IMPACT OF TAX ON

GOVERNMENT CAPITAL
EXPENDITURE AND ECONOMIC
GROWTH IN NIGERIA
(A CASE STUDY OF KWARA STATE INTERNAL REVENUE
SERVICE)

BY
OJO BAMIDELE
DAMILARE
ND/22/ACC/PT/102
BEING A RESEARCH PROJECT SUBMITTED TO THE

DEPARTMENT OF ACCOUNTANCY INSTITUTE OF FINANCE

AND MANAGEMENT STUDIES (IFMS), KWARA STATE

POLYTECHNIC, ILORIN.

1
 IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

AWARD OF NATIONAL DIPLOMA (ND) IN ACCOUNTANCY

MAY, 2024
CERTIFICATION

This is to certify that this Project Work has been completed, read

through and Approved as Meeting the Requirement of the Department of

Accountancy, Institute of Finance and Management Studies. Kwara State

Polytechnic Ilorin Kwara State.

MR. TOSHO.H DATE

(PROJECT SUPERVISOR)

MR. MUHYDEEN ELELU DATE

(PROJECT CO-ORDINATION)

MR. YUSUF A.S DATE

(HEAD OF DEPARTMENT)

2
MR. ABDULRAHAMAN ABDULLATEEF DATE
EXTERNAL EXAMINER

DEDICATION

This research work is dedicated to ALMIGHTY GOD, the Author or

wisdom knowledge and understanding whose spiritual direction with

encouragement is on me through this year, he also made this research work

successful.

It is also dedicated to my loving, caring and best parent in the

universe MR and MRS. AKANO OLAJIDE STEPHEN for their great

contribution, moral, spiritual (prayers) and physical with social support.

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 ACKNOWLEDGEMENT
All gratitude goes to ALMIGHTY GOD who is in his infinite mercy
made this research a successful one and kept me throughout my stay as a
student of this great institution.
I humbly accord accolades to my beloved parent MR and MRS.
AKANO OLAJIDE STEPHEN for their usual and continuous effort
towards the completion of this project. I pray GOD bless them with long life
and prosperity so as to reap the fruit of their labour on their children (Amin).
Furthermore, I specially want to commend the effort of my project
supervisor in person of MR. TOSHO H. who is a lecturer and also MR.
YUSUF A.S the HOD of Accountancy Department under the Institute of
Finance and Management Studies (IFMS) Kwara State Polytechnic, Ilorin
Kwara State whom despite his tight academic schedule and commitment
offered constructive criticism and emphasized based teal obliged to
acknowledge him. I also appreciate his progressive support, consideration,
patience, above all, his understanding through the course of supervision,
may GOD bless you abundantly (Amin). And other lecturers of my
department I want to say a big thanks to you all.

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 I remain very grateful to those my beloved ones, the like of TAIYE,
ARANSIOLA, MONDAY, OLA, OPE, ROFIAT and ABEEBAT along
side with my friends, colleagues and my well wishers. May GOD bless you
all abundantly Amin.

TABLE OF CONTENTS

Title page i

Certification ii

Dedication iii

Acknowledgement iv

Table of content vi

TABLE OF CONTENTS

CHAPTER ONE: INTRODUCTION

1.0 Introduction 1

1.1 Background to the study 1

1.2 Statement of the study 4

1.3 Research questions 4

1.4 Objective of the study 5

1.5 Research Hypothesis 6

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1.6 Significance of the study 6

1.7 Scope of the study 6

1.8 Limitation of the study 7

1.9 Definition of terms 7

CHAPTER TWO: LITERATURE REVIEW

2.0 Literature Review 9

2.1 Conceptual Framework 9

2.1.1 Concept of Taxation on cash flow return 13

2.1.2 Concept of taxation on personal income 14

2.1.3 Concept of personal income laws 15

2.2 Theoretical framework 21

2.2.1 Acting as instrument of fiscal theory 22

2.2.2 Theory of fiscal policy 22

2.2.3 Theory of equitable distribution of income/wealth 23

2.3 Empirical review 24

2.3.1 Tax laws and economic development 26

2.3.2 Tax administration in Nigeria 27

CHAPTER THREE: METHODOLOGY

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3.1 Research design 28

3.2 Sources of data 28

3.3 Population of the study 29

3.4 Sample size and sample techniques 29

3.5 Research Instrument 30

3.6 Method of Data Analysis 30

3.7 Model specification 31

CHAPTER FOUR : DATA ANALYSIS AND DISCUSSION

4.1 Introduction 32

4.2 Demographic Characteristics of respondent 32

4.3 Statistical Result 39

4.4 Testing of Hypothesis 40

4.5 Summary of Findings 42

CHAPTER FIVE: SUMMARY, CONCLUSION AND

RECOMMMENDATION

5.1 Summary of findings 43

5.2 Conclusion 45

5.3 Recommendation 46
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 References

CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Taxation which comes the words “let tax are” to estimate or to
evaluate, it is usually in monetary manner, levied by the government upon
persons, corporations and property, primarily for fiscal purpose, i.e it is a
purpose.
Taxation may however be used for various economic and social
purpose. It may serves as a method of developing and balancing of
economic, by controlling certain firms of industrial and commercial
activities. It may also be use d to bring about social reforms through
distribution to the government such as fines and other similar puberties
which are imposed as punishment for violating laws. Taxes a export, also
usually distinguish from government fees tools and special assessment
which are levied as payment for specific benefit provided by the government
to the individual tax payer and from tariffs which furnish revenue from
forties on imports and exports. It is the believe of some economic and
political scientist that taxation should be limited to an absolute minimum
because the government consumer revenue in excess of the value of their
8
production function. They assert that private enterprise can only be carried
on success with the smallest tax.
On the alternative and it was held the big scholar that taxes should be
imposed on the basis of the uses of which the revenue is paid. Economist
generally agreed on the principles that are to be limited to a reasonable share
of the social income of the community.
The ideal of taxation system is the type which distributes the tax
burden accordingly to the ability of individual to pay.
The opportunities are equally among the member of the community
sacrifices in the firm of taxes to be used for the public good. Considerable
disagreement arise with respect to determination on the ability to pay and
the scholar argues that in certain circumstance tax burden can be distributed
according to the benefits received from the allocation of revenue. The
collection of taxes from public can be justified only when the effect is
directly or indirectly of public interest.
Taxation is the process of imposing percentage of tax income and earning of

every individual and corporation, the percentage should be paid to the

government. Tax is a necessary ingredient for development as it constitutes one

of the greatest sources of revenue for the government. As a result of this, tax is

also defined as a compulsory contribution from individual and business

organization for the purpose of financing government expenditure.

Andersonand Book (2017) defined taxation as any non-private to the

public sector levied on the basis of predetermines criteria and without reference
9
to specific benefit so as to accomplish some of a nation economic social

objective. Based on this definition tax can therefore be regarded as a bunden

which everybody most bear to sustain the government. The process involved in

the levy and payment of taxes series of tax without any complication for proper

execution of these process, there federal government enacted layout that are

meant to acquire the government official in their operation and to safeguard the

person and institutions concerned in tax administration.

The income tax management act (IITMA) 1961, Company Income Tax

act (CITA) 1979 are of the act that were passed to this effect typical Nigeria

government and critical evaluation its effort ay ensuring fair exercise of tax

management for a long time, less attention been paid to government tax system

which makes it almost impossible solution prepared for the contribution.

The intention to be carryout this project maybe hindered by the fact that

there are limited and finance of the research work. Therefore the initial scope

as to be streamlined to available information and data. All the information and

data used for this project work obtained from Kwara state internal revenue

service and some text books, journal and relevant project to the topic.

Finally, as stated earlier, the study will be limited to the tax system in

Nigeria that lowers the computation of levies and payment of taxes by both

individual and corporation. Nevertheless, this study will be a fact point with a

10
view of bringing out consternates weakness if the whole system and the central

system which are suggest possible correction and recommendation.

1.2 STATEMENT OF THE PROBLEM

The administration of tax in Nigeria is controlled by the following as
part of the problems likely to hamper the efficiency and effectiveness of
global soap and detergent industry limited.
Poor working environment and condition of service of tax workers
paring way for sabotage and inefficiency.
Inability of government policy as regards revenue generation relation
to collection shortage of tax collector, tax collector are not enough to
carryout the tax distraction of the global soap and detergent industry limited
both at federal and state levels.
Lack of adequate training for tax collectors result to inefficiency some
times sometimes. The static department relies on invalid information which
determined. This .base for instance some try to avoid taxed.
Bad precedents are regards as non enforcement of tax laws through
persecution of tax fraud many illiterates who fully educated on how and why
taxes are paid prove difficulty in payment to their taxes
Some tax payer does not maintain proper record of accounts and so
assessment are often based on best of judgment.

11
 The payer sees the collectors as their enemies and makes attempts to
avoid them as much as possible.
Global soap detergent, industry limited should draw serious attention
to these problems so as to improve the collection and administration of tax
in Nigeria.

1.3 RESEARCH QUESTIONS

In order to ensure that adequate revenue is generated for the
government through taxation and subsequent provision of sufficient
infrastructure and necessary amenities. It is important that we know the
impact of tax on government capital expenditure and economic growth in
Nigeria.
i. what are the relationship between tax revenue and economic
growth in Nigeria
ii. what are the impact of tax revenue on capital expenditure in
economic growth in Nigeria
iii. what are the problem facing tax revenue on capital expenditure in
economic growth in Nigeria
1.4 OBJECTIVES OF THE STUDY
i. To identify the relationship between tax revenue and economic
growth in Nigeria
ii. To determine the impact of tax revenue on capital expenditure in
economic growth in Nigeria

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iii. To examine the problem facing tax revenue on capital expenditure in
economic growth in Nigeria.
1.5 RESEARCH HYPOTHESIS
The following hypotheses will be tested for the purpose of this study.
1. Ho: There is no significance relationship between tax revenue and
government capital expenditure in Nigeria.
Hi: There is significance relationship between tax revenue and
government capital
2. Ho: There is no impact of tax revenue on capital expenditure in
economic growth.
Hi: There is impact of tax revenue on capital expenditure in
economic growth.
3. Ho: Tax Revenue is not the main problem facing government capital
expenditure in economic growth in Nigeria
Hi: Tax Revenue is the main problem facing government capital
expenditure in economic growth in Nigeria
1.6 SIGNIFICANCE OF THE STUDY
The research work will forgive a perspective relating to principle
application and problems of taxation in Nigeria it will also serves as an aid
towards recommendation of solution in order to keep activities in good
conditions.
The study will also be help to company individuals’ tax collectors and other
related organization and administration could be completely prevented so as
to stimulated growth and development in the economy through fiscal
13
measure. In combating inflation, the project will assist the government
reasonably apply tax laws in the levy of taxes on individuals companies and
related organization who constitute the economy.
1.7 SCOPE OF THE STUDY
This study will focus on the impact of tax on government capital
expenditure and economic growth in Nigeria using the kwara state internal
revenue service, Ilorin as the case study. Data covering the period between
years 2022 to 2024 will be used for the study. This is because of the Nigeria
economy witnessed a meltdown in these periods and the effect on the
economy need to be examined. The study also examine the necessary steps
to curb the menance of tax in Nigeria.
1.8 LIMITATION OF THE STUDY
The limitations the researcher encountered during the survey are time
constraint, lack of finance, respondent’s attitudes and transportation
constraints.
Another borderline is the title of the Thesis itself, this thesis is confine
or limited to the impact of Tax on government expenditure and economic
growth in Nigeria, the investigator is limited to Nigeria. Despite the
borderline confronted by the investigator, the researcher still extends
tentacle to other countries to buttress sound comparison
1.9 DEFINITION OF TERMS
Some of the term used in the study is defined, guide and give proper
understanding of the research work.

14
YEAR OF ASSESSMENT: This period from 1st January and ends on 31st
December of the same years. It is the preference years for which tax is paid
priors to 1980, year of assessment use to be a period from 1st April of one
year to 31st March of the next calendar year.
BASIC PERIOD: This refers to the period during which a business
accounting period income is assessable to tax in the year of assessment.
ACCOUNTING PERIOD: This is the period during which a business
makes up its account for income. For an ongoing business, the accounting is
usually for a period of twelve months if the business fails to make up
account if its old accounting data, the business as deemed fit for the
following year of assessment.
ACTUAL YEAR BASIS OF ASSESSMENT: Under this basis of
assessment the income derived in the actual period of the years of
assessment in assessable to tax in that year of assessment.
CEASATION OF BUSINESS: This is when a business in permanently
ceased to trade or discontinue to trade its business. The assessable income
for the last two year will be ascertained.
COMMENCEMENT OF BUSINESS: When a business commences, the
assessable income for three years of commencement is considered.
PAY AS YOU EARN: The tax payer that fall under this section is salary
earner. It is the amount of salary that is earned that can justify the amount of
tax payable and vice versa.
TAX EVASION AND AVOIDANCE: Tax evasion means the act of
evading or escaping by artifice or contravening and prevaricating tax while
15
tax avoidance is the act of avoiding tax through and meeting with tax
authority to state unreasonable and in genius reason so as to be spared.

CHAPTER TWO
2.0 LITERATURE REVIEW
The serious decline in price of oil in recent years has led to a decrease
in the funds available for distribution to the federal and state governments.
The need for the state and local governments to generate adequate revenue
from internal sources has therefore become a matter of extreme urgency and
importance. This need underscores the eagerness on the port of state and
local governments and even the innovative in the mode of collecting revenue
to the government in terms of the magnitude of revenue derivable from
taxation, however, taxation is the most important source of revenue to the
government. Owing to the inherent power of the government to impose
taxes, the government is assured at all times of its tax revenue no matter the
circumstances.
This study focuses on identifying the means taxation been utilized to
promote fiscal redistribution of income, identify problems that militate
against the use of taxation as revenue generation in Federal Capital Territory
(FCT) and in some.
2.1 CONCEPTUAL FRAMEWORK
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 A tax can therefore be defined as mean by which the government
appropriate part of private sector income and expenditure (in equilibrium
where income and expenditure are equal) as it revenue for the purpose of
meeting recruitment expenditure are creating public and growth of goods
and service of the economy.
According to Edey (1982) a tax although may be imposed for the
purpose of Providian for public services and goods. It has effect on the
behavior of the payer and some variable income and consumption function.
Field (1994) defined tax as any non pented yet compulsory transfer of
resource from the private to the public sector levied on the bases of
predetermined criteria and without references to specific benefit
received/other to accomplish some of a nation’s economic and social
objectives.
Taxes generally have a sizable effect on the profitability on
investment tack cark (1980) said and understanding of tax laws, effecting
investment decision. Tax law is o numerous and complex that bit would
field the major taxes affecting investors and reviewed it in the following
chapter, including the federal personal income tax and federal estate taxes.
According to chambers mini dictionary defined tax as a change made
by the government on the income on certain types of goods e.t.c to help to
pay for the running of the state.
Taxation is defined according to chamber mini dictionary as the act
raising money for the government by tax.

17
 In defining income, priest, notice were what constitution income is
one country does not in another this gave example of capital join which from
part of personal income/America but not in Britain before it will be very
different, he observe to define the income of firm in developing countries,
he does not only provide his own need but does not keeping account of its
own income.
Assessment of group income in a developing nation tends to be
difficult according to priest. He argues besides unwillingness of the group to
keep account of the income. Evaluation of their income need to Wisdó’of
Solomon.
Priest preserved the many Africa countries in the past, the richer
country/fixing there rates and allowance which in the end not create
administration problem, also lead to tax evasion.
He also wrote about the problem, of tax collection which he saidibut
limited in the western countries due to application of some technical diverse
that, cannot be applied in Africa countries.
Thus, he said will actually lead to evasion and even gave example of
Africa defaulters who treat into the bush or some who look at the prison
yards as rest bruise.
Fashokun, (1994) has entirely a different view on the implication of
the tax laws on provision and called for their review.
While contending that he exhaustive list income assessable to the
chain for allowance in that, there is no common measure in provision’ to all
classes of employment and charms in conclusion, Fashokun and for the
18
liberation of allowance and expenses in respect of employment income and
the need .to the employers set-up specialized department and complex tax
system.
Omorayiwa’s (1982) work traced to Biblical support for taxation
Rome 1817 and Luke 2017 and various attempt by nations to perfect system.
He discussed the legal basis states observed to both federal and state tax law.
Omorayiwa also examined the various problem of tax administration
in Nigeria and offered suggestion. In his own opinion policy measure should
not be aimed at increasing taxes but that of political will enforce tax. He
called for the reduction of the current rate of 70 percent and a general review
of tax laws.
C.S Ola (1981) presented both legal and approach to the subject of
taxation as related not only personal income but also partnership,
companies’ petroleum profit capital transfer and so on.
Taxation is seen as a burden which every citizen must bear to sustain
his or her government because the government has certain functions to
perform for the benefits of those it governs. A précised definition of taxation
by Farayole (1987) is that taxation is one of the sources of income for
government, such income as used to Finance or Run Public Utilities and
perform other social responsibilities. Ochiogu (1994) defines tax as a levy
imposed by the government against the income, profit or wealth of the
individuals and corporate organizations.
According to Adams (2001) taxation is the most important source of
revenue for modern governments, typically accounting for ninety percent or
19
more of their income. Taxation is seen by Aguolu (2004), as a compulsory
levy by the government through its agencies on the income, consumption
and capital of its subjects. These levies are made on personal income, such
as salaries, business profits, interests, dividends, discounts and royalties. It is
also levied against company’s profit petroleum profits, capital gains and
capital transfer. Whereas, Ojo (2008) stresses that, taxation is a concept and
the science of imposing tax on citizens. According to him tax is itself a
compulsory levy which is required to be paid by every citizens. It is
generally considered as a civic duty. The imposition of amenities, both
social and security and creates conditions for the economic well being of the
society.
Okon (1997) stated that income tax can be regarded as a tool of fiscal
policy used by government all over the world to influence positively or
negatively particular type of economic activities in order to achieve desire
objectives.
Primary economic goals of developing countries are to increase the
rate of economic growth and hence, per capital income, which leads to a
higher standard of living. Progressive tax rate can be employed to achieve
equitable distribution of resources. Government can also increase or
decrease the rate of tax, increase or decrease the rate of capital allowances
(given in lieu of depreciation) to encourage or discourage certain industries
(e.g in the area of agriculture, manufacturing or construction) or may give
tax holidays to pioneer companies. Income tax therefore can be used as an

20
agent of social change if employed as a creative force in economic planning
and development.
2.1.1 CONCEPT OF TAXATION ON CASH FLOW RETURN ON
INVESTMENT AND RESEARCH IN PRACTICAL
The most essential function of a grid management is the planning how
to reduce the amount of tax payable and how to make funds available for tax
payment when its funds available for tax payment when it is done when the
tax payable is now paid and if such tax is excessive, the amount of funds
ploughed back of further strengthening of business.
The income tax provide in the account to all taxable co-operate and
corporate entities at any point in time represent the third larges items
expenditure after the cost of sales and salaries when the amount is paid
represent substantial outflow of cash and it will result and have a negative
and effect the liquidity position of the business organization. The direct
position of the business organization. The direct impact of that, the directors
may not have confidence in the companies and any therefore stop supplied.
The company will not be an advantage of settlement of debt. Current asset
will blow in relation to current liabilities and if short, creditors press for
payment of debts. The business entity may be forced into liquidation. Also
there will be difficult meeting the current obligation such as embarking on a
capital project when the opportunity arises. The main objective of any
company is maximum utilization of owners Wealthy maximization is
possible sonly if there is any appreciable growth by the owners.

21
 The effect of the following analysis that by tax is paid on the owners
hence a fail in the value of share and the business organization. A substantial
amount of each outflow resulting from settlement of tax will greatly affect
the amount of fund ploughed back into the business strengthens it base.
2.1.2 CONCEPT OF TAXATION ON PERSONAL INCOME
Personal income tax is quasi income because it is imposes on
individual tax payers on the basis of ascertained estimated income, input in
order based on apparent wealth. The positive impact on this levy his been to
help allocation of resources from subsistence sector. Either through
production. or market or through wage employment for unlinked labour. The
income individuals are incorporated bodies assessable to tax conducted
show that 70 percent. The result some personal oral interview conducted
bow that for partners sole proportion said those assessable to tax under the
P.A.Y.E scheme. The 70 percent crop income tax rate is too high having
regard to the extended has also show that employs prefer having leisure.
Time some where the volume of production. This is as a result of the fact
that the tax on such overtime premium taxes; the spirit behind the overtime
work itself to out love its usefulness as additional earning efforts. The
taxation on personal income reduces the purchasing power of the individual.
The realization that earnests income will be subject to such tax influence.
The morale of employees at work they deliberately reduce the man power in
out to compensate part of the income that will be lost to the authority
2.1.3 CONCEPT OF PERSONAL INCOME LAWS

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 This law that give the necessary procedure and administrative power
to impose and collected taxes from person, individual partnership, executor
trustee, family or communities, corporation, sole or body of individual is the
income tax management oil 1961 (ITMA).
This act has been amended several times. The following laws made
major amendment to the act.
i. Income tax amendment act 1960 (No. 65)
ii. Income tax management amendment 1971 (No. 28)
iii. Income tax amendment act 1968 (No. 58)
iv. Income tax management uniform taxation act 1975 (No. 7)
v. Income tax miscellaneous taxation provision act 1985 (No. 4)
vi. Finance miscellaneous taxation provision act 1985 (No. 4)
Finance miscellaneous uniform taxation decree 1985 not income years
after the initial act of 1967 was enacted rough the call state for unformed in
the assessment of personal income tax among the state of federation.
This new dimension brought a lot of relief to the work of tax
practitioner. Account and the generally of the public as it put an end to
application of diverse method and its assessment by each state.
THE CURRENT TAX REFORM PROCESS
(Overview of the report of the study group (2003) and the working
group (2004) on the Nigcrian tax system). The current reform process
commenced on August 6, 2002 after series of proposal forwarded by our
institute to the federal ministry of finance. A study group was eventually in
our guarded to examine the tax system and make appropriate
23
recommendations to the government on ways to entiench a better tax policy
and improve tax administration in the country distinguish participants. It is
instructive to note that the study group on the review of the Nigerian tax
system that was inaugurated on August 6, 2002 with the il-point terms of
refrrences all inherits and purpose. The study group which had three
members of our institute was set up to, take a critical look at the existing tax
laws, the inherent lapses and proffer ways and means of enhancing the tax
system through feasible recommendations.
A comparative analysis showed that term of references of the 2002,
study group broader in scope than the 1991, study groups in that while the
letters exercised cover the review of direct tax under the jurisdiction of
federal and states revenue services. The 2002 exercise was more
comprehensive as it covered the entire gamut of taxes at federal, state and
local government levels. The study group had its main reporting 20 chapters
of 17 volume in all, about 39 takes levies and fees, including 8 federal, 11
states and 20 local government taxes and levies captured in the taxes
(approved list of collection) decree nol2 of 1998 were thoroughly appraised
by the group consequent upon which study recommendation were made to
the federal government.
Some of its recommendation includes;
i. Nigeria to have a 24 clause national tax policy
ii. Compilation of registers of individuals and corporate tax payers
and also issuance of smart tax identity card for all tax payers.

24
 iii. Raising of the threshold of personal income tax up to #200,00
consolidation of personal income tax free allowances to a single
bulk of 40% of assemble income and the highest income rate
should be 20%
iv. Reduction of companies’ income tax rate to 20% from the current
30% rate.
v. A company to make profit before being exposed to companies’
income tax in any assessment year.
After a thorough appraisal to the technical issues involved in the
implementation of its reading recommendations, the group also suggested a
tax environment where tax payer is registered as the ‘king’ and tax system
with a ‘human fact as a strategic option of achieving the broad policy of its
sundry recommendations. The study group submitted it report in July
A private sector driven group was constituted on 12 January 2004 and
was fundamentally based on the issues covered by the group report of 2003.
The working group was mandated in its term of references to critically
evaluate the recommendation of the study group and propose set of strategic
whose implementation would give effects to the reform of the Nigeria tax
system; which were grouped into:
a. Short term: within 6 months of submission of the report
b. Medium term: within 2 years of submission of WG’s report
c. Long term: after 2 years of submission of WG’s report
Both groups addressed macro and micro issues in tax policy and
administration among the incentives and tax administration generally.
25
REASONS FOR REFORM
The study group recommendations and sub-basement evaluations saw
the need for more inputs from stakeholders in the nation’s tax system. Hence
the convening of the 1st national tax retreat, tagged “tax reform and
democracy” held in Lagos from 22-24 August, 2005. Stakeholders agreed
that at the end of the retreat that the following reasons were only expedient
but necessary for the Nigerian tax system:
• Efficient and effective tax administration
• Stimulate the non-oil sector of the economy
• To resolve contentious issues in tax administration
• Redistribute wealth and entrench a more equitable tax system
• Capacity building for administrators and tax payers
• Centralization of revenue agency and computerization
• Reduce effective tax policy for Nigeria, etc.
The public hearing of December, 2005 on the 8 tax bill by the national
assembly and the drafting of the national tax policy which draft copies had
already been distributed to all stakeholders for their input were the
consumption of the- various initiatives of the federal government and
stakeholders in reforming the nation’s tax system. The chartered institute of
taxation of Nigeria was not left out in this asset. The institute in furtherance
of its statutory responsibility was among the first stakeholders forward its
position papers on the 8 tax bills and participated actively during the public
hearing. Thereafter, the institute based on its invaluable contributions to the
public hearing and previous inputs to the tax system re-engineering process,
26
was requested by the finance committee of both houses of the national
assembly to serve in the think tank group that assisted in packaging the final
tax bills that were passed into law by national assembly. Today, 4 out of 8
tax bill, namely
i. Bill for an act to establish the FIRS as autonomous services.
ii. Bill for an act to amend the companies income tax act
iii. Bill for an act to amend the national the petroleum profit tax and
iv. Bill for an act to amend the national automotive council act were
passed by the national assembly and signal into low by President
Olusegun Obasanjo, on April 16,, 2007, while the remaining four
(4) tax bills are still at the fiscal debate stage of the parliament.
TAX AVOIDANCE AND TAX EVASION PRACTICES
Concept of economic development: Economic development is the
development of economic wealth of countries or regions for the well-being
of their inhabitants. From a policy perspective, economic development can
be defined vices as efforts that seek to improve the economic well-being and
quality of life for a community by creating jobs and supporting or growing
incomes and the tax base. Economic development implies improvements in
a variety of indicators such as literacy rates, life expectancy, and poverty
rates. GDP is a specific measure of economic welfare. Economic
development encompasses policies that governments undertake to meet
broad economic objectives such as price stability, high employment,
expanded tax base, and sustainable growth. Economic growth is the growth
of an economy’s output of goods and services which is sometimes reffered
27
to as the Gross National Product (GNP) growth. When the growth rate of
GNP declines, unemployment results and income generally falls. When this
happens, the government has a duty to pursue a set of policies aimed at
stepping up the economy’s outputs. As Such the goal of sustained economic
growth should be important to any government.

2.2 THEORETICAL FRAMEWORK

Taxation is a product of theorists and this study intend to apply are as
follow.
The first theory that this study looks at is Professor Arthur Laffer
theory on taxation, popularly known as the “Laffer Curve”. It is a theoretical
representation of the relationship between government revenue raised by
taxation and all possible rates of taxation.
This theory is demonstrated by through experiment).

Government
Revenue

28
Source: TAX RATE
 It considered the amount of tax revenue raised at the extreme tax rates
of 0% and 100% the theory conclude that a 100% tax rate raises no revenue
in the same way that a 0% tax rate raises no revenue. This is because at
100% rate, there is no longer incentive for a rational tax payer to earn any
income, thus the revenue raised will be 100% of nothing. If therefore
follows that there most exist at least on rate in between where tax revenue
would be a motimum. Laffer attributes the concept to Ibn Kholdun and
Keynes J.M.
One potential result of this theory is that increasing tax rate beyond a
certain point will become counter productive for raising further tax revenue
of diminishing returns (Latter, 2004). The second theory that helps to shape
taxation is Ibn Khadun theory on taxation. This theory was explained in term
of two different effect that is the arithmetic effect and the economic effect
which state tax rates have on revenues. The two effects have opposite results
on revenue in case the rate are increased or decreased.
2.2.1 ACTING AS INSTRUMENT OF FISCAL THEORY
Teriba O (2000:27) traced the origin of fiscal policy to the treasury of
ancient rome which was called “FISC” from it we get the word “fiscal which
something concerning public revenue. By define fiscal public is that part of
government public which is concerned with raising revenue through taxation
and other means and deciding on the level and pattern of expenditure.
2.2.2 THE THEORY OF FISCAL POLICY AS AN INSTRUMENT
OF INCREASING ECONOMIC GROWTH IN NIGERIA
29
 Teriba O. (2009:67) continued by saying assuming that total demand
for goods and services is low as the level of employment and production. In
this situation, the government may plan for a budget deficit, it can do this
through reducing taxes. This is because if people and firms pay excess tax,
there will be more money available to spend and total demand will go up.

FISCAL POLICY AS AN INSTRUMENT OF REDUCING

ECONOMIC ACTIVITY.
He further asserts that if total spending is much higher than the supply
of goods and services prices will tend to rise (inflation). The government
may try to reduce total demand and thereby economic activity by increasing
taxes. This is because it is generally easier for the government to make tax
changes then to reduce its expenditures, especially when it involves long
term investment and socially desirable public service.
2.2.3 THEORY OF EQUITABLE DISTRIBUTIO OF
INCOME/WEALTH
Taxes often aim to distribute income. A progressive income tax,
which taxes more from those with higher income thereby reducing the
unequal income among people, satisfies there role of taxes. The government
income therefore, spreads tax revenue on service that include health,
education social welfare which often benefit low-income group more than
those with higher income impact of tax on group’s capital powerful and
effective device for ensuring a more equal distribution of income. On the
other hand, equitable distribution of wealth is very essential in order to
30
maintain a desire level of economic stability. This is achieved through
redistribution of wealth concentration on high –income earners.
FAVOURABLE BALANCE OF PAYMENT
Teriba O (200:187) The foreign trade of a country is controlled and
protected by the government in order to safeguard the economy. Taxes on
import and export affect the balance of payment and may affect production
at home. High tax of imports reduce of prevent the import of a particular
manufactured goods so the industries (infant industries) can become
properly established. Conversely, government encourage export by giving
tax subsides/relief to producers especially in the areas of agricultural and
industries. Being able to produce its basic need not relying on foreign
supplies make a country self-reliant. This in turn raises enough revenue to
the government, keep income and employment at a high level with a positive
result of correcting on unfavourable balance of payment.
2.3 EMPIRICAL REVIEW
Afuberoh and Okoye (2014) investigated the impact of taxation on
Revenue Generation in Nigeria: A study of Federal Capital Territory and
selected states. The major challenge of the study was to determine the
impact of revenue derived from taxes and identifying the means taxation has
been utilized, identifying the means taxation problem that militate against
the use of taxation as revenue generation in Federal Capital Territory and
some states in Nigeria. This study adopted both primary and secondary
source of data regression analysis was employed with the aid of SPSS
version 17.0. The finding of the study was that taxation has a significant
31
contribution to the revenue generation. The researcher however
recommended that well dote base on all tax payers should be established by
federal, state and local government with the aim of identifying all possible
resources of income of tax payers for the purpose of tax collection process
and must be free from corruption.
Rotimi (2013), investigated revenue and engagement of tax consultant
in Lagos state, Nigeria. The challenge was to examine revenue generation of
Lagos state with emphasis on use of tax monetary Agent (TAMA) in the
light of tax evasion as well as activities of some unsnipulous tax officials.
The study concluded by stating that tax evasion and avoidance is imminent
and of course has significant relationship with revenue generation of Lagos
state, hence the researchers states that evasion and avoidance reduce revenue
inflow. The study recommended that use of tax collectants in Lagos state
yield positive result but their activities should be monitored, commissions on
collections should be paid promptly as well.
The study also recommend for continuous tax education right from
early education as well as in religious gathering in Lagos state.
Samuel and iyakoso (2014) investigated taxation and revenue of
generation, an empirical investigation of selected state in Nigeria.
The challenge of the study was to examine the contribution of taxation
on revenue generation and to certain the extent at which tax evasion and tax
avoidance has affected negatively on revenue generation and the extent to
which taxation has contributed to the steady adopted both primary and
secondary sources of data simple regression was employed in analyzing the
32
data with the aid of spss version 17.0 the result of the study showed that
taxation has a significant effect on revenues generation in Nigeria. The study
recommended among other things that will equipped data base payers
should be established by the federal, state and local government with aim of
identifying all possible source of income of tax payers for tax purpose.
From the empirical review above, various studies has exploral the
impact and contribution of taxation to revenue generation and economic
development in Nigeria corporate tax and it’s contributions to revenue
generation in Nigeria such need to full the gap necessities on this study.
2.3.1 TAX LAWS AND ECONOMIC DEVELOPMENT
Musa (2009) opined that economic and social development laws and
policies provide the basis for effective state action that lifts society from
underdevelopment, improves the standard of living and facilities for the
realization of the millennium development goals. Nigeria is in dire need of
solution to its development challenges. Good laws that are well implemented
would contribute to the resolution of these challenges. The first thing to do
in this scenario is an attempt to review the implementation of the identified
laws like the company income tax, petroleum income Act and tax reform
Act. The second thing is to get the relevant legislative committees and
ministers, departments and agencies involved give account of their
respective stewardship/roles in implementation of the law. Ariyo (1997) in
his study on productivity of the Nigerian tax system and reports a
satisfactory level of productivity of the tax system before the oil boom. The
advent of the oil boom encouraged some laxity in the management of non-
33
oil revenue sources like the company income tax, which was rectified to a
reasonable extent with the commencement of the structural adjustment
programme. The report underscores the urgent need for the improvement of
the tax information system to enhance the evaluation of the performance of
the Nigerian tax system and facilitate adequate macroeconomic planning and
implementation. Sani (2005),the Executive Governor of Zamfara State
stated that tax system as a whole is an embodiment of contention and
controversy whether in its policy and formulation, legislation or
administration. Similarly, the objectives of the tax system are multi-
dimension in nature which include revenue generation, resources allocation,
fiscal tool for stimulating economic growth.
2.3.2 TAX ADMINISTRATION IN NIGERIA
According to Bariyiman and Gladson (2009), tax administration in
Nigeria is carried out by the various tax authorities as established under the
relevant tax laws. “Tax authority” as defined in section 100 of the Personal
Income Tax Decree, 1993 and amended by Decree No 18-finance
Miscellaneous Taxation Provisions) Decree 1998, means “the Federal Board
of Inland Revenue, the State Board of Internal Revenue or the Local
Government Revenue Committee”. The tax authority as defined in addition
to the Joint Tax Board, the Joint State Revenue Committee and the Body of
Appeal commissioners together constitute the organs of tax administration in
Nigeria., the Federal Inland Revenue Service, deals with corporate bodies as
well as Personal Income Tax for certain categories of individuals Viz: This
is the body established by the federal government and it is vested with the
34
power to administer the act and to carry out all acts which may be deemed
necessary and expedient of the assessment and collection of tax and shall
account for all amount so collected in a manner to be prescribed by the
Federal Ministry of Finance.

CHAPTER THREE
RESEARCH METHODOLOGY
3.1 RESEARCH DESIGN
Research methodology can be defined as the means, techniques and
frames of references applied in such very a way as to arrived at a dependable
solution to problem through the collection, analysis and interpretation of
data. Methodology is the main stream of any research project are derived
from the method of research study adopted.
This chapter therefore deals with the various means and devices
employed in the collection processing and presentation of data for this
research. It focuses on the appraisal of the population of the study, sample
size and the research tools used in carrying out the study. And attempt is
also made to describe the validity of the research instrument.
3.2 SOURCES OF DATA
This undoubtedly will include all the services of information from
other. The primary or secondary sources nevertheless the primary sources
includes the use of questionnaire and personal interview with various
investors moving in the holding of shares and secondary includes the use of

35
journal text book and various internet involving published statement of the
Nigeria stock exchange.
There are two principle sources of data used for research work from
which a research can obtain the data and information he needs to enable him
draw a conclusion on the subject of the study.
There are two primary data namely of internal source and secondary
namely of external source. All the above method maintained were used
extensively to obtain broader range of information from the various
categories of staff contacted.
Primary data like questionnaire and personal published interview facts
or record in the organization where also used for example in the company
annual report.
3.3 POPULATION OF THE STUDY
This study focuses on the staff of the Kwara State Internal Revenue
Service (KWIRS). In essence the population of this research work is the
entire staff which is two hundred and four of the Kwara State Internal
Revenue Service .
3.4 SAMPLE SIZE AND TECHNIQUES
The sampling procedure included the introduction of the examine of
the recipients. The actual administration of tests, the collection of the result
and the processing of result into relevant information for analysis. A simple
which is a representative of the population was drawn from the employer of
Kwara Internal Revenue Services.

36
 These participants who were randomly selected range from casual
worker, entry level employers to senior management. The sample size aims
to have an appropriate number of respondents to participate in the study, in
this study the population size comprises of (50) employees at the
organization.

3.5 RESEARCH INSTRUMENT

In this project, the researcher used three method in gathering data
used in the writing up of this project::
i. Personal interview
ii. Personal observation
iii. Questionnaire
PERSONAL INTERVIEW
Some staff was interviewed by the researcher. The question asked
centered around the nature of the worked of the financial controller
statement, the behavior of the department staff and the implementation of
financial statement. The responses were noted and serve as control for some
question asked in the questionnaire.
PERSONAL OBSERVATION
The researcher made personal observation of the company financial
statement and noting carefully activities of the financial controller.
QUESTIONNAIRE
The staffs of the financial control unit were given questionnaire and
the researchers administered this personally.
37
3.6 METHOD OF DATA ANALYSIS
Analysis of the relevant data collection during the course of this study
was done using descriptive approach of sample percentage to analyze the
data collected through the use of administered questionnaire and observing
the reason for chosen this method of data analysis is because of its
simplicity.
However, simple percentage is very easy and simple to understand,
because average people can go through and understand how data are
presented and collected in sample percentage. Statistical analysis can take
form of:
- Descriptive Statistical Analysis
- Statistical Inference Analysis
The descriptive approach consists of forming statistical distribution,
while inference consists of regression analysis and correlation coefficient.
3.7 MODEL SPECIFICATION
The decision rule states that data collected from the secondary sources
will be affected to the “liquidity and profitability management in Nigeria
commercial bank”.
X I X 2 = Independent variables
Y = Dependent variable
Y= F(X)
Y= b 0 + b l x 1 + b 2 x 2 +…….+ b x 0l + b x 02
Where
Bo = Constant/Slope
38
Bi, B2 = coefficient of regression
X1 = Rates
X2= Fees, Fines and licenses
X3=Earnings
X4= Rent
Y TIGR (Total tax Generated)
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 INTRODUCTION
The focus of this chapter is on the analysis of the data collected from
the field of the study according to the responses given by the respondents. In
all One hundred questionnaire (100) were distributed among the VAT
officer staff wholesalers retailers, service providers, manufacturers and
consumer out of which one Forty Six (46) were retrieved. The researcher
also contacted other revenue agencies to have additional tax on
administration and economic structure of Nigeria which were equally
analysis.
4.2 DEMOGRAPHIC CHARACTERISTICS OF RESPONDENT
TABLE 4.1 DISTRIBUTION OF QUESTIONNAIRE ACCORDING
TO STAFF IN THE SERVICE
RESPONDENTS Questionnaire Distributed 50 Percentage %
Questionnaire returned 46 92%
Questionnaire not returned 4 8%
Total 50 100%
Sources: Field work 2024
39
 The table above clearly shows that 50 copies of questionnaire were
administered to the staff of Kwara State Internal Revenue Service. Out of
the 50copies administered, 46 were returned . These represent 92% of the
total copies administered, while 4 of the 50 copies were lost and this
represents only 80% of the total.

SECTION A
DEMOGRAPHIC DATA
TABLE 4.2 DISTRIBUTIONS OF THE RESPONDENTS
ACCORDING TO GENDER
Gender Frequency Percentage %
Male 26 56.52
Female 20 43.48%
Total 46 100%
Sources: Field work, 2024
The table above reveals the distribution of the respondents by gender.
It clearly shows that 26% out of the 46 respondents which represents
56.52%, are male, while 20 out the 46 respondents are female, which
represent 43.48%. hence it could be informed that majority of the staff of the
Kwara State Internal Revenue Service are male.
TABLE 4.3 DISTRIBUTION OF THE RESPONSES ACCORDING
TO AGE
Age (yrs) Frequency Percentage %
18-29 14 30.43%
30-49 24 52.17%
50 and above 8 17.39%
Total 46 100%
Sources: Field work, 2024
40
 The above table, reveals that 14 out of the 46 respondents
representing 30.43% of the total falls within the age bracket of 18-29 years,
24 respondents, representing 52.17% fall within the age bracket 30-49 years
while 8 out of the respondents, representing 17.39% fall within 50 years and
above. Hence, it can be concluded that majority of the staff of the Kwara
State Internal Revenue Service , falls within the age group 30-49.
TABLE 4.4 DISTRIBUTIONS OF THE RESPONDENTS
ACCORDING TO ACADEMIC QUALIFICATION
Qualification Frequency Percentage %
MBA/M.SC 18 39.13%
B.SC/HND 24 52/17%
OND/NCE 4 8.7%
WASC/SSCE or Equivalent - -
Total 46 100%
Sources: Field work, 2024
The above analysis shows that the Kwara State Internal Revenue
Service consists of staff with different academic qualification . it can be
concluded here that the minimum qualification of the respondents is
OND/NCE. This implies that the staffs of the Kwara State Internal Revenue
Service consist of people that acquired formal education. Hence, the
reliability of data collected from these people can be guaranteed.
TABLE 4.5 DISTRIBUTION OF THE RESPONDENTS
ACCORDING TO PROFESSIONAL QUALIFICATION
Professional/Qualification Frequency Percentage %
ACA/FCA 7 15.22%
ACCA 8 17.39%
CITN 2 4.35%
Others 29 63.04%

41
 Total 46 100%
Sources: Field work, 2024
The above analysis clearly shows 15.22% of the respondents are
qualified members of the Institute of Chartered Accountant of Nigeria
(ICAN), 17.39% of the total is qualification members of Association of
chartered and certified Accountant of England (ACCA) 4.35% of the
respondents are qualified members of the Chartered Institute of taxation of
Nigeria (CITN), While 63.04% holds other professional qualifications.
Hence it could be informed that majority of the staff of the Federal Inland
Revenue services Ilorin, are qualified Accountants and tax officials
TABLE 4.6 WORKING EXPERIENCE OF THE RESPONDENTS
Years of experience Frequency Percentage %
5-10 Years 12 26.09%
11-15 years 14 30.43%
16-25 Years 20 43.49%
Above 25 Years - -
Total 46 100%
Sources: Field work, 2024
The above table reveal that 26.09% of the total respondents have 5-10
years working experience, 30.43% have 11-15 years working experience
43.49% have 16-25 years working experience but have above 25 years
working experience. Hence, it could be concluded that majority of the staff
of the Kwara State Internal Revenue Service have 5-10 years working
experience.
TABULATION OF RESEARCH QUESTIONS

42
TABLE 4.7: OPINIONS OF THE RESPONDENTS ON WHETHER
TAX PAYERS PAY TAX AS REGULAR AS POSSIBLE
(QUESTION 1)
Response Frequency Percentage %
Strongly Agree 3 6.52%
Agreed 24 52.17%
Uncertain - -
Disagree 15 32.61%
Strongly Disagree 4 8.70%
Total 46 100%
Sources: Field work, 2024
The implies that majority of the respondents agreed that taxpayers pay
their taxes as regular as possible. This opinion is however, in contrary to that
of Faseun (2001) which stated that the most common form of tax evasion in
Nigeria is through failure to render tax returns to the relevant tax authority.
TABLE 4.8: OPINIONS OF THE RESPONDENTS ON WHETHER
TAX EVASION RATE IS HIGH IN NIGERIA (QUESTION 2)
Response Frequency Percentage %
Strongly Agree 10 21.74%
Agreed 17 36.96%
Uncertain 7 15.22%
Disagree 8 17.39%
Strongly Disagree 4 8.70%
Total 46 100%
Sources: Field work, 2024
The table above shows that 21.74% strongly agreed that tax evasion
rate is high in Nigeria, 36.96% agreed with the opinion. Out of the 46
respondent s also, 15.22% were not certain tax evasion rate is high or not,
17.39% disagreed with the opinion, while only 8.70% Strongly disagreed. It

43
can therefore be concluded that majority of the respondents accepted that tax
evasion rate is high in Nigeria.

TABLE 4.9 OPINION OF THE RESPONDENTS ON

WHETHER LACK OF PROPER BOOKS OF ACCOUNT IS THE
MAJOR FACTOR CAUSING TAX EVASION IN NIGERIA
(QUESTION 3)
Response Frequency Percentage %
Strongly Agree 4 8.70%
Agreed 21 45.65%
Uncertain - -
Disagree 14 30.43%
Strongly Disagree 7 15.22%
Total 46 100%
Sources: Field work, 2024
The above table depends that 8.70% strongly agreed that lack of
proper books of account is the major cause of taxation in Nigeria, 45.61%
agreed with the opinion, 30.43% disagreed, while 15.22% strongly
disagreed. Hence, it can be inferred that majority of the respondents believed
that lack of proper books of account is the major causes of tax evasion.
TABLE 4.10 OPINION OF THE RESPONDENTS ON WHETHER
TAX PAYER HAS NEGATIVE IMPACTS ON NIGERIA ECONOMY
(QUESTION 4)

44
 Response Frequency Percentage %
Strongly Agree 10 21.74%
Agreed 32 69.56%
Uncertain - -
Disagree 3 6.52%
Strongly Disagree 1 2.17%
Total 46 100%
Sources: Field work, 2024
The above table shows that 21.74% strongly agreed that tax evasion
has a negative impact on the Nigeria economy. 69.50% of the respondents
also agreed with the opinion, none of the respondent were not certain
whether or not tax evasion has negative impacts on the Nigeria economy
6.52% disagreed with the opinion and 2.17% strongly disagree.
TABLE 4.11 OPINION OF THE RESPONDENTS ON WHETHER
GOVERNMENT DERIVES BENEFITS FROM CURBING TAX
EVASION
(QUESTION 5)
Response Frequency Percentage %
Strongly Agree 16 34.78%
Agreed 21 45.65%
Uncertain - -
Disagree 8 17.39%
Strongly Disagree 1 2.17%
Total 46 100%
Sources: Field work, 2024
The above table shows that 34.78% of the total Strongly agreed that
government derives benefit from curbing tax evasion, 45.65% agreed with
the opinion, none of the respondents were not sure whether or not

45
government derives benefit from curbing tax evasion 17.39% disagreed with
the opinion and 2.17% strongly disagreed.
TABLE 4.12: OPINION OF THE RESPONDENTS ON WHETHER
THERE IS NO SIGNIFICANT RELATIONSHIP BETWEEN TAX
EVASION AND REVENUE GENERATION IN NIGERIA
(QUESTION 6)
Response Frequency Percentage %
Strongly Agree 1 2.17%
Agreed 7 15.22%
Uncertain 6 13.04%
Disagree 13 28.26%
Strongly Disagree 19 41.30%
Total 46 100%
Sources: Field work, 2024
The table above shows that only 2.17% strongly agreed that there is
no relationship between tax evasion and revenue generation in Nigeria
15.22% agreed with the opinion. 13.04% were not certain whether or not
there is any relationship 28.06% also disagreed with the opinion, while
41.30% strongly disagreed.
4.3 STATISTICAL RESULT

46
Critical or rejection Acceptance Critical or Rejection

KEY

=Rejection

=Acceptance
a
Z-Score a+ ¿ i.e 2 ¿ = ±1.96

47
 As indicated in the above figure, we reject the null hypothesis (Ho) if
the Z-computed lies outside the range +2.132 and -2.132 and the alternative
hypothesis (Hi) will be accepted.
The z-test formula is given as.
x−u
z Ơ
√n
Where:
Z=the test statistic being computed
x=sample mean
µ=population mean
Ơ=standard deviation
n=sample size
4.4 TEST OF HYPOTHESIS
The data collected were analyzed. The stated hypothesis was tested with chi-
square statistical tool under the following headings and procedure.
1 Statement of hypothesis (H0 1)
2 The statistical tools used.
3 Test the hypothesis
4 The decision rule
5 Take the decision.
TEST OF HYPOTHESIS (H01)
1 Statement of hypothesis
H01 : value added tax has no economic impact on the consumption pattern of
Nigeria.
48
2 The statistical tools used
Data for testing this hypothesis was obtained from question number
14 from the questionnaire (appendix A) chi-square used in this study as
follows
( O−E ) 2
X2 = ∑
E
Where X2 = is the computed chi-square
O = the observed frequency
E = the expected frequency
∑ = the summation sign.
The table 10 was used for this analysis
TABLE 4.4.1CALCULATION OF CHI-SQUARE FOR HYPOTHESIS
(H01)
RESPONSE O E O–E O – E2 O – E2 ÷ E
YES 146 77 69 4761 61.83
N0 43 28 20 400 17.22
TOTAL 189 79.22
Source: computed from field survey, 2024.
Computed chi-square (x2) = 79.22
Table value
DF = (M-1) (n-1)
DF= (2-1) (2-1)
Df = 1x1 = 3.84
iv. The decision rule

49
 A decision rule is the statistical objective procedure which guides the
researcher as to whether a particular hypothesis is accepted or rejected from
a set of data.
In testing the above hypothesis the decision rule state that at 0.5% level of
significance with 1 degree of freedom of the calculated value of chi-square
x2 > x2 0, rejected H0 and accepted H1where x2 0 is the table value of 3.84.
V. Take the decision
The chi-square shows that the calculated value of 79.22 is greater than
the table value 3.84 at 1 degree of freedom and at a probability level of 0.5.
So the (H01) NULL hypothesis is rejected and the alternate hypothesis (H 01)
upheld, that value added tax have economic impact on the consumption
pattern in Nigeria.
4.5 SUMMARY OF FINDINGS
The research hypothesis was states in chapter one as (H01) value
added tax has no economy impact on the consumption patter in Nigeria from
the foregoing analysis and the result obtained value added tax have economy
impact on the consumption patter in Nigeria which is a measure of economy
growth thus we reject the null hypothesis and concluded that value added tax
have economic impact on the consumption pattern in Nigeria.

50
 CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 SUMMARY OF FINDINGS
The purpose of any empirical investigation such as this is to provide
the basis for purposeful formulation. Hence the finding of this research work
recommendation and conclusion are all presented in this chapter of the
study.
As stated in chapter one of the study, the purpose of this research is to
supply answer to the questions raised and suggest solution to the problems
raised. In the contest tax evasion and revenue generation in Nigeria, a case
study of Kwara State Internal Revenue Service , several aspects concerning
the incident of tax evasion and the overall effect of it has no revenue
generation in Nigeria were critically reviewed. Background information was
given and significance of the study was also stated.
Three hypothesis were formulated and tested and inferences were
drawn from information gotten from the respondents through the
questionnaire administered. The first hypothesis was that “there is no
significant relation between tax evasion and revenue in Nigeria”. This was
concluded to be false and rejected after been analyzed using simple
percentage method and also tested using e-score statistical technique. If the
act of tax evasion is not properly checked, it will reduce the revenue that is
supposed to be generated by the government through the source of revenue.
Government has always been short of fund because the estimated revenue
that is expected to be earned has not always been earned because tax payers
51
often evade tax. This is as a result of efficient and effective promulgations to
curb illegal act.
The second hypothesis was that “ Government will derive benefits
from curbing tax evasion”. Although this was tested and rejected leading to
the conclusion that government will not derive benefit from curbing tax
evasion.
On one hand, this could be accepted to be absolutely true because of
the level of corruption that has eaten the integrity of the staff of the Inland
Revenue. Majority of the workers instead of assisting the government to
curb tax evasion, often help to establish it. The act of corrupt practice may
be due to poor remuneration of the staff of the Inland Revenue. On the other,
believing that government will not derive benefit from curbing tax evasion
could be false. If putting in place of the necessary promulgations to curb tax
evasion is accompanies by proper and adequate remuneration of these key
personnel in charge of taxation, this may reduce the level of corrupt practice
in the revenue, and which will accrue to the government through taxation.
The third hypothesis was that “ lack of proper books of account is the
major factor causing tax evasion”. This was tested within the limit of
available data collected and accepted to be true. It is believed in Nigeria that
majority of the small and medium scale business do not keep proper books
of account and this makes it difficult for the revenue to access the income of
such businesses with consequent effect of tax evasion leading to a
substantial reduction in the revenue accrue to the government.

52
5.2 CONCLUSION
One of the major sources of revenue to the government is taxation
substantial amount of revenue is supposed to be generated by Nigeria
government through taxation to supplement oil revenue in order that
sufficient and adequate infrastructure is provided for the citizenry. However,
tax evasion has robbed the government of this substantial amount of revenue
such that Nigeria Government is now over dependent on the amount realized
from crude oil for all its functions.
No doubt about the fact that tax evasion reduces the revenue
generation in Nigeria and makes the government to be on a look out for
funds in order to finance its obligations. In some instances where projects
are undertaken towards the ends of the year, the government is always
doubtful concerning the adequate of it cash resources. As times, the
government bankers assist to settle the creditors and later the government
pays them back.
Furthermore, tax evasion does not only reduce the government
revenue but also increases the financial burden and slow down development
programmes and capital projects. The tax evasion of a concept is a universal
problem only that is extents differ from one location to the other or from one
nation to the other.
The problem of tax collection was compounded by the under
developed nature of the economy and the inaccessibility of some areas.
Effective contacts could not be made as to educate the people on the need to
pay taxes and probably, the only time of meeting these people would when
53
payment was required. Furthermore, there is the problem of time. Time of
collection may not coincide with harvesting time, thus limiting the amount
of government revenue when a proper record of such harvest does not exist.
Notwithstanding, every problem exist with its antecedence solution.
The government must decide and adopt methods which will discourage or
eliminate tax evasion. In order to increase the revenue generated from
taxation, an urgent and concerted effort have to be made by the government
to see it that this, illegal act is curbed or eradicated completely.
5.3 RECOMMENDATION
Having critically analyzed the various problems identified in the
research work, (i.e the effect of tax evasion on revenue generation in
Nigeria), the following recommendations are suggested, hoping that their
implementation will go a long way reducing tax evasion to its bearest
minimum, if not completely eradicated in Nigeria
Firstly, most Nigeria are ignorant of the role of taxation in national
planning and development. It is therefore strongly recommend that the
government should cure the ignorance of important of taxation before
curbing the menace of tax evasion. Public enlightenment prpogrammes
should be opened on how the tax collected in the past are utilized. The
taxpayers should constantly be reminded of how capital projects and other
social amenities and infrastructure can be developed via prompt payment of
taxes. People should be made to be realize that tax officials are not public
enemies but public servants meant to cater for their interests. S the people
should be made aware of their contribution and the purpose for which their
54
contributions are utilized and how their obligations are to be discharged. The
enlightenment could be done through the media such as television and radio
transmission as these are the means through which information can be
widely spread across the country.
The rate at which Nigerians evade tax is very pathetic. The burden has
always been put on the salary earners, leaving the rich relatively untaxed
inspite of the fact these contactors, manufacturers and consultants enjoy
most of the amenities provided by the government. Even when they pay tax,
it is far from being a true reflection of their earnings. This can be put under
check by the government if the government can adopt the system of
electronic taxation. Electronic taxation is a system by which the income of
the taxpayers is being assessed by computer. This will give room for the
presentation of wrong information on the tax return file. Using this method,
it will be difficult for people especially the wealthy people to evade tax
payment.
Most of the time, the taxpayers forget the need to perform their
obligation via prompt payment of tax. It is therefore recommended that
direction of the Inland Revenue published notice in the nation’s officials
Gazette and in the daily papers at the beginning of each assessment yar
reminding all taxable person and companies what is expected of them in
terms of tax payments. The taxpayers are also to be reminded through radio
and television in local languages and also by giving handbills and posting of
postals written in our local dialeats. This will go a long way reducing tax
evasion which occurs as a result of ignorance.
55
 It is also recommended that adequate penalties and prosecution be
made for tax evaders. The personal income tax act and the evasion a serious
criminal offence, punishable with say, double the amount of tax evaded plus
imprisonment for a reasonable period of time. This will serve as deterrent
for potential tax evaders.
It is further recommended that the Nigeria government should assist
on the production of satisfactory evidence of tax payments or exemption
before granting right to enjoying various amenities in the country and
patronage such as issue and renewal of licenses, registration and even
admission of children to school. This action will make people know the
importance of tax payments.

56
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Ani, W.U and Ugbor, and Igbeka, V.C (2012): Petroleum profit and
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Balls, O (2014): The problems of Tax Administration in Latin America,
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Soyode, L and Kajola, S.O (2006): Taxation Principals and Practice in
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