Tax Evasion and Its Consequences on an Emerging Economy: Nigeria as a Focus

Abstract

There is a universal understanding that tax evasion is a product of underground economy, however, the two economic scenarios have dissimilar influences on an economy. The effects of tax evasion and underground economy have been examined in this study, in order to establish a statistical evidence of the varying consequences of the two economic circumstances. The study employs secondary form of data ranging from 1991 to 2018 while using ordinary least squares multiple regression technique for the analysis. The findings reveal that tax evasion has a robust significant negative influence on economic growth while underground economy is having a strong and positive significant impact on economic growth of Nigeria. The two independent variables are found to be having very strong relationship with economic growth and are also determining 98.7% of the variation in the Nominal Gross Domestic Product. In the light of these findings, it is obvious that informal economy and tax evasion have become an integral part of Nigeria's economy doing both harm and good substantially. Therefore, the study recommends more effort on the part of the government to encourage good leadership, formulate policies that will enhance voluntary tax compliance and help the informal sector businesses that are legitimate to become officially registered with little or no cost.

E-tax system effectiveness in reducing tax evasion in Nigeria

“…Actual tax revenue is one of the variables used as a proxy for an E-tax system in this study. The E-tax system is a component of the revenue collection reforms by FIRS to improve tax collections and tax effectiveness, thereby rapidly increasing tax revenues (Atika, 2012;Omodero, 2019). The actual tax revenue on the pre and post electronic tax revenue was used to measure this study dur- ing data gathering.…”

Merefleksikan Sifat Gajah Mada Dalam Diri Konsultan Pajak

“…Pence gahan terjadinya sebuah dilema etis me rupakan tujuan pertimbangan etis atas apa yang harus diterapkan (Bailey & Plečnik, 2020). Omodero (2019) menyatakan bahwa sangat kecil peluang peran seorang individu dalam kepribadian yang tidak etis jika indi vidu tersebut mempertimbangkan pemikiran moral yang berkembang lebih baik.…”

Tax Awareness, Taxpayers’ Perceptions and Attitudes and Tax Evasion in Informal Sector of Ekiti State, Nigeria

“…Informal sector economy and tax evasion have become an integral part of Nigeria's economy with a considerable positive and negative effect. Tax revenues from the informal sector will have a considerable positive effect on the Nigerian economy, while tax evasion has a robust negative effect on the economy (Omodero, 2019). Also, existing literature suggests that the government should formulate policies to ensure voluntary tax compliance and bring legitimate informal sector enterprises to tax net (Omodero, 2019).…”

“…Tax revenues from the informal sector will have a considerable positive effect on the Nigerian economy, while tax evasion has a robust negative effect on the economy (Omodero, 2019). Also, existing literature suggests that the government should formulate policies to ensure voluntary tax compliance and bring legitimate informal sector enterprises to tax net (Omodero, 2019). They further noted that the "fiscal gap" that arises from the failure to tax this sector could be quite large.…”