Tax evasion is the purposeful and conscious violation of tax legislation with a view to avoid the payment of tax. While tax avoidance is the fraudulent means, whereby the taxpayers seek to subtract or make less every of his liability to tax in such a way that will look as if he is not breaking the tax law. Nevertheless, tax avoidance is a game, considered to be legitimate, while tax evasion is considered illegal and immoral. The effects of tax evasion and avoidance has been so severe in Nigeria, owing to the fact that, Nigerians are reluctant in carrying out their civic responsibilities of paying their taxes.
This negative behaviour to taxation is unpatriotic, even after knowing the role that taxation is playing in the Nigerian economy. Thus, to create a system of taxation, a nation must make choices regarding the distribution of the tax burden and how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing the tax system like Nigeria, these choices reflect the type of community that the public or government wish to create. To this end, lets discuss some of the effects of tax evasion and avoidance to the Nigerian economy.
- Tax avoidance generates investment distortion in the form of the purchase of assets exempted from tax or under-valued for tax purposes.
- The tax evasion and avoidance has impacted the Nigerian economy in such a way that, it has encouraged population drifts from one state to the other, and from Nigeria to other nations of the world, all in the search a better and viable economy.
- Taxation is not only a means of revenue generation for Government, it can also be used to stimulate other sources of Government revenue and develop other areas of the economy from which Government can realize revenue.
However, when there are leakages in tax collection through evasion, no development can take place, thus in most countries where, there is high rate tax evasion and avoidance, it is usually associated with high unemployment.
- Tax Evasion And Avoidance Deprives Society Of Basic Social Amenities-the government provides social amenities to the general public through taxation, if the people have an unpatriotic attitude in paying their taxes, the government is handicapped in providing basic social amenities in the society.
- Tax Evasion And Avoidance Reduces Government Savings resulting in less money in the circulation hence, the government would be discouraged to make savings, even the members of the public too, would be withdrawn from serving, and this practices are likely to impact negatively the Nigerian economy.