AN ASSESMENT OF TAXATION LAW AND

THE ROLES OF OFFICERS IN PREVENTING

TAX EVASION IN NIGERIA
(A CASE STUDY OF FEDERAL BOARD OF INLAND REVENUE, ILORIN)

BY

OLASEHINDE MARY OLAITAN

ND/15/ACC/FT/491

BEING A RESEARCH PROJECT SUBMITTED TO THE

DEPARTMENT OF ACCOUNTANCY, INSTITUTE OF FINANCE
AND MANAGEMENT STUDIES (IFMS), KWARA STATE
POLYTECHNIC, ILORIN, KWARA STATE.

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR

THE AWARD OF NATIONAL DIPLOMA IN ACCOUNTANCY

JULY, 2017

i
 CERTIFICATION
This is to certify that this project was carried out with
the supervision and approved by the undersigned as having
satisfied the condition required for the award of National
Diploma in Accountancy Kwara State Polytechnic, Ilorin.

------------------------ --------------------------
MR. OLABODE, K.J DATE
(Project Supervisor)

------------------------- --------------------------
MR. SAAD TUNDE DATE
(Project coordinator)

--------------------------- ---------------------------
MR. MOHAMMED, K.A.G. DATE
Head of Department (H.O.D)

--------------------------- ----------------------------
MR. ISMAILA DAUDU DATE
(External Examiner)

ii
 TABLE OF CONTENTS
Title page i
Dedication ii
Acknowledgement iv
Table of contents v
CHAPTER ONE
General Introduction 1
1.1 Overview of taxation 1
1.2 Statement of the problem 4
1.3 Objective of the study 5
1.4 Significance of the study 5
1.5 Scope of the study 6
1.6 Limitation of the study 6
1.7 Definition of key terms 7
CHAPTER TWO
Literature Review
2.1 Definition of taxation 10
2.2 Concept of taxation 11
2.3 The tax system 13
2.4 The policy 13
2.5 Tax laws 15
2.6 Tax administration 18
2.7 Features of a good taxation system 19

iii
2.8 Features that enhance the efficiency tax administration in
country 19
2.9 The tax structure 20
2.10 Organs of tax structure in Nigeria 21
2.11 Definition of evasion 24
2.12 Courses of tax evasion 25
2.13 Differences between tax evasion and tax avoidance 26
2.14 The roles of revenue tax officers in preventing
tax environment 27
CHAPTER THREE
Research methodology
3.1 Historical background of the case study 29
3.2 Sources of data 30
3.3 Administration instrument 30
3.4 Analysis 31
CHAPTER FOUR
Data analysis withholding tax and company income tax
4.1 Data analysis 32
4.2 Penalty for failure to deduct 35
4.3 Remittance of withholding tax to the authority 36
4.4 Withholding rate 36
4.5 Company income tax 37
4.6 Income chargeable 38
4.7 Income expected 38
4.8 Assessment 39
iv
4.9 Notice of assessment 39
CHAPTER FIVE
Summary, Conclusion, and Recommendation
5.1 Summary 41
5.2 Conclusion 42
5.3 Recommendations 42
References 44

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 CHAPTER ONE
GENERAL INTRODUCTION
1.1OVERVIEW OF TAXATION
Tax is financial issue and its payment is a civil duty. It is
the imposition of a financial burden from the government on
individual, firm and companies. In general based, the 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 taxation may be defined as the
compulsory levy by the government through its various agencies in
the income, capital or consumption of its subject such as salaries,
business profits, interest, dividends, commission regularities, rent
e.t.c
It could be said that there are three main methods of
financial economic expedition open to meet developing countries,
they are:
a. Loans
b. Grants
c. Tax and other current receipt
Of these sources, tax is perhaps the most important since the
level of government expenditure is to a great extent dependent on

1
the ability of the tax system to generate the require 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 frown at the issue of tax
evasion and avoidance, and uses its authorities to enforce
compliance.
Aronomode and Oluwakayode (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 while 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.
Batch direct and indirect taxes that are collected for the
government inform of income tax, exercise duty, import and export

2
duties purchase and sales taxes and so on help the government to
generate a lot of revenue for the smooth admission in the nation
There are two elements in every form of taxation and these
are: Base and Rate. The tax base is the object which is taxed or a
measure of the private sector income or wealth that can be taxed,
while the tax rate is the percentage of the measured amount taken
off from the tax base. In this case, the money realized from it is
used to provide social goods and services so that everybody both
the rich and the poor will have equal chances of making use of
them, that is the goods and services they include pipe borne water,
electricity, good roads, hospital, schools e.t.c. Most people in
Nigeria have the habit of evading or avoiding tax payments i.e. they
always avoid paying their taxes. With this state of affairs, the varies
tiers of government in the country don’t usually generate enough
revenue which will enable them to effectively execute all the
development projects which are highlighted in their budgets.
It has to be pointed out that the successive Nigeria
government has not made adequate and sincere efforts toward
informing the tax dodger or evader on the need for them to pay the
taxes. All attentions have been directed on the revenue from oil
sector while taxes and agriculture which supposed to be generating
a lot of revenue to the country are deliberately overlooked
Also the researcher wants to look into the problems of paying
tax by the public such problems are as follows:

3
 a. Tax evasion and tax avoidance by the public
b. Poor system of tax collection
c. Inability of the government to prosecute tax avoidance
1.2STATEMENT OF THE PROBLEM
It has been noted that tax system in Nigeria has come to play
a significant role as a major source of revenue to the federal
government by way of imposing tax on tax payers and it is for them
to pay up the tax. The act of evading and avoiding tax by most
registered companies and some individuals has however affected
the revenue base of the government especially in providing
essential services in the society. People naturally prefer to reduce
their tax liabilities by deliberately overstating their expenses and
make false entries and fictions in their books of accounts. Thus,
their act however, causes tremendous reduction in the revenue
accruable to the government which eventually shrinks revenue to
the treasure of government
The inability of the revenue board to collect substantial
amount of money from tax is as a result of evasion and avoidance
of tax. This research work examines the problems facing the
revenue department in collecting taxes and levies under their
jurisdiction with a view to identify possibilities act minimizing or
even eradicating tax evasion and avoidance.

4
1.3 OBJECTIVE OF THE STUDY
The objectives of this study are as follow:
1. To analyze the various causes of tax evasion and avoidance.
2. To identify the factors or problem militating against the tax
assessment and collection in Nigeria
3. To identify possible effects of the tax evasion and avoidance
on the economic development of the country and Abia state in
particular
4. To analyze the effectiveness and flaws of various tax in the
country
5. To examine ways in which tax evasion and avoidance can be
reduced with the new reforms
6. To examine tax reforms in Nigeria
1.4SIGNIFICANCE OF THE STUDY
This research work would be relevant to various tax
authorities, the federal board of Inland Revenue, local government
revenue committee as well as their tax officials who are responsible
to collect tax on individual or corporate bodies. It gives them
insight on how to improve the tax administration.
The research would also help in the professional bodies like
the chartered institute of taxation of Nigeria and the institute of
chartered accountants of Nigeria as well as their members to the
areas of deficiency in the collections and call for improvement in
tax revenue.

5
 The research would also be relevant to the future researchers
and the dents of accounting, economic, business administration
and their social and management science as well as the legislations
which will also benefit immensely from this research because it will
form basis of tax policy formation, implementation and
administration
1.5 SCOPE OF THE STUDY
This research is on tax evasion and the role of revenue
officials. A study of federal Inland Revenue Ilorin, This research will
look into the cause of tax of evasion in the state, how evasion is
made possible under the various types of taxes and the roles of
officials in reducing it and probably come out with solution to these
problems of tax evasion and recommendation to the federal Inland
Revenue Ilorin.
1.6 LIMITATION OF THE STUDY
It is not unusual for research to encounter some difficulties in
course and their research and these may include:
1. Finance: this is always a major limitation in a study of this
nature, since the individual may not have enough money to
carry out all the necessary research
2. Lack of Data: these are areas where data is available but
which the researcher cannot lay hands on because the
relevant information is sometimes termed confidential and
unavailable to outsiders

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 3. Lack of Co-Operation: by some respondents whom he
administered certain copies of his questionnaires and vocal
interview
4. Delay In giving back some of the copies of the questionnaires
for some of the respondents
1.7DEFINITION OF KEY TERMS
It is important at this point to define some terms which will
be used frequently in this project work
1. TAXABLE PERSON: an individual or body of individual
(including family) and corporate sole, trustees or executor is
having any income which is chargeable to tax by the tax
board
2. ASSESSMENT TEAR: a period of twenty months (January 1 st
– 31st December of the same year). It is the reference year for
which tax is paid prior to 1980 year of assessment was a
period from April 1st, one year to 31st march of the next
calendar year
3. ACCOUNTING PERIOD: this is the period which a business
makes up an account for income for an ongoing business; the
accounting period is usually for a period of twelve months e.g.
1/1/99 – 31/12/99
1/6/93 – 31/5/94
1/10/2000 – 30/09/2001
1/8/2004 – 31/07/2005

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4. CHARGEABLE INCOME: this is the amount of an individual
total income, less personal relief, this is applicable only in the
case of an individual as personal relief are not granted to
other categories of tax payers
5. COMPANY: a company or corporation other than sole or
individual unless otherwise expressly stated
6. The term “individual” include a corporation sole or individual
unless otherwise expressly stated
7. TOTAL INCOME: this is the aggregate assessable income from
all sources for the year after deducting losses and capital
allowances
8. CAPITAL EXPENDITURE: consist of expenditure whose
benefits are not fully consumed in one period but spread over
several periods. This includes assets acquired for the purpose
of earning income or increase the earning capacity of the
business e.g. land and building
9. REVENUE EXPENDITURE: it consists of expenditure on
repairs and ordinary maintenance of the fixed asset provided
such expenditure does not enhance the earning capacity of
the assets
10. DEPRECIATION: this is the diminution in the utility
value of an asset due to nature wear and tear, exhaustion of
the subject matter, defluxion of time accident obsoleteness or
similar course

8
11. ASSET IN USE: initial allowance asset hast to be in
used at the end of the basis period, the asset is treated as in
use if:
a. It is out of use but the period of discuss is only temporary or
b. The first anticipated use is expected to be in trade or
business anticipated to commence
12. EARNED INCOME: this is the income derived from
exercise of carrying on a trade, business profession, vocation
or employment and income derived from a pension in respect
of any previous employment
13. DIRECT TAX: these are taxes levied on chargeable
person’s income or capital, and they are paid directly by the
person to the tax authority
14. INDIRECT TAX: these are taxes paid indirectly on goods
and services and it is collected from the person providing the
goods and services and their burden is usually born by
ultimate user or consumer in form of higher prices.

9
 CHAPTER TWO
LITERATURE REVIEW
2.1 DEFINITION OF TAXATION
Taxation has been given various definitions by different
authors some of these definitions are as follows:
Okeke (1994:254) defines tax as a payment compulsory made
to individuals, companies, cooperate bodies by the government or
governmental agency for the public use.
Stein (1991:14) defined tax as a means by which government
raises fund to meet its expenditure. It may also be used as a means
of influencing or controlling the economy
Osita (2004:1) defined tax as the compulsory levy by
government through the various agencies in the income, capital
consumption of its subjects.
Onaolapo (1988:3) defines taxation generally as the process
or machinery by which communication or group of persons are
made to contribute part of their income in some agreed quantum or
method for the purpose of the administration and development at
the society as a whole.
Agyei (1983:2) defines taxation as transfer of resources from
the private sector in order to accomplish some of the nation
economic and social goal

10
2.2 CONCEPT OF TAXATION
These are guiding principles of governing the various tax
systems we have today and even in the past.
According to Adams smith (1996:87) there are major
principles of taxation; among these principles of taxation are the
following
1. EQUALITY OF PAYMENT: this principles state that income
earned the same level and with the same responsibility
should pay the same amount of money in tax. This also
means that people should pay tax according to their ability of
pay (PAYE) pay as you earn
2. CERTAINTY: this principle holds that the amount of tax to be
paid by one tax payer should be made known to him or her
and how it is worked out should be made known to him or
her and how it is worked out should be clearly explained to
him or her
3. CONVINIENCE: this means that tax payment should be
arranged so as to be convenient to the tax payers
4. ECONOMY: the tax system should be arranged to make it
possible to send little amount of money in tax collection. Any
system where by a proportion of the tax money is spent on its
collection, is not a good tax system that is to say that the tax
authorities should be efficient in their collection of taxes

11
5. SIMPLICITY: the tax system or principle should be simple
enough for everybody especially the payer to understand
6. FLEXIBILITY: a good tax system must be easily changed.
These tax system concerned must be capable of being easily
or conveniently ad justly as occasion warrants
7. PRODUCTIVITY: in tax principle the amount realized from tax
should be efficient to cover some government expenses.
According to ANDY(2001:199), this is otherwise referred or
known as the principle of fiscal adequacy
In his own contribution in the subject under consideration,
FALDDUMETA (1877:212-213) agrees with the above
principle of equality, there are two nations of equality. These
are horizontal equity i.e. equal treatment for equal and
vertical equality which is the poor and the rich. In the
authors view, the principle of equality often envisages a
transfer of income from the very rich to the poor. Progressive
income tax is devised to achieve such redistribution. It takes
a greater proportion of income from the rich than from the
poor. The principle of equality or ability to pay reflects a
concern from the poor members of the society

12
2.3 THE TAX SYSTEM
The Nigeria tax system refers to a set of rules and the
aggregation of tax arrangement, institutions and agents that
interact with each other and rest of the economy to generate
revenue for government.
Government business whether in the firm or policies,
program activities or functions run in accordance with laid down
formulation. This will constitute the objectives. The plan of action
and the expected product of result, All these must operate within a
specific theoretical and regulatory frame work which constituted
the system
2.4 THE POLICY
The primary goal of developing countries is to increase the
rate of economic growth and hence the per capital income leads to
higher standard of living through the accomplishment of two major
objectives identified by one (1963:144) as follows:
a. Provisional of additional basic government services
particularly in education public wealth and transport which
are imperative from the growth of the remainder of society
b. A higher rate of capital formation in production facilities,
whether undertaken in the public or private sector. The
specific goal is of course not the highest possible rate capital
formation but the lowest rate that will permit the maximum

13
 rate of growth in GNP regarded as feasible under the
circumstance
Tax policy provides a mechanism for influencing consumer
demand and for providing incentives for production, investment
and savings; it is therefore a key factor for objectives nowadays,
taxation is used to:
a. Achieve economic growth
b. Fight inflation, deflation and depression
c. Achieve equitable distribution of income wealth
d. Allocate resources in a socially desirable manner
e. Discourage the consumption of certain goods
f. Encourage and protect new industries
g. Ensure that the balance of payment of the country is in a
healthy position
Burruwa (1985:3) has further listed two purposes for taxation
a. To transfer resources from the private sector to public sector
b. To distribute the cost of government fairly by income class
among people in approximately the same class.
Finally, the aims and purpose for modern taxation from the
different view point are as follows:
Taxation is a tool for:
a. Satisfy collective wants
b. Solving economic problems
c. Social policy

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2.5 TAX LAWS
The legal formalities on the area of government finances
include laws, rules and regulations. The laws made during the
tenure of a democratically elected government at the federal level
are refers to as act and the same is applied at the same level.
However, under military rule, the laws at the federal level are
called edict. Every tax imposed must be backed by legislations,
below are the various legislation imposing taxes on individuals and
corporate bodies in Nigeria.
A) The personal income tax degree (decree 104 of 1993) which
was made to replace income tax management
B) Income tax (armed forces and other persons/social provision
act cap 174 LFN 1990)
C) Personal income tax (Lagos)
i. The company income tax act cap 60 LFN 1990 formally
C.I.T.A1990
ii. The petroleum profit tax act cap 354 LFN 1990
iii. The industrial development (income tax relief)act 1971
iv. The capital gain tax act 1967
v. The stamp duty ordinance 1958
The type of taxes covered by this legislation include the
following

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1) PERSONAL INCOME TAX (DECREE 104 OF 1993)
This legislation regulates personal taxation in Nigeria that is,
it regulates the assessment and collection procedure for the
individual or body of individual including a family, or any corporate
sole trustee or executor having any income which is chargeable to
tax under the provision of decree is to be applied throughout the
federation.
2) COMPANY INCOME TAX ACT CAP 60 LFN 1990(C.I.T.A 1978)
This regulates the assessment and collection procedure for
the taxation of all corporate bodies other than those in the
production of crude oil or gas. This corporate body is taxed under
the petroleum profit tax act act 354 LFN 1990.
3) THE PETROLEUM PROFIT TAX ACT 354 LFN 1990
The petroleum profit tax act regulates the taxation of oil
producing companies including N.N.P.C the oil producing
companies are in some cases in joint ventures with N.N.P.C to
produce crude oil for sale
4) THE INDUSTRIAL DEVELOPMENT (INCOME TAX RELIEF)
ACT 1978
The act does not impose tax but provide for industrial
incentives by a way of exemption from tax for all companies that
might be accorded pioneer status by the industrial development co-
ordination committee of minister.

16
5) CAPITAL GAIN TAX 1967
This is the tax imposed in profit derived from sales of capital
items e.g. property shared in companies etc the rates of tax is 20%
of the net gain after deducting the original cost of the asset and the
expenses of the sales allowed
6) THE STAMP DUTIES ORDINANCE 1958
This regulates transaction, which is subject to advance duty
to give them legal backing for the purpose of revenue. Under this
ordinance, those matter over which the state has no collection
jurisdiction are stamped by the federal Inland Revenue service e.g.
stamp duty for the federal Inland Revenue service e.g. stamp duty
for inland revenue service. Stamp duties on legal transaction
involving individual are only payable to the state.
7) THE CAPITAL TRANSFER ACT 1979
This is intended to tax capital being transferred from one
person to another, other than on right sales capital deemed to be
transferred to another person when dies or by a way of gratuitous
gift and the transferred bears the tax. Gift of property from father
to children during life-time are deemed to be capital transfer liable
to tax, because the law was designed to catch those who are really
wealthy, property less than N100,000 are not chargeable.
8) VALUE ADDED TAX DECREE NO 102 (1993)
This is consumption tax on the study of goods and services.
Those who supply the goods collect it on behalf of the government

17
and service pay for by the buyer or consumer of the goods and
services V.A.T is normally included in the involvement which must
be issued for every transaction. The percent rate is 5%.
2.6 TAX AMINISTRATION
According to AUFAYO(1996:122) taxation is administrated as
below.
1. At the federal level the federal boards of Inland Revenue are
in charge of companies tax and petroleum profit tax and the
federal board of customs and excise in the case of import,
export and excise duties.
2. At the state level, it is administered by the state tax board in
respect of personal income tax (PIT), capital gain tax resident,
casino, vehicle and drivers incense, sales tax, capital, transfer
tax e.t.c.
3. The local government administered the flat income (pull tax)
cattle tax, community tax, property tax e.t.c.
According to AUYAFO (1996:114), the administration of
income tax under the ITKA is rested on the joint tax board. This
board consists of an officer from each of the state and a nominee of
the federal public services commission with the chairman of the
federal board of Inland Revenue as its chairman.

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2.7 FEATURES OF A GOOD TAXATION SYSTEM
1. PRINCIPLE OF EQUITY: a good tax system must be
equity and the tax should be paid according to their
ability
2. PRINCIPLE OF CONVENIENCE: a tax payer must not
experience great cost or inconvenience simply because
he wants to comply with tax obligations. The tax payer
should not be forced to pay when it is not actually
convenient for him/her.
3. PRINCIPLE OF CERTAINTY: a good tax must be
certain, that it will enable tax payer and the amount to
be paid as tax.
4. THE ECONOMIC PRINCIPLE: a good tax system must
ensure that it does not make economic situation worse.
It must take concern of the citizen as investor’s
consumer and server must not affect adversely the
economic consumption of the person taxed.
2.8 FEATURES THAT ENHANCES THE EFFICIENCY TAX
ADMINISTRATION IN A COUNTRY
1. HONESTY AND COMPETENT STAFF: there is a need for
every honest and dedicated staff to possess sufficient
technical and administrator competence but in a situation
where tax officers are corrupt they may collide with tax
payers to underestimate tax liability

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 2. LITERACY: it is believed that educated people are able to
understand the tax laws and would cooperate fully in
reaching a consensus with tax authority on tax liability, but it
will take a longer process for illiterate to understand the tax
law
3. ACCOUNTING RECORDS: for a tax system to succeed there
must be honestly in the preparation of accounting record of
the business so that the tax authority can rely upon such
accounting records but in a situation records it will be
difficult to estimate the taxable income
4. VOLUNTARY COMPLIANCE: this will be better achieved if
people are satisfied with the way government spend it revenue
but when trends is been suspected, tax payer won’t be able to
pay voluntarily.
2.9 THE TAX STRUCTURE IN NIGERIA
A country’s economic, political and social circumstance is the
structure demonstrates the following features:
i. TAX BASE: the tax base is the basis of taxation that is the
object to be taxed. What is to be taxed in Nigeria is too narrow
for example, if someone’s income is N100, 000, N10,000 is
the tax base.
ii. TYPE OF TAXES: the type of taxes that are being
administered in Nigeria a very fair, for example capital gain

20
 tax and capital transfer tax which have legal provision are
hardly seriously pursued in practiced
iii. TAX REVENUE: the tax revenue accounts for a very small
proportion of the national income
2.10 ORGANS OF TAX STRUCTURE IN NIGERIA
The organs of tax administration in Nigeria are made up of
three tiers of government but in this research topic, we shall
concentrate mainly on the federal level.
2.10.1 FEDERAL GOVERNMENT LEVEL FEDERAL
BOARD OF INLAND REVENUE (FBIR) AND FEDERAL INLAND
SERVICE (FIS)
The company’s income tax act (28 of 1979) amended by
finance (miscellaneous provision) amendment decree No 3 of 1993
established the board and in addition created the federal inland
revenue service (F.I.R.S) at its operational aim (usually refer to as
the service)
COMPOSITION
a. An executive chairman who shall be a person within the
service experienced in taxation to be appointed by the
president of the federal republic of Nigeria
b. The director and heads of department of the service the office
of the federal ministry of finance who shall be a director with
responsibility for planning and research.

21
 c. A member of the board of the national revenue mobilization
allocation and fiscal commission
d. A member from the Nigeria national co-operation not lower in
rank than the executive director
e. A director from national planning commission
f. A director from Nigeria custom service
g. The registrar general of the corporate affairs commission
h. The legal adviser to the service
i. The secretary who shall be on ex official member of the board
j. The secretary shall summon meeting of the board whenever
the business require its attention so warrants or upon any
k. Any seven member of the board of whom one shall be the
chairman or a director of department within the service shall
constitute quorum
TAXES AND LEVIES COLLECTED BY THE FEDERAL
GOVERNMENT IN NIGERIA WITH EEFECT 1ST APRIL 1997
i. Company income tax
ii. Withholding tax on companies
iii. Petroleum profit tax
iv. Value added tax
v. Education tax
vi. Capital gain tax Abuja resident and corporate bodies
vii. Stamp duties involving a corporate entity
viii. Personal income tax in respect of:

22
 a. Armed forces
b. Phone
c. Resident of Abuja (FCT)
d. External affairs and
e. Non – residents
FUNCTIONS OF THE BOARD
The board has a great power and many duties, some of the
duties are so important that the board is not allowed the delegate
any of them to any other person. Some of these exclusive duties are
mentioned below: the board is charge with:
a. The ministry and the management of the companies income
tax and value added tax
b. The assessment and collection of tax in its jurisdiction
c. The accounting for all amount of the tax so collected
d. Specifying the form of raptures claim statement and notice to
be made or given
e. Instituting legal action court to recover any tax payable and
any penalties
THE BOARD HAS THE FOLLOWING POWER:
i. Acquire hold and dispose of any property taken a security for
tax or penalty due
ii. Sue and be sued in its official name
iii. Specify the form of retires, claims statement and notices
under each of the acts

23
 iv. Authorized the joint tax board (JTB) to perform on its behalf
any of its powers
v. To give notice in writing to any company furnish further
information
vi. To grant relieve in respect of errors or mistakes
vii. To grant right of installment payment to tax payer
viii. Extend the time with which to pay tax under companies
income
DUTIES OF THE FEDERAL INLAND REVENUE SERVICE
1. To collect tax according to law by actively encouraging
voluntary compliance
2. Prosecute the tax laws very vigorously there by detecting tax
evasion and tax avoidance
3. To maximize tax collection through effective and extension
coverage of the whole country
4. To maintain public confidence in the integrity of the tax
system by administering the tax laws and regulation formally,
uniformly and courteously.
2.11 DEFINITION OF EVASION
Tax evasion is the action of tax payer to evade tax that is, get
away illegally from his constitutional obligations. Tax evasion
involves concealment of income or refusing to pay tax altogether.
Tax evasion devices usually take all the following forms:
1. Falsification of account and other documents

24
 2. Concealment of information about income and assets held
outside the country.
3. Over invoicing of import and under invoicing of export
4. Claims for fictitious expenses in order to reduce taxation
income.
2.12 CAUSES OF TAX EVASION
1. LOW LEVEL OF INCOME: income level in Nigeria is very low
because of low level of productivity, low level of education and
dominances of small scale agricultural activities, most of
which are subsistent level.
2. The so called self employed people do not keep proper
account, which the tax authority can rely upon
3. Due to poor remuneration in the public sector, it has been
difficult to attract and retain technically qualified personnel.
4. Company tax appears to be imposed on while few large public
companies since most of other companies do not render
accurate account.
5. Marketing of property is largely under developed and as such
as it is difficult to calculate capital gain tax on such
properties. The only exception are the capital gain on shares
that are traded through the stock exchange
6. Manufacturing activities are too narrow and as such excise
duty cannot be broadly used
7. Delay in prosecuting tax offender

25
 8. Improper orientation: people see tax as an instrument of
oppression rather than seeing it as an instrument of
development.
9. Poor internal control system: control of tax firms generally
loose lot. Forms are stolen soiled e.t.c which made room for
high level of wastages.
10. RELIGIOUS BELIEF: very recently, some government
had refuse the tax proceed from alcohol, gambling and
prostitution as a result of the introduction of sharia. But the
trade continued under secret covers and those engaged in the
business systematically avoid paying taxes.
2.13 DIFFERENCES BETWEEN TAX EVASION AND TAX
AVOIDANCE
Tax avoidance is a practice by tax payer who take advantages
loopholes in tax laws to under oat their dues that is who take
advantages of circumstance that are not clearly defined on laws for
example, if tax payer declares that he has children or aged
dependent when actually he has none, that action amount to tax
avoidance.
Tax avoidance from the above definition can then be called
dodging tax without breaking the law, however it may be objectives
or subjective tax avoidance may be of any kind and for many
motives it includes a deliberate avoidance as well as unplanned tax
reduction.

26
 The border line between the concept of tax evasion and tax
avoidance is rather interesting one and establishing a distinction
between the two is only on the legal realm rather than the
economic perspectives. For instance, there is obviously a material
difference between a tax payer who out rightly conceals his taxable
income and one who so honestly arrange his business in such a
way or manner as to net a lower chargeable income, the difference
being that former sought to reduce his true burden by fraudulent
means while the latter achieved the same objectives within his legal
limits even through the end result are the same.
2.14 THE ROLES OF REVENUE TAX OFFICERS IN
PREVENTING TAX ENVIRONMENT
Revenue tax officers have numerous and important roles to
play in order to reduce the rampant occurrence of tax evasions.
Among the roles and the services of investigation which should be
carried out as stated here under:
i. Investigation within revenue office
ii. The annual growth of the asset of a business has to be
observed and investigated
iii. Rate of gross profit should be compared one or a period of
year and comparative analysis of companies within the
industries should be carried out.

27
iv. Documents affidavits produce to the revenue authority in
form of particulars investment dividends building and landed
property yield that yielded rent should be investigated
v. Tax clearance certificate information will assist the revenue
official to be in possession of classified information, which will
be disclosed on application for a clearance
vi. Revenue outdoor officials
vii. Heavy lodgment on the occasion of currency exchange should
also be investigated.
INVESTMENT THROUGH EXTERNAL INFORMATION SOURCES
i. Information received from companies re dividend interest
rental withholding tax list sharing recipient’s names and
addresses.
ii. Exchange of information between the revenue and the
custom and excise department.
iii. For name of company’s and registration of business name
through registrar of companies.
iv. Business advertisement in newspaper, trade journals,
magazines, radio and television.
v. Self confession.

28
 CHAPTER THREE
RESEARCH METHODOLOGY
3.1 HISTORICAL BACKGROUND OF CASE STUDY
The historical research is used in this work to interpret past
trends of attitudes events and facts: it may be considered as
embracing the whole field of human past as board as life itself.
The board inland revenue department was made up of the
following:
A. The resident approved by government
B. A representatives of elders in each district
C. Any native authority which by native law and custom was
recognized as tax collection authority.
D. Any village council or group of persons appointed by
governor
The law that divided taxation in Nigeria was then known as the
native revenue ordinance of 1917, the coordination of 1918 and
1928 were later incorporated into the direct taxation ordinance of
no 4 of 1940, which reveal the native revenue ordinate. Later on
there was riesmatscas commission of 1957. Resman commendation
were the basis of providing in sub section (1) of section 70 of
Nigeria constitution order in council of 1960 on executive power
upon parchment to make law for the Nigeria or any past thereof
with respect to taxes on the income and profit of companies, while
sub section (2) and (3) conferred current power upon parliament to

29
make laws for Nigeria or any past thereof with respect to contain
uniform principle in respect of personal income tax. In this exercise
of these powers, the federal government enacted the personal
territory was being administered as region.
3.2 SOURCES OF DATA
1. THE PRIMARY METHOD: this method of data collection was
used for this study, this was obtained through the use of
questionnaire, asking people and putting their responds
down.
2. THE SECONDARY METHOD: this was obtained through the
review of relevant literature a textbooks, journals, articles in
newspaper, government gazettes, magazines, lectures, notes
and information from libraries and also the tax returns at the
tax authorities.
3.3 ADMINISTRATIVE OF INSTRUMENT
The instrument of data collection which is simple method was
administered in order to draw the sample from the population,
personal interview was held in various department of the federal
board of inland revenue Ilorin, the interview was administered in
the top down made of administration and it was administered to
save time of the researcher and that of the staff of the federal board
of inland revenue Ilorin.

30
3.4 ANALYSIS
Three hypothesis were selected for this study and one
statistical roll was used to them which is the £- test.
1. Degree of freedom (DF).
The degree of freedom which corresponds to the various sum of
square are as follows:
A. SS total has N-1 degree of freedom corresponding to it, since
the total number of the observation is denoted by N.
B. SST has r-1 degree of freedom corresponding to it. Since there
are r treatment means
C. SSE has N-r degree of freedom corresponding to it.
2. Decision rule
Reject the H0 and uphold H1 (alternate hypothesis) if the £- call
excess the £ tab otherwise do not reject the null hypothesis , H0.

31
 CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 DATA ANALYSIS
The research being an independent process by which one
tries to solve a problem, which involves carrying out of the themes
and hypothesis in a systematic manner to arrived at a meaningful
conclusion. The fact ascertain by this research can be classified in
term of past, present or future and on the basis of data analysis
selected, the method are historical method for the present and
descriptive method for the future.
The historical research used in this work interpreted each
trends of attitudes, events, and facts, it may be considered as
embracing the whole field of human past and board past as life
itself. It is undertaken principally to gain a clear perspective of the
present. This method involved the location of the availability of
adequate data. To establish the validity of the data, the dual
process of establishing the authenticity of the source and the
validity of its content was carried out.
Experimentation used to derive verified functional
relationship among phenomena under contributed conditions: it
enables the researcher to improve the condition under which is
observed and this is to advance at more precise results. The steps
involves, solving funds detaining of problem review of literature,
drawing up experimental design, determining the population and
adherence to plans.
32
 Survey research are therefore oriented towards the
determination of the study of given phenomena, rather than
towards the isolating calmative factors. The purpose of survey has
in the accurate assessment of the characteristics of the whole
population of the people. Survey research therefore is not capable
of testing specific hypothesis. The descriptive research was equally
employed to specify the nature of the problem; it is used to give a
picture of the situation and was represented by general descriptive
analysis and classification. The analysis was done by giving more
than the definition of the state.
4.2 Question 1: are some people evading taxes?

Category of Questionnaires Response rate Refusal rate

staff distributed
Management 3 12.5% 87.5%
staff
Supervisory 6 25% 75%
staff
Senior staff 15 62.5% 37.5%
Total 24
Source field 2017
From the table above 12.5% of the management staff agreed
that people does not evade tax and 87% said people do not evade
tax.
4.3 Are you making any proper assessment of tax in any company?

33
 Category of Questionnaires Response rate Refusal rate
staff distributed
Management 4 19% 21%
staff
Supervisory 10 47% 53%
staff
Senior staff 7 33% 67%
Total 21
Source field 2017
From the above 19% of the management agreed that they are
making proper assessment in any company, while 81% of the staff
disagreed. Deducted or having deducted fails to pay the board
within thirty days (30) from the data, the time, the duty to deduct
arises shall be equity of an offence and shall reliable on conviction
to a fine of N5,000.00 of affairs of a case study categorizing the
findings to their respective groups carried out the classification.
The method adopted by the research of this project work are
both descriptive and survey method. It is survey because it is sure
method of obtaining necessary data via personal interview and
observation. It is descriptive since it is the basis for all type of
research in assessing the situation as a pre-requisite of
interference and generalization.
4.2 PENALTY FOR FAILURE TO DEDUCT

34
 Table in discovering any company evading of paying tax, what
would be the result
Category of Questionnaires Response rate Refusal rate
staff distributed
Management 5 33% 64%
staff
Supervisory 7 46% 54%
staff
Senior staff 3 20% 80%
Total 15
Source field 2017
From table above 33% of the senior agreed that company
evading and avoiding of tax payment while 64% disagreed with it
4.1 Table 4: when did you normally assess any
company?
Category of Questionnaires Response rate Refusal rate
Staff distributed
Management 8 40% 60%
staff
Supervisory 5 25% 75%
staff
Senior staff 7 35% 65%
Total 20

35
 4.2 REMITTANCE OF WITHHOLDING TAX TO THE TAX
AUTHORITY
Failure of an agent to remit withholding tax within the statutory
limit will attract:
i. Interest at commercial rate
ii. Persecution for default
iii. Denial of tax clearance certificate to such agent withholding
taxes are advanced payment and can be applied as tax credit
used to settle the assessment of the years to which income
relate and are subjected to some modification
4.3 WITHHOLDING RATE
Payment made to companies and certain categories of individual
that may suffer deduction are as follows:
Types of payment Application within Applicable within
Individual
Dividend interest and 1090
rent 1090
Royalties 1590 1590
Commission 1090 -
consultancy
Construction 590 -
Contract of supplies 590 -
Director fees 590 590
Note:

36
 1. The individual covered by the federal Inland Revenue service
are the non residents of Abuja, member of police and armed
forces, external affairs office, other individuals are under the
tax jurisdiction of the state authority where individual
resides.
2. The term contract of supplies covers all form of deliveries
through competitive bidding tenders LPO and other
arrangements whether oral or written, the term does not
cover the cross counter cash sales or supplies on the
ordinance of sales.
4.4 COMPANY INCOME TAX
This is an act that regulates taxation of companies, other
than those engaged in petroleum operations, throughout the
country CITA 60 LFN
Any company in corporation (other than corporation sole)
established by under any law in force in Nigeria or elsewhere. This
relevant tax authority in respect of company’s income tax is the
federal board of Inland Revenue.

4.5 INCOME CHARGEABLE

37
 Section 6 (1) of the act provides that tax for each year of
assessment shall be paid upon the profit of any company brought
into Nigeria in respect of:
a. Rent of any other person for the use of occupation of any
property.
b. Dividend, interest, royalties, discount annuities
c. Any trade of business
d. Any sources of annual profit or gain tax that does not fall
within the following
e. Any amount demand to be income or profit provision of the
act.
f. Fees dues and allowances (wherever paid) for services
rendered
g. Any amount of profit or gain arising freom acquisition and
disposal of short term money instrument like government
services etc.
4.6 INCOME EXPECTED
The income expected from income tax under section 19 (1) of the
company\s income tax act 1978 as amended.
1. In profit statutory of registered friendly society provided not
derived from a trade business carried on by such society
2. Profit of cooperative society registered under any enactment
or law relating to cooperatives

38
 3. Profit of a company formed for the purpose of promoting
sporting activities provided such profits are fully applied for
such purpose.
4. Profit of trade union registered under the trade union
4.7 ASSESSMENT
After the expiration of the time allowed to any company for the
delivery of audited accounting and returns, the board may proceed
to assess the company tax. But situation where the company has
delivered its audited accounts the board management:
1. Accept the audited account and returns and assess the
company accordingly.
2. Refuse to accept the returns and make a best of judgment.
But where a company that is hobble to tax has not deliver
returns the board according to the best of its judgment
determined the amount of total profit of such company.
4.8 NOTICE OF ASSESSMENT
After computing the total profit of tax payable by any company,
the board sent to the company a notice of assessments the notice
contains:
THE AMOUNT OF TOTAL PROFIT
i. The tax payable
ii. The place of which such payment should be made.

39
iii. The right of a company objective to assessment but when
the discovers that a company liable to tax has not been
assess, an assessment can be made

40
 CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 SUMMARY
The study conducted is research on taxation enlighten the tax
development up to 1963 when the federal republic of Nigeria
formally had three (3) regions, west, north, east and the federal
territory of Lagos mid west was later added from the west.
Chapter one explains the general introduction, dealt with the
law that guided taxation in Nigeria then known as the native
revenue ordinance of 1917.
On 1st April, 1961 all the regional on taxation had to be
amended through the introduction of the income tax management
act, to bring them into uniformity with the federal laws.
The uniform principle covered by the income tax management
act 1961 includes:
1. What constitute income for tax purpose
2. Upholding residence as the basis of taxation or in the
alternative principals place of business
3. Describe what expenses are deducted for tax purpose and
machinery for computing capital allowance as relieves against
profit or income
4. Very recently, prescribes the rates and reliefs determined by
the state
This chapter also defined form in taxation and critically
identified major characteristics of tax such compulsory with a view

41
to reducing the menace of tax evasion and the attendant loss of
huge revenue to the government.
5.2 CONCLUSION
In conclusion, on this project work, the researcher would
advice that the various ways discussed in chapter two on the
causes of tax evasion, how tax payers perpetrate to the act in
collaboration with tax officials can play in preventing tax evasion
are properly addressed with a view of reducing the menace of tax
evasion and the attendant loss of huge revenue to government.
5.3 RECOMMENDATIONS
The following recommendations, if effectively and aggressively
pursued, it’s capable of drastically reducing the rampant
occurrence of tax evasion and as such increases the revenue
collection of the government. The recommended action is as
follows:
1. Embarking in wide coverage of enlightens and education
campaign to all tax payers in regular basis
2. Imposition of stiffens penalty for the evaders and their
collaboration
3. Tax authority should be very watchful to any doubling more
any official who might want to connived with the outsiders to
perpetrate this tax exit
4. The tax authorities should organize educative program to
enlighten the tax payers above the different law guiding the

42
 Nigeria tax system why he/she should pay tax and the effect
on non-payment of tax.
5. In order to ensure that the incidence of tax evasion and
avoidance is minimum and members of registered enterprise
is brought into the tax bracket there should be better co-
ordination between the town of government which is
responsible for the registration of business unit and internal
revenue services.
6. Government should provide infrastructure facilities like
water, good roads, electricity and those in the rural areas
7. The direct bank lodgment system should be put in place for
all taxes collection by all tiers of government in order to
prevent fraud
8. Special salary and incentives should be given to the revenue
official to strengthen them against temptation and enticement
which is usually occasioned by power remuneration.
9. Any morally upright members of the revenue officials
dedicated, efficient, loyal and trustworthy should be
encouraged through granting of accelerated promotion and
encouraged through granting of accelerated promotion and
cash awards.
10. Assessment of the likes who do not keep records
should be based on the spot of assessment by judgment.

43
 REFERENCE
Abesoles S.M (1986) Income Tax Law Administration in Nigeria,
Ibadan, NPS Education Publishers page 5 to 7
Ajiboye J.F (1998) Income Tax in Nigeria, Ilorin, Olad Publisher.
Aniwodola J.A (1987) Personal Taxation in Nigeria Lagos, concepts
Publication
Farayola G.A (1987) Guide to Nigeria taxes concept publication, ltd
page (1 to 2)
Ishola K.A (1999) Companies and Personal Taxation in Nigeria,
Ilorin, Indemac Publisher Nigeria ltd page (2 to 3)
Ishola K.A (2000) Companies and Personal Taxation in Nigeria,
Ilorin, Indemac Publisher Nigeria ltd page (2 to 3)
Ogedengbe F. (1989) Path to Success in Nigeria Taxation, N.P.E
Education Publisher ltd page (1 to 2)
Ola C.S (1998) Nigeria Income Tax Law and Practice, Lagos C.M.S
Publisher

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