THE EFFECT OF TAX EVASION ON REVENUE GENERATION BY INFORMAL SECTOR AMONG SELECTED LOCAL GOVERNMENT IN EKITI STATE

ABSTRACT

Meeting the demands of the society calls for a large bulk of

funds which an individual or community could not contribute alone. One of the

main methods through which these funds are generated for the government is

through taxation. Members of the public who are capable of paying tax are

expected to discharge their civic responsibility by paying their taxes to

contribute to the development and administration of the society at large. Alas,

it is a known fact that every government depends largely to some extent on

taxation for its socio-economic development and as a means of ameliorating the

existing inequalities of wealth in the economy.

Tax

revenue which serves as a lifeblood of any government in power if not utilized

surely leads to reduction in revenue generated by the government, according to

Olaseyitan & Sankay (2012): Saratu (2015) stated that taxes constitute the

principal source of government revenue, and the effectiveness of any government

largely depends on the ability of its citizens to voluntarily discharge their

tax obligations without any coercion or harassment. Is also constitute
Tahoma;mso-hansi-theme-font:major-latin">a major source of revenue to the

government of any country whether direct or indirect taxes collected by the

government inform of income tax, excise duty, import and export duties, motor

park levy, small shop fee, Value added tax, purchase and sales tax. Etc.

assists the government in generating large bulk of revenue for the smooth

administration of a nation.
major-latin;mso-hansi-theme-font:major-latin">

Tahoma;mso-hansi-theme-font:major-latin">Inspite of the relevant legal force

setup by the government of Nigeria, there have not been adequate and sincere

efforts towards enforcing the informal sector on the need for them to pay their

tax instead, they concentrated on the revenue from formal sector, while

overlooking the taxes from the informal sector which is supposed to yield

additional revenue to the country as a whole.

The

complexity and difficulty of tax laws and policy for the common taxpayer from

the informal sector, coupled with some cases which are problematic even for

literate official are one of the reasons why most taxpayers evade tax

payment.  In addition to lack of

understanding, many taxpayers are unaware of the existence of certain tax. This

couple with the lack of information, laziness on the part of tax official,

uncooperative taxpayers and the habit of ‘quick –fix’ solutions which solely

encourages the use of the best judgement approach, all this also sum up to lack

of public awareness.

Tax

evasion have adverse effect on government revenue, moreso, it is presumed that

there are legal framework established and setup to punish tax evaders it

perhaps raises a concern on the efficacy and effectiveness of tax laws and tax

administration in Nigeria.

The

main objectives of this research thesis is to fully evaluate the effect of tax evasion

on revenue generation by informal sector, while other specific objectives are

to determine the effective use of taxation as a

veritable tools for economic development and to determine the growing factor

that promotes tax evasion in Nigeria.

This

study will be of significant endeavour in contributing to the existing

knowledge of taxing the informal economy which in the past was not officially

captured into the tax net of the State. It would be useful to the three tiers

of governments in the federation as a potential source of additional revenue

generation process and would promote a wider coverage for taxation.

mso-ascii-theme-font:major-latin;mso-hansi-theme-font:major-latin">The primary

data were obtained direct form field study include questionnaire, and direct

interviews, The secondary data employed was obtained was majorly from internet

and from other journal reports, textbooks, CBN guidelines and Annual report or

Publications of professional tax body, CITN, ICAN and ANAN journals,

Newspapers, Seminar report, Circulars, Communiques and Library.

Tahoma;mso-hansi-theme-font:major-latin">The study area focus on Four (4) Local

Government in Ekiti State namely
mso-ascii-theme-font:major-latin;mso-hansi-theme-font:major-latin">Ado EKiti

Local Government
mso-fareast-font-family:Tahoma;mso-hansi-theme-font:major-latin"> Efon

Local Government, Ikere Ekiti Local Government, Ekiti West Local Government,
Tahoma;mso-hansi-theme-font:major-latin">with partial consideration to the

State Board of Internal Revenue in Ekiti State.

In order to carry out a successful research study, the personal

judgement of the researcher was considered in selecting the preferred local

governments to be visited for respondent in the informal sector population of the study which includes 200

entrepreneur drawn from various trade association due to the nature of the

research, registered entrepreneurs were given first recognition.

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It

can also be concluded that, taxing the informal economy will demand not only appropriate

technical policy changes, about which much is known, but also wider administrative

and institutional tax reform strategies that will helps to generate greater

acceptance of such tax-friendly policy among taxpayers and transparent leadership

among political and administrative officials.

The

study recommend that there is the need to move focus from employment of rent

seeking personnel to those who are knowledgeable in the field of taxation

(Garde 2004). The salary of this tax officials in charge of collection of tax

from the informal sector should be handsome to help curb unpatriotic activities

of bribery and corruption that have so destroy the tax administration in

Nigeria and the loss of confidence of the people on the tax officers and the

government in general.