CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

In Nigeria their so many form of taxation dating back of the days of our great ground father whose by communities dated themselves through communal labour to prosecute community projects.  Taxation is process on machinery by which group or communities made contribution from their income in some agree amount and method for the purpose providing amentias for the society.  It is because of this it I often referred to as civic responsibility.  It is important to note that the present tax has in Nigeria was been out of the Rouseman’s Commission of inquiry of last. But before that, we only had what was called the income tax ordinance for the colonies and which was very similar Raismars recombine nature was the basis for providing in section to, subsection of the Nigeria prospects for reform (Anarticle published in Business Time on May 20, 1786).  Taxation can be divided in two basic profiles we have the direct taxation sand indirect tax is based on ascertainment of income rather on individual a group of individuals co-operate bodies and institution under this was have personal income tax and company income tax.  The personal income is one which of individual is assessed and resident by the state on those individual resident in the state, which the companies income tax is cleared on corporate bodies is the responsibility of federal government through the federal board of inland revenue indirect taxation is lived on consumption of goods or services and each of consumption. In various countries, various government rely heartily on taxation on as in aid to encouraging capital formation policy. In a developing economy, tax may be collected strutted in such way that the high may be collected and even raise revenue for the economy of the country.  
1.2  PRESENT DAY TAXATION IN NIGERIA
Taxes are one of the major sources or revenue for all government in Nigeria. The taxes collected income back to the tax payer in the form of social amenities, like building as school, hospital. Nigeria tax is an assessment imposed by the State of Federal Government to enable them provide service for Nigeria citizens present day tax administration in Nigeria is guided by the following Act Decree:
1.    Income tax management Act (ITNIA) 1961.  This governs the taxation of individual.  (Individuals, trustees, executors, partnership and families) the Act was amended by the finance (miscellaneous taxation provision) Decree 1986,1983,1990,1992, 1994 and 1996.
2.    Company Income Tax act (CTA) 1979, this registered companies. It also suffered some amendments.  
3.    Petroleum Profit Tax Act (PPTA), 1959 as amended this Act regulates the assessment and collection of petroleum. Tax payable by entries that engage in the secretion and sale of petroleum oil in Nigeria.
4.    Capital Gains Decrees (CGD), 1976, this was introduced by Decree 44 of 1967.  it takes care of gain accruing to any person on or after 1st of April 1967 on the disposal of fiscal assets.  
1.3  STATEMENT OF PROBLEM
The existence of tax evasion and tax avoidance in Nigeria tax system poses a lot question in the inquisitive mind of some people especially in the board of inland revenue as to the way and how of this existence. This brings about reactions from various sections of the economy.  This reaction are the problems this research work going to address itself to.    
1.4  OBJECTIVE OF STUDY
Based on the statesman of problem this study, the write intends to x-ray the following issues as decide the mind of the public:
-      Reason for tax evasion and avoidance
-      To x-ray the impact of tax avoidance
-      To make recommendations the board on Inland Revenue.  
15.   HYPOTHESIS    
The null hypothesis (Ho): revenue generated form tax has a negative impact on the development of Nigerian Economy. The alternative hypothesis; >Revenue generated from tax has a positive impact on the development of Nigerian Economy
Hypothesis II Null hypothesis (Ho): that tax aviation and avoidance has created a reduction in the revenue generated from tax (Ha) the alternative hypothesis; that the revenue generated from tax is more merger compare to revenue generated from other source as such government cannot do without tax.      
1.6  SIGNIFICANCE OF STUDY
The way in this term paper has been planned and carried out off enough information and explanation to inquisitive minds.  This project is aimed to beneficial to the following:
i.     Though this term paper, enough awareness will be created so that the public attitudes of not paying tax will be nullified.
ii.    This term paper will offer a source of secondary data collection forming research student iii.              The Board of Inland Revenue, this enable to know how they will treat any tax evader they come across.  
1.7 DEFINITION OF TERMS
Tax is defined as a levy imposed by the government against the income profit or wealth of the individuals, partnership and organization, also it is a levy the government makes no direct benefit to the tax payer. Taxation is divided into various types such income tax, corporate tax, capital transfer tax.  
Classification Of Taxes                         
-     Proportional Tax
-     Regressive tax
-     Direct Tax
-     Indirect Tax
-     Progressive Tax  
1.   PROPORTIONAL TAX:   This is a system of taxation where by people pay tax in proportional to their incomes for instance if a cocoa farmer who earns N20,000 should pay N2,000.  
2.   REGRESSIVE TAX:   This is a system of taxation whereby the poor man pays some amount as the rich  man and also where the amount paid is not recited to the person’s income, e.g. community tax.  
3.   DIRECT TAX:   This is a system of taxation born or paid directly by the payer to the government, in this people know what they pays annually.  It is also a tax the impact and incidence of taxation fail on and the same person that pays it.  E.g. personal income, company tax, expenditure tax.  
4.   INDIRECT TAX:         This is tax imposed on person but paid partly or wholly by another person.  The impact and incidence falls on different person e.g. impact duties, export duties, exercise duties, purchase tax, custom duties and entertainment tax.
5.   PROGRESSIVE TAX: This is a system of tax which taxes a large portion of higher income than that of lower income.  The more income a person earns, the higher tax which he/she will pay, in the people suffer more than the poor people.  
1.8  CHARACTERISTICS/OBJECT OF MODERN TAX SYSTEM
Adam Smith and down certain principles funding taxation and those principle are canons of taxation for memory purpose the ECCEEA.
i.    EQUALITY: - This is on of the characteristics of taxation which state that the tax payer in the same income group should pay equal tax.  Here there is no room for favouritism.  
ii.   CERTAINTY: - This means that the tax payer should know the amount of tax due to him, when to pay it and method of payment.  
iii.   CONVENIENCE: - This time of tax payment should convenience to the tax payee.  The pay-as-you earn (PAYE) is a good example of the convenience.  
iv.   ECONOMY: - This principle recognize the need to prevent the cost of collecting the tax not be more the revenue from tax.  That is to say the cost of collecting tax should no be excessive.  
v.    ENFORCEABILITY: - It says that the government should be able to enforce the tax as levied.  
vi.   ACCEPTABILITY: - The tax should acceptable to the tax payer as a way of raising revenue for the government.    
OBJECTIVE PF MODERN TAX          
The objectives of modern tax include the following: -
i.     provision of free – social service like health and education
ii.    achievement of desirable social ends, that is help in discouraging excessive and drinking.
iii.   Generation of revenue it need to carry out its function
iv.   To protect home industries by imputing discrimination tariffs.
v.    To provide incentive for industries and investment e.g. granting of allowance for capital investment
vi.   Maintenance of favorable balance of payment that is help encouraging more export than import.  
DEFINITION OF RELEVANT TERMINOLOGIES
a.   Tax Avoidance: Tax avoidance is the reorganization of economic activity possibly at some cost to lower tax payment.
b.   Tax Evasion: This means that the tax payer is doing something that is against the law that is illegal something and if found he/she will be dealt with under the law.  
c.   Tax Code: - This is total relief and alliance grant to an individual tax payer divided by two.  
d.   Income Tax: This is tax on income.  It may be personal or company income.  
e.   Person: This includes an executor, company partnership families or individuals.  
f.    Collectors of Tax: This does not handle money or collect taxes but their effect result in taxation paying in the casher.  
g.    Inspector of Tax: Under the control of the board are a large number of inspector who
(i).       receive and return other information from tax payer;
(ii).      Make assessment;
(iii).     Deals with claims for repayment and defect errors
(iv)      They tackle down evasion  
h.    Nigeria Company: means any company that control and management of whose business are exercised in Nigeria.  
i.     Tax Authority: This mean the person or body of people responsible under the law.   Internet working means an individual who works at any time during a year of assessment other than or member of Nigeria army on the Nigeria.  For a daily wage or customarily earns his live hood in more than one place in Nigeria and his total income does not exceed at N600.