AN APPRIASAL OF THE LEGAL EFFECT OF TAX AVOIDANCE AND TAX EVASION IN NIGERIA

ABSTRACT

Tax has been described as a compulsory contribution towards a country’s expenses raised by the government from people's salaries, and properties and the sales of goods and services as well as the profit, properties and assets of corporate entities. Tax avoidance refers to legally employed means to minimize the amount of payable tax owed by an individual or a business while Tax evasion is the willful attempt to defeat or circumvent the tax law in order to illegally reduce one’s tax liability or avoid paying tax. The problem of tax evasion is a global phenomenon which has led to the various enactments of tax laws and the establishment of different tax regulatory bodies to curb this menace but over the years little success has been recorded. Tax avoidance has been used by individuals and businesses to reduce their tax liability within the ambit of the law which has drastically reduced the revenue generated by the government from taxation. It is therefore advocated that a strict application of the proscribed penalty for tax evasion and establishment of anti-tax avoidance policy. This study seeks to advocate more tax avoidance legislation and provisions to encourage tax compliance and also empower the government through the instrumentation of the law as the determining factor of when and how tax avoidance mechanism is being utilized by individuals and business organizations.

This study further seeks to draw a comparison between the tax avoidance laws and tax evasion laws in Nigeria and other jurisdictions in a bid to reform the existing legal framework to measure up with the world’s best practices to ensure that the economic growth of the Nation is not stunted by the constant practice of tax avoidance and tax evasion. The study also seeks to advocate the utilization and optimization of existing tax exemption provisions and tax incentives in a bid to encourage tax compliance and increased revenue generation.