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  • Name: THE EFFECTS OF TAX EVASION AND AVOIDANCE ON SUSTAINABLE INFRASTRUCTURAL DEVELOPMENT IN ADO-ODO OTA LOCAL GOVERNMENT AREA, OGUN STATE
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ABSTRACT

Sustainable infrastructural development as a key ingredient for sustained economic growth has thus far received poor attention in Ado-Odo Ota local government area. The intense shortage of infrastructure constitutes a huge threat to survival in the study area. Despite the efforts made to enhance this “Social Overhead Capital”, it still currently does not meet the requirement of economic development. The study emphasizes on the extent the tax irregularities hinder sustainable infrastructural development, the short and long-run effects and the possible causes of tax evasion and avoidance, drawbacks of tax revenue, in the study area. The opinions of the population of study comprising tax payers and authorities were not left out as a structured questionnaire was used to elicit the opinions of seventy (70) respondents in the study area, after then analyzed using the simple percentage method and the formulated hypotheses were later on tested using the chi-square goodness of fit technique at 0.05 level of significance. After a statistical analysis of results, it was concluded amongst others that the practice of tax evasion and avoidance has negative effects only, on sustainable infrastructural development ranging from short to long-run effects. A lot still needs to be harnessed towards improving the quality and condition of infrastructures. It was recommended amongst others that we should always pay our tax correctly and as at when due because greediness and selfishness constitutes one of the major causes of tax evasion and avoidance on the part of the tax payers.

TABLE OF CONTENTS

COVER PAGE ………………………………………………………………..……….. TITLE PAGE ………………………………………………………………………………. CERTIFICATION …………………………………………………………………… DEDICATION …………………………………………………………………….…. ACKNOWLEDGEMENTS …………………………………………………………. ABSTRACT ……………………………………………….………………………….. TABLE OF CONTENTS ………………………………………………………………… LIST OF TABLES ……………………………………………………..……………. CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY……………………………………………. 1.2 STATEMENT OF THE PROBLEM ………………………………………….. 1.3 RESEARCH QUESTIONS …………………………………………………….. 1.4 AIM AND OBJECTIVES OF THE STUDY ……………………………….. 1.5 STATEMENT OF HYPOTHESES ………………………….…………….. 1.6 SIGNIFICANCE OF THE STUDY …………………………………………… 1.7 SCOPE OF STUDY …………………………………………………………….. 1.8 STUDY AREA ……………………………………………………………………… 1.9 LIMITATION OF STUDY ……………………………………………………… 1.10 DEFINITION OF TERMS ……………………………………………………… CHAPTER TWO LITERATURE REVIEW 2.1 UNDERSTANDING TAX AS A TERM ………………………………………. 2.2 THE PRINCIPLES OF TAXATION …………………………………………… 2.3 TYPES OF TAX ………………………………………………………………….. 2.4 HISTORICAL ACCOUNT OF TAXATION IN NIGERIA ……………….. 2.5 TAX ADMINSTRATION IN NIGERIA ………………………………………… 2.6 REASONS FOR TAXATION …………………………………………………… 2.7 TAX AVOIDANCE AND EVASION …………………………………………… 2.7.1 TAX EVASION …………………………………………………………………….

2.7.2 TAX AVOIDANCE ……………………………………………………………….. 2.8 DIFFERENCES BETWEEN TAX EVASION AND TAX AVOIDANCE … 2.9 TECHNIQUE OF TAX AVOIDANCE AND EVASION ……………………. 2.10 CAUSES OF TAX AVOIDANCE AND EVASION …………………………. 2.11 SUSTAINABITY AND SUSTAINABLE DEVELOPMENT ……………….. 2.12 IMPACT OF TAX EVASION AND TAX AVOIDANCE ON THE………… ECONOMY 2.13 OVERVIEW OF EXISTING INSTITUTIONAL RESPONSIBITIES ..…… FOR THE CONSTRUCTION AND MAINTENANCE OF INFRASTRUCTURE AND SERVICES IN NIGERIA CHAPTER THREE RESEARCH METHODOLOGY 3.1 RESEARCH DESIGN …………………………………………………………… 3.1.1 SOURCE OF DATA ………………………………………………………… 3.1.2 POPULATION OF STUDY ………………………………………………………. 3.1.3 SAMPLE SIZE AND SAMPLING TECHNIQUE …………………………… 3.1.4 INSTRUMENTATION/DATA COLLECTION PROCEDURE …………… 3.2 RELIABILITY TEST ………………………………………………………….. 3.3 VALIDITY TEST …………………………………………………………..….. 3.4 METHOD OF DATA ANALYSIS ………………………………………………
3.4.1 DECISION RULE ……………………………………………………………… CHAPTER FOUR DATA PRESENTATION, ANALYSIS AND INTERPRETATION 4.1 DATA PRESENTATION ……………………………………………………… 4.2 ANALYSIS OF QUESTIONS ………………………………………………… 4.3 TEST OF HYPOTHESES ……………………………………………………. CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS 5.1 SUMMARY OF FINDINGS ………………………………………………… .. 5.2 CONCLUSION ………………………………………………………………… 5.3 RECOMMENDATIONS ……………………………………………………… REFERENCES ……………………………………………………………………………….. APPENDICES ……………………………………………………………………………

CHAPTER ONE

INTRODUCTION 1.1 BACKGROUND OF THE STUDY There is every need to update our knowledge with the effects of tax evasion and avoidance on sustainable infrastructural development in Ado-Odo Ota local government area, Ogun state, because it is of a great benefit to all of us that fall under these categories, the residents of the study area, the governing authority who is the custodian of the local government in question, professionals who service infrastructural development and tax administration and inquisitive members of our society. Tax evasion and avoidance is a common drama acted in many local government areas in the country most especially the Ado-Odo Ota local government area, unknown to most of the occupants of such areas the effects of such actions. Tax evasion and avoidance defiles sustainable infrastructural development in any constituted society. One of the duties of the government at all tiers is making available infrastructures, referring to roads, utility lines, hospitals, schools, emergency services like fire fighters, ambulance and police, sidewalks, motorable and pedestrian bridges. The basic facilities that make a town or city function effectively are known as infrastructures. Tax evasion and avoidance can be understood as an act of deliberately causing harm to oneself and fellow members of the society. According to Farayola (1987), Tax evasion is the fraudulent, dishonest, intentional distortion or concealment of facts and figures with the intention of avoiding the payment of or reducing the amount of tax otherwise payable, while Tax avoidance according to Nwakaji and Ewah (2010) refers to a taxpayer’s effort to avoid paying tax by finding a legal loophole in the tax system, it could also be said to be the arrangement of affairs in such a manner as to pay minimum amount of tax due. A number of questions then bother the mind: To what extent does tax evasion and avoidance hinder sustainable infrastructural development in Ado-Odo Ota local government area? What are the short and long-run effects of tax evasion

and avoidance on sustainable infrastructural development in Ado-Odo Ota local government area? What is sustainability and sustainable development? What are the chances of advancing sustainable infrastructural development in Ado Odo Ota local government area? In my attempt to cover the entirety of this study, answers to these questions will be given accordingly.

1.2 STATEMENT OF PROBLEM
The quantity and condition of the infrastructures in Ado-Odo Ota local government area gets worse by the day as the population increase due to influx of residents of Lagos state who share boundary with Ogun state, caused by the over-congestion and over-crowdedness of dwellers in Lagos state of which can no longer contain its over-flowing populace. Over-utilization of infrastructures in Lagos state presently causing defects and great unbalance of resources to inhabitants. The outcome of such migration is a large increase in the demand for sustainable infrastructural development in Ogun state, just as Ado-Odo Ota local government area serves as the choice residence to these migrants due to its proximity to Lagos state. Over-dependence and over-reliance on the federal allocations has instigated tax payers and collectors in the local government area to relax from their civic duties towards tax. Sustainable infrastructural development can only be achieved where there is minimal or no presence of tax evasion and avoidance. Tax evasion and avoidance have rooted its presence in virtually the entire local government areas in the country but no one seems to know the extent it has gone in particular areas, why they occur there and proffer solution. This study is therefore designed to add to existing knowledge, the effects of tax evasion and avoidance on sustainable infrastructural development in Ado-Odo Ota local Government area, Ogun state.

1.3 RESEARCH QUESTIONS In order for this research work to be effective and efficient, it pleases the researcher to ask the following questions:
1. To what extent does tax evasion and avoidance hinder sustainable
infrastructural development in Ado-Odo Ota local government area?
2. What are the short and long-run effects of tax evasion and avoidance on
sustainable infrastructural development in the study area?
3. What are the possible causes of tax evasion and avoidance in the study
area?
4. What recommendation can be given to the examined problems of these tax
irregularities in the study area?

1.4 AIM AND OBJECTIVES OF THE STUDY
The aim of this study is to examine the effects of tax evasion and avoidance on
sustainable infrastructural development in Ado-Odo Ota Local Government
Area, Ogun state. The broad objective is broken down to the following specific
objectives:
1. To ascertain the extent tax evasion and avoidance hinder sustainable
infrastructural development in Ado-Odo Ota local government area.
2. To examine the short and long-run effects of tax evasion and avoidance on
sustainable infrastructural development in the study area.
3. To identify the possible causes of tax evasion and avoidance in the study
area.
4. To make recommendation on the examined problems of these tax
irregularities in the study area.

1.5 STATEMENT OF HYPOTHESES The following hypotheses have been posited to aid the research work. The null hypothesis is denoted as “Ho” while the alternative hypothesis is denoted as “Hi”. HYPOTHESIS ONE: Ho1: There is no relationship between tax evasion and avoidance and sustainable infrastructural development in Ado-Odo Ota local government area, Ogun state. Hi1: There is a relationship between tax evasion and avoidance and sustainable infrastructural development in Ado-Odo Ota local government area, Ogun state. HYPOTHESIS TWO: Ho2: There is no difference between the number of persons that are liable to pay tax and the number of persons that pay tax in Ado-Odo Ota local government area, Ogun state. Hi2: There is a difference between the number of persons that are liable to pay tax and the number of persons that pay tax in Ado-Odo Ota local government area, Ogun state.

1.6 SIGNIFICANCE OF THE STUDY This study would be relevant to various tax authorities; the Federal Inland Revenue Service, State Internal Revenue Service, Local Government revenue committee as well as their tax officials who are responsible to collect tax liability from individuals or corporate bodies. It gives them insight on how to improve the tax administration. The study would also help professional bodies like the Chartered Institute of Taxation of Nigeria, the Institute of Chartered Accountants of Nigeria and the Nigerian Institution of Estate Surveyors and Valuers as well as their members to see the areas of deficiency in the collections and call for improvement in tax revenue. This study would also be relevant to the future researchers and any such individual or corporate body that is concerned with achieving sustainable infrastructural development in a

particular area as well as the legislations which will also benefit greatly from this study, because it will form basis of tax policy formation, implementation and administration.

1.7 SCOPE OF STUDY It is focused on studying the discernible and foreseeable effects of tax evasion and avoidance on sustainable infrastructural development. The study will focus primarily and precisely on Ado-Odo Ota local government area in Ogun state, to enable the studier carryout an extensive study on this subject. The geographical scope to be covered is strictly limited to Ado-Odo Ota local government area in Ogun state.

1.8 STUDY AREA

Source: Maphill Map Gallery, 2013; Ogun Today, 2014.

The Ado-Odo/Ota Local Government Area is one of the 19 Local Government Areas of Ogun State, Nigeria. It came into existence on May 19, 1989 following the merging of Ota, part of the defunct Ifo/Ota Local Government with AdoOdo/Igbesa Areas of the Yewa South Local Government. Ado-Odo/Ota borders on metropolitan Lagos. The Local Government Area is the second largest in Ogun State and it is headquartered at Ota or Otta (Wikipedia, 2015). It has an area of 878 km² and a population of 526,565 at the 2006 census.

Being primarily agrarian in nature, the Local Government Area produces cash and food crops especially cocoa, kolanut, palm oil, coffee, cassava, timber, maize, and vegetables. Mineral resources include kaolin, silica sand, gypsum, and glass sand (Wikipedia, 2015). The local government area have these as its boundaries, Lagos state in east and south, Yewa South and Ifo local governments in the north and Ipokia local government in the west. The area is divided into 16 administrative/political divisions, which are Ota (1), Ota (2), Ota (3) Ilogbo, Atan, Alapoti, Ado-Odo (1), Ado-Odo Ota (2), Ere, Igbesa, Ketu, Adie Owe, Agbara (1), Agbara (2), Iju, Sango and Ijoko (Ogun State Biz, 2013). The Local Government is populated mainly by the Awori people, a subset of the Yorubas and the original inhabitants of the area. However, other ethnic groups like Egba settlers, Eguns, and Yewas (Egbados) also live here. There are currently eleven Traditional Obaship institutions in the Local Government Area namely: Olota of Ota, Olofin of Ado-Odo, Oloja Ekun of Igbesa, Onilogbo of Ilogbo, Alagbara of Agbara, Amiro of Ilamiro, Onikooko of Kooko Ebiye, Onikogbo of Ikogbo, Onitekun of Itekun, Onigun of Odan Abuja and Olodan of Odan Abuja Sule (Wikipedia, 2015). The Local Government Area boasts of a range of cultural, traditional, and historic attractions. One of the most popular is the Egungun (Masquerade) festival in Ota alongside the Oduduwa (Odu’a) festival. There are also shrines such as Ijamido and Ogbodo Shrines. The second oldest storey building in West Africa can be found in Ota, the Vicarage of the St. James Anglican Church built in 1842. The postal code of the area is 112. The Local Government Area is also home to former Nigerian President Olusegun Obasanjo and his post-presidential enterprise, Obasanjo Farms located in Ota (Wikipedia, 2015). It houses the largest religious auditorium in the world, the Faith Tabernacle (Canaan Land) of the Winners Chapel built and dedicated in September, 1999. The immediate Executive Chairman is Comrade Rotimi Rahmon (Adeyemo, 2014).

1.9 LIMITATION OF THE STUDY It is not strange for a research to encounter some difficulties in the course of research and these encountered in the course of this research include: 1. Inadequate time due to the combination of class schedule and project work. 2. Lack of full cooperation by some of the respondents and some who refuse to receive the researcher and some afterwards delayed in giving back the questionnaire. 3. Financial constraints though this is always a major limitation in studies of this nature, since the researcher may not have enough money to carry out all the necessary research. 4. There are areas where data is available but the researcher cannot lay hands on them because the relevant information is sometimes termed confidential and unavailable to outsiders. Despite all this limitations and hindrances mentioned above, the research study no doubt turned out to be successful.

1.10 DEFINITION OF TERMS There are some terms used in this study and proper understanding of the terms is important in appreciating this study: 1. TAX: Tax can be defined as a charge by government on persons, corporations, estates and trust for the purpose of raising money for government expenditure (Umezuruike, 1998). Ifediora (1998) also defined tax as the sum of money demanded by the government for its support or for specific facilities or service, levied upon incomes from property, sales and services. Eribo (2010) emphasized that taxes are normally paid by the eligible citizens of any political system as a legal obligation, regardless of the extent to which they benefit from the services the proceeds finance.

2. TAX EVASION: Tax evasion is the fraudulent, dishonest, intentional distortion or concealment of facts and figures with the intention of avoiding the

payment of or reducing the amount of tax otherwise payable (Farayola, 1987).

3. TAX AVOIDANCE: Tax avoidance refers to a taxpayer’s effort to avoid paying tax by finding a legal loophole in the tax system, it could also be said to be the arrangement of affairs in such a manner as to pay minimum amount of tax due (Nwakaji & Ewah, 2010).

4. TAX LIABILITY: This is the amount that is borne by the tax payer (Ihuoma, 2013).

5. PAYE (PAY AS YOU EARN): This type of tax is based on the earning of the tax payer (Ihuoma, 2013).

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