EXAMINATION OF THE LEGAL FRAMEWORK ON TAX AVOIDANCE AND EVASION UNDER THE PERSONAL INCOME TAX ACT IN NIGERIA

Abstract

Tax is a statutory compulsory contribution imposed by government exacted from a person’s or entity’s income, property or transaction for the purpose of funding governance. The motivation for this article is that taxation is a major source of government revenue all over the world and governments use tax proceeds to render their traditional functions, such as the provision of goods, maintenance of law and order, defence against external aggression, regulation of trade and business to ensure social and economic maintenance, and the provision of these services will be impossible without adequate revenue backing. This study found that the Personal Income Tax Act did not specifically make provisions for tax avoidance, rather the Act contained anti-avoidance provisions which are specifically intended to plug the identified loopholes and forestall tax avoidance scheme. It was also found that the distinguishing factor between tax avoidance and tax evasion was that while tax avoidance is considered as legal, tax evasion is considered to be illegal and attracts penal sanctions, such as fine and imprisonment terms. It was recommended that government should endeavour to provide social amenities to all nooks and crannies of the country and provide employment opportunities to all by the judicious use of tax proceeds. In this way, all will have the sense of belonging thereby encouraging voluntary compliance. It was also recommended that government should embark upon other means of publicity such as radio messages, television advertisement, post bills as well as the use of town criers to inform taxpayers of changes in tax legislation and need for compliance.