CHAPTER ONE
INTRODUCTION
1.1. BACKGROUND TO THE STUDY
Taxation is considered a veritable source of revenue for financing developmental as well as people oriented programs in virtually all countries, irrespective of whether they are classified as developed or developing economies. History has however shown that individuals often exhibit one form of tax reduction behavior or the other, with series of arguments on the legal, economic and moral consequences of these acts. Tax evasion and tax avoidance reduce government revenues. This has a significant detrimental effect on the provision of infrastructures, public services and public utilities. Multinational companies (MNCs) in the oil, gas, and manufacturing sectors have used various tax schemes, ranging from o-shore intermediary companies to claiming recharges, royalties or technical fees and under-reporting of profit, to avoid paying tax in Nigeria.
Stimulated majorly by increased profitability, and intense competition and pressure to increase earnings, capitalist enterprises constantly seek new ways of boosting their earnings by developing complex structures and novel ways of increasing their profits by exploiting ambiguities in the law. The evidence shows that tax havens and offshore financial centres, shaped by globalisation, are major structures facilitating the anti-social tax practices of MNCs. Tax evasion is an unlawful practice which has the effect of reducing the government revenues needed for the provision of infrastructures, and for public services and public utilities. Tax avoidance, while not regarded by some as being unlawful, has the same effect. Both practices are motivated by different factors and involve a wide range of different mechanisms (Mo, 2003). They are a major feature of national and international fiscal policy and of the global capitalist economy.
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