INTRODUCTION
1.1BACKGROUND OF THE STUDY
Tax is a financial issue and its payment is a civil duty. It is the
imposition of a financial burden for the government on individual firm and
companies. In general based, the word 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 define as the compulsory
leave by the government through it’s various agencies in the income,
capital or consumption of it’s subject such as salaries, business profits,
interest, dividends, commission regularities, rent etc.
It could be said that there are three main methods of financial
economic expedition open to meet developing countries there are:-
(a) LOANS
(b) GRANT
(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 the ability of
the tax system to generate the required 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 it’s authorities to enforce compliance.
ARONOMOLE and OLUWALAYODE (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 where as 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. Both direct and indirect taxes that are
collected for the government inform of income tax, exercise duty, import
and export duties. Purchase and sales taxes and so on help the
government to generate a lot of revenue for the smooth administration
in the nation.
There are two elements in every form of taxation and that is the
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 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
etc. most people in Nigeria has the habit of evading or avoiding tax
payment i.e. they always avoiding paying their taxes. With this state of
affairs the various tier 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 governments
have 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 over looked.
Also the researcher wants to look into the problems of paying tax by
the public, such problem are as follows
a) Tax evasion and tax avoidance by the public
b) Poor system of tax collection
c) Inability of the government to prosecute tax avoidance.

1.2 STATEMENT 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
account. 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
indentifying possibilities at minimizing or even eradicating tax evasion and
avoidance.

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 problems 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 reduce
with the new reforms.
6. To examine tax reforms in Nigeria

1.4 RESEARCH QUESTION
For this research work to be effective it please the researcher to ask
the following question
1. What are the causes of tax evasion and avoidance
2. What are the factors or problems militating against the tax
assessment and collection in Nigeria?
3. What are the possible effects of tax evasion and avoidance
economics development of the country and Abia state in particular
4. Are tax laws in the country effective
5. Have new tax reforms reduce tax evasion and tax avoidance and tax
avoidance in Nigeria
6. Do the loopholes in the tax laws encourage tax evasion and tax
avoidance in Nigeria.

1.5 STATEMENT OF HYPOTHESES
To aid the research work the following hypotheses has been
postulated, the mill hypothesis is denoted by “Ho” while the alternative
hypotheses is denoted by “HI”
1. H0: There is no significance difference between the expected
tax revenue and the amount actually paid by those who evade and avoid
tax
HI: There is a significance difference between expected tax revenue and
the amount actually paid by those who evade and avoid tax
2 H0: There is no significance difference between the
number of people who are due to pay personal income tax and those that
actually pay tax
HI: There is a significance difference between number of people who are
due to pay personal income tax and those that actually pay tax.
3. H0: There is a significance difference between numbers
of register enterprise and the numbers of registered enterprises that pays
tax in the country .
HI: There is a significance difference between numbers of
Register enterprise and the numbers of registered enterprises that pays tax
in the country or state

1.6 SIGNIFICANT 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 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 see the areas of
deficiency in the collections and call for improvement in tax revenue.
This research would also be relevant to the future researchers and
the dents of accounting, economic, business administration and other
social and management sciences 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.

1.7 SCOPE OF THE STUDY
Since no single research can validly cover all areas of the topic the
researcher tends that thrust of this project will be limited within the scope
of how tax payers performance on tax are influenced by the choice of its
tax system. The study will focus primarily on Abia state to be precise to
enable the researcher carryout on extensive investigation on this subject.
The state to be studied is: Abia state.

1.8 LIMITATION OF THE STUDY
It is not unusual for research to encounter some difficulties in course
at 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 carryout all the
necessary research.
2. LACK OF DATA: There 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.
3. LACK OF CO-OPERATION:- By some of the respondents whom
he administered certain copies of his questionnaire and vocal
interview.
4. Delay in giving back its him some of the copies of the questionnaires
for some of the respondents.
1.9 DEFINITION OF TERMS
In order to aid understanding of this research work by the user,
special term used in this study are defined,
1. TAX: This is a compulsory contribution imposed by government on
individual and corporate bodies for the use of government to provide
facilities or service in the nation.
2. TAX EVASION: This is the attitude adopted by tax payers to
deliberately misrepresent the true state of their affairs to the tax
authorities or include dishonest tax report such as declaring less income,
profit or gains to escape tax liability (wholly or partially) by breaking the
law.
3. TAX AVOIDANCE: This is a legal way by which a tax payer reduces
his tax liabilities.
4. TAX LIABILITY: This is the amount that is borne by the tax payer
5. PAYE(PAY AS YOU EARN): This type of tax is based as the
earning of the tax payer.
6. CAPITAL GAIN TAX: This is the type of tax that is based on the
gain realized from the sale of capital goods.
7. CORPORATE TAX: This is the type of tax that is based on the
profit a company.
8. CASINO REVENUE: This is the amount of the levy paid by people
who operate at public being rent to gambler or for other
amusements.
9. TAX LAWS: These are acts decree or regulations guiding the
assessment and collection of taxes in the country.
10. STATE INLAND REVENUE: The body responsible for the collection
of tax at state level.
11. FEDERAL INLAND REVENUE: The body responsible for the
collection of tax at federal level
12. REVENUE: Amount of money realized by an individual or group or
company
13. PERSONAL INCOME TAX DECREE 1993: The law guiding the
assessment and collection of personal income tax
14. COMPANY INCOME TAX ACT 1990:U The law regulating the
assessment and collection of tax of corporate bodies.