4 INSTRUMENTATION/DATA COLLECTION PROCEDURE ……………
3.2 RELIABILITY TEST …………………………………………………………..
3.3 VALIDITY TEST …………………………………………………………..…..
3.4 METHOD OF DATA ANALYSIS ………………………………………………
3.4.1 DECISION RULE ………………………………………………………………
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 DATA PRESENTATION ………………………………………………………
4.2 ANALYSIS OF QUESTIONS …………………………………………………
4.3 TEST OF HYPOTHESES …………………………………………………….
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 SUMMARY OF FINDINGS ………………………………………………… ..
5.2 CONCLUSION …………………………………………………………………
5.3 RECOMMENDATIONS ………………………………………………………
REFERENCES ………………………………………………………………………………..
APPENDICES ……………………………………………………………………………
LIST OF TABLES
PAGES
Table 2.1 Differences between tax evasion and tax avoidance ………….
Table 2.2 Existing institutional responsibilities for the construction …
and maintenance of infrastructure and services in the
country.
Table 2.3 Nigeria expenditure assignments …………………………………
Table 4.1 Pattern of retrieval of questionnaires ……………………………
Table 4.2 Sex of Respondents …………………………………..………….. …
Table 4.3 Location of respondents …………………………..…………….. …
Table 4.4 Age group of respondents …………………………………………..
Table 4.5 Marital status of respondents …………………………….……….
Table 4.6 Employment status of respondents ………………………………
Table 4.7 Analysis to know if the respondents pay their tax …………….
Table 4.8 How often the respondents pay their tax ………………………..
Table 4.9 Highest Academic Qualification of Respondents…………..…..
Table 4.10 Analysis to show the respondents’ opinion on the ……………
quantity and condition of infrastructures in
Ado-Odo Ota local government
Table 4.11 Analysis to show the respondents’ opinion on how ……..…….
effective tax administration is undertaken in
Ado-Odo Ota local government area
Table 4.12 Respondents’ description of the practice of tax evasion……….
and avoidance
Table 4.13 Analysis to show the respondents’ opinion on how they………
consider the practice of tax evasion and avoidance
Table 4.14 Tax evasion and avoidance hinder sustainable…………..…….
infrastructural developmental in Ado-Odo Ota local
government area.
Table 4.15 The extent tax evasion and avoidance hinder sustainable……
infrastructural development in Ado-Odo Ota local
government area
Table 4.16 Analysis to show the respondents’ opinion on whether ……….
the effects of tax evasion and avoidance on sustainable
infrastructural development in Ado-Odo Ota local
government area are in the short-or-long-run.
Table 4.17 The respondents’ opinion on the short-run effects of tax …..
and avoidance on sustainable infrastructural development
in Ado-Odo Ota local government
Table 4.18 The respondents’ opinion on the long-run effects of tax …..
and avoidance on sustainable infrastructural development
in Ado-Odo Ota local government
Table 4.19 Analysis to show the respondents’ opinion on the possible…
causes of tax evasion and avoidance in Ado-Odo Ota
local government area.
Table 4.20 There is a difference between the number of persons that…
pay tax and the number of persons that are liable to pay
tax in Ado-Odo Ota local government area.
Table 4.21 The number of persons that are liable to pay tax is ……….
greater than the number the number of persons that pay
tax in Ado-Odo local government area.
Table 4.22 Tax revenue gotten from tax payers is for their betterment…
and welfare.
Table 4.23 Respondents’ opinion on whether sustainable ………………
infrastructural development can be advanced in
Ado-Odo Ota local government area.
Table 4.24 Respondents’ opinion on whether we should always pay..…
our tax correctly and as at when due.
Table 4.25 Exemption of religious properties …………………………….…
Table 4.26 Analysis to show the respondents’ recommendations…….…
Table 4.14 Analysis to show the respondents’ opinion on Question 5 …
in Section B which was used to test for the hypothesis one
stated.
Table 4.20 Analysis to show the respondents’ opinion on Question 11…
in Section B which was used to test for the hypothesis two
stated.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
There is every need to update our knowledge with the effects of tax evasion and
avoidance on sustainable infrastructural development in Ado-Odo Ota local
government area, Ogun state, because it is of a great benefit to all of us that
fall under these categories, the residents of the study area, the governing
authority who is the custodian of the local government in question,
professionals who service infrastructural development and tax administration
and inquisitive members of our society.
Tax evasion and avoidance is a common drama acted in many local
government areas in the country most especially the Ado-Odo Ota local
government area, unknown to most of the occupants of such areas the effects
of such actions.
Tax evasion and avoidance defiles sustainable infrastructural development in
any constituted society. One of the duties of the government at all tiers is
making available infrastructures, referring to roads, utility lines, hospitals,
schools, emergency services like fire fighters, ambulance and police, sidewalks,
motorable and pedestrian bridges. The basic facilities that make a town or city
function effectively are known as infrastructures. Tax evasion and avoidance
can be understood as an act of deliberately causing harm to oneself and fellow
members of the society. According to Farayola (1987), Tax evasion is the
fraudulent, dishonest, intentional distortion or concealment of facts and
figures with the intention of avoiding the payment of or reducing the amount of
tax otherwise payable, while Tax avoidance according to Nwakaji and Ewah
(2010) refers to a taxpayer’s effort to avoid paying tax by finding a legal
loophole in the tax system, it could also be said to be the arrangement of affairs
in such a manner as to pay minimum amount of tax due.
A number of questions then bother the mind: To what extent does tax evasion
and avoidance hinder sustainable infrastructural development in Ado-Odo Ota
local government area? What are the short and long-run effects of tax evasion
and avoidance on sustainable infrastructural development in Ado-Odo Ota
local government area? What is sustainability and sustainable development?
What are the chances of advancing sustainable infrastructural development in
Ado Odo Ota local government area?
In my attempt to cover the entirety of this study, answers to these questions
will be given accordingly.
1.2 STATEMENT OF PROBLEM
The quantity and condition of the infrastructures in Ado-Odo Ota local
government area gets worse by the day as the population increase due to influx
of residents of Lagos state who share boundary with Ogun state, caused by the
over-congestion and over-crowdedness of dwellers in Lagos state of which can
no longer contain its over-flowing populace. Over-utilization of infrastructures
in Lagos state presently causing defects and great unbalance of resources to
inhabitants. The outcome of such migration is a large increase in the demand
for sustainable infrastructural development in Ogun state, just as Ado-Odo Ota
local government area serves as the choice residence to these migrants due to
its proximity to Lagos state.
Over-dependence and over-reliance on the federal allocations has instigated tax
payers and collectors in the local government area to relax from their civic
duties towards tax. Sustainable infrastructural development can only be
achieved where there is minimal or no presence of tax evasion and avoidance.
Tax evasion and avoidance have rooted its presence in virtually the entire local
government areas in the country but no one seems to know the extent it has
gone in particular areas, why they occur there and proffer solution. This study
is therefore designed to add to existing knowledge, the effects of tax evasion
and avoidance on sustainable infrastructural development in Ado-Odo Ota
local Government area, Ogun state.
1.3 RESEARCH QUESTIONS
In order for this research work to be effective and efficient, it pleases the
researcher to ask the following questions:
1. To what extent does tax evasion and avoidance hinder sustainable
infrastructural development in Ado-Odo Ota local government area?
2. What are the short and long-run effects of tax evasion and avoidance on
sustainable infrastructural development in the study area?
3. What are the possible causes of tax evasion and avoidance in the study
area?
4. What recommendation can be given to the examined problems of these tax
irregularities in the study area?
1.4 AIM AND OBJECTIVES OF THE STUDY
The aim of this study is to examine the effects of tax evasion and avoidance on
sustainable infrastructural development in Ado-Odo Ota Local Government
Area, Ogun state. The broad objective is broken down to the following specific
objectives:
1. To ascertain the extent tax evasion and avoidance hinder sustainable
infrastructural development in Ado-Odo Ota local government area.
2. To examine the short and long-run effects of tax evasion and avoidance on
sustainable infrastructural development in the study area.
3. To identify the possible causes of tax evasion and avoidance in the study
area.
4. To make recommendation on the examined problems of these tax
irregularities in the study area.
1.5 STATEMENT OF HYPOTHESES
The following hypotheses have been posited to aid the research work. The null
hypothesis is denoted as “Ho” while the alternative hypothesis is denoted as
“Hi”.
HYPOTHESIS ONE:
Ho1: There is no relationship between tax evasion and avoidance and
sustainable infrastructural development in Ado-Odo Ota local government
area, Ogun state.
Hi1: There is a relationship between tax evasion and avoidance and
sustainable infrastructural development in Ado-Odo Ota local government
area, Ogun state.
HYPOTHESIS TWO:
Ho2: There is no difference between the number of persons that are liable
to pay tax and the number of persons that pay tax in Ado-Odo Ota local
government area, Ogun state.
Hi2: There is a difference between the number of persons that are liable to
pay tax and the number of persons that pay tax in Ado-Odo Ota local
government area, Ogun state.
1.6 SIGNIFICANCE OF THE STUDY
This study would be relevant to various tax authorities; the Federal Inland
Revenue Service, State Internal Revenue Service, Local Government revenue
committee as well as their tax officials who are responsible to collect tax
liability from individuals or corporate bodies. It gives them insight on how to
improve the tax administration. The study would also help professional bodies
like the Chartered Institute of Taxation of Nigeria, the Institute of Chartered
Accountants of Nigeria and the Nigerian Institution of Estate Surveyors and
Valuers as well as their members to see the areas of deficiency in the
collections and call for improvement in tax revenue. This study would also be
relevant to the future researchers and any such individual or corporate body
that is concerned with achieving sustainable infrastructural development in a
particular area as well as the legislations which will also benefit greatly from
this study, because it will form basis of tax policy formation, implementation
and administration.
1.7 SCOPE OF STUDY
It is focused on studying the discernible and foreseeable effects of tax evasion
and avoidance on sustainable infrastructural development. The study will
focus primarily and precisely on Ado-Odo Ota local government area in Ogun
state, to enable the studier carryout an extensive study on this subject. The
geographical scope to be covered is strictly limited to Ado-Odo Ota local
government area in Ogun state.
1.8 STUDY AREA
Source: Maphill Map Gallery, 2013; Ogun Today, 2014.
The Ado-Odo/Ota Local Government Area is one of the 19 Local Government
Areas of Ogun State, Nigeria. It came into existence on May 19, 1989 following
the merging of Ota, part of the defunct Ifo/Ota Local Government with AdoOdo/Igbesa Areas of the Yewa South Local Government. Ado-Odo/Ota borders
on metropolitan Lagos. The Local Government Area is the second largest in
Ogun State and it is headquartered at Ota or Otta (Wikipedia, 2015).
It has an area of 878 km² and a population of 526,565 at the 2006 census.
Being primarily agrarian in nature, the Local Government Area produces cash
and food crops especially cocoa, kolanut, palm oil, coffee, cassava, timber,
maize, and vegetables. Mineral resources include kaolin, silica sand, gypsum,
and glass sand (Wikipedia, 2015).
The local government area have these as its boundaries, Lagos state in east
and south, Yewa South and Ifo local governments in the north and Ipokia local
government in the west. The area is divided into 16 administrative/political
divisions, which are Ota (1), Ota (2), Ota (3) Ilogbo, Atan, Alapoti, Ado-Odo (1),
Ado-Odo Ota (2), Ere, Igbesa, Ketu, Adie Owe, Agbara (1), Agbara (2), Iju, Sango
and Ijoko (Ogun State Biz, 2013).
The Local Government is populated mainly by the Awori people, a subset of the
Yorubas and the original inhabitants of the area. However, other ethnic groups
like Egba settlers, Eguns, and Yewas (Egbados) also live here. There are
currently eleven Traditional Obaship institutions in the Local Government Area
namely: Olota of Ota, Olofin of Ado-Odo, Oloja Ekun of Igbesa, Onilogbo of
Ilogbo, Alagbara of Agbara, Amiro of Ilamiro, Onikooko of Kooko Ebiye,
Onikogbo of Ikogbo, Onitekun of Itekun, Onigun of Odan Abuja and Olodan of
Odan Abuja Sule (Wikipedia, 2015).
The Local Government Area boasts of a range of cultural, traditional, and
historic attractions. One of the most popular is the Egungun (Masquerade)
festival in Ota alongside the Oduduwa (Odu’a) festival. There are also shrines
such as Ijamido and Ogbodo Shrines. The second oldest storey building in
West Africa can be found in Ota, the Vicarage of the St. James Anglican
Church built in 1842. The postal code of the area is 112. The Local
Government Area is also home to former Nigerian President Olusegun
Obasanjo and his post-presidential enterprise, Obasanjo Farms located in Ota
(Wikipedia, 2015).
It houses the largest religious auditorium in the world, the Faith Tabernacle
(Canaan Land) of the Winners Chapel built and dedicated in September, 1999.
The immediate Executive Chairman is Comrade Rotimi Rahmon (Adeyemo,
2014).
1.9 LIMITATION OF THE STUDY
It is not strange for a research to encounter some difficulties in the course of
research and these encountered in the course of this research include:
1. Inadequate time due to the combination of class schedule and project
work.
2. Lack of full cooperation by some of the respondents and some who refuse
to receive the researcher and some afterwards delayed in giving back the
questionnaire.
3. Financial constraints though this is always a major limitation in studies of
this nature, since the researcher may not have enough money to carry out all
the necessary research.
4. There are areas where data is available but the researcher cannot lay
hands on them because the relevant information is sometimes termed
confidential and unavailable to outsiders.
Despite all this limitations and hindrances mentioned above, the research
study no doubt turned out to be successful.
1.10 DEFINITION OF TERMS
There are some terms used in this study and proper understanding of the
terms is important in appreciating this study:
1. TAX: Tax can be defined as a charge by government on persons,
corporations, estates and trust for the purpose of raising money for
government expenditure (Umezuruike, 1998). Ifediora (1998) also defined tax
as the sum of money demanded by the government for its support or for
specific facilities or service, levied upon incomes from property, sales and
services. Eribo (2010) emphasized that taxes are normally paid by the eligible
citizens of any political system as a legal obligation, regardless of the extent to
which they benefit from the services the proceeds finance.
2. TAX EVASION: Tax evasion is the fraudulent, dishonest, intentional
distortion or concealment of facts and figures with the intention of avoiding the
payment of or reducing the amount of tax otherwise payable (Farayola, 1987).
3. TAX AVOIDANCE: Tax avoidance refers to a taxpayer’s effort to avoid
paying tax by finding a legal loophole in the tax system, it could also be said to
be the arrangement of affairs in such a manner as to pay minimum amount of
tax due (Nwakaji & Ewah, 2010).
4. TAX LIABILITY: This is the amount that is borne by the tax payer
(Ihuoma, 2013).
5. PAYE (PAY AS YOU EARN): This type of tax is based on the earning of the
tax payer (Ihuoma, 2013).
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