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PROJECT TOPIC: THE IMPACT OF TAX AVOIDANCE AND EVASION ON INCOME GENERATION

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CHAPTER ONE

1.0    INTRODUCTION

1.1    BACKGROUND OF THE STUDY

Tax is a financial issue and its payment is a civil duty. It is the imposition of a financial burden for the government on individual firm and companies. In general based, the word tax means any contribution imposed by the government upon individual and companies for the use of government to provide facilities or services as rendered by the state. It is not a voluntary payment or donation but an enforced contribution made on the pronouncement or directive of legislative authorities.

Osita (2004:1) stated that taxation may be defined as the compulsory levy by the government through her various agencies on the income of an employee, capital or on other subjects such as salaries, business profits, interest, dividends, commission regularities, rent etc.

However, It could be said that there are three main methods of financial economic expedition opened to meet developing countries. These are:-

(a) LOANS

(b) GRANT

(c) TAX AND OTHER CURRENT RECEIPT

Out Of these sources, tax is perhaps the most important since the level of government expenditure is to a great extent dependent on the ability of the tax system to generate the required revenue at the disposal of the government.

In spite of this benefit from tax most people still indulge in tax evasion and avoidance. Attempt to avoid some portion of liability or not to pay tax will affect the revenue of the government that is the reason why the government frowns at the issue of tax evasion and avoidance by using her authorities to enforce compliance.

ARONOMOLE and OLUWALAYODE (2006:39). Define tax avoidance as legal ways by which a tax payer reduces in tax liabilities.  Tax evasion is a deliberate on the part of the tax payers to reduce their tax liabilities through illegal means or an attempt not to pay tax due.

The distinction between this tax avoidance and tax evasion is that tax avoidance is not considered a criminal offence where as tax evasion is a criminal offence.

According to ANYAELE (1990:225) a tax may be defined as a compulsory contribution imposed by a government authority on goods, individual and co-operate bodies irrespective of the exact amount of services rendered to the tax payer in return and not imposed as a penalty for our legal offence. Both direct and indirect taxes are collected for the government inform of income tax, excise duty, import and export duties. Purchase and sales taxes and so on help the government to generate a lot of revenue for the smooth running of government’s administration.


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