THE EFFECTS OF TAX EVASION AND AVOIDANCE ON SUSTAINABLE INFRASTRUCTURAL DEVELOPMENT IN ADO-ODO OTA LOCAL GOVERNMENT AREA, OGUN STATE. BY ZEBULON VICTOR CHUKWUDI ENV/208140316 DEPARTMENT OF ESTATE MANAGEMENT, SCHOOL OF ENVIRONMENTAL STUDIES, AUCHI POLYTECHNIC, AUCHI, EDO STATE. SEPTEMBER, 2016. THE EFFECTS OF TAX EVASION AND AVOIDANCE ON SUSTAINABLE INFRASTRUCTURAL DEVELOPMENT IN ADO-ODO OTA LOCAL GOVERNMENT AREA, OGUN STATE. BY ZEBULON VICTOR CHUKWUDI ENV/208140316 BEING A PROJECT WORK PRESENTED TO THE DEPARTMENT OF ESTATE MANAGEMENT SCHOOL OF ENVIRONMENTAL STUDIES IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF HIGHER NATIONAL DIPLOMA (HND) IN ESTATE MANAGEMENT. SEPTEMBER, 2016. CERTIFICATION We the undersigned hereby certify that this project work has achieved its aim and objectives both in scope and quality as partial fulfillment of the requirement for the award of Higher National Diploma (HND) in Estate Management, Auchi Polytechnic, Auchi. _____________________________________ _____________________ ESV. A.O. ERIBO FNIVS, RSV, FCAI, MNES, FIIA DATE Project Supervisor _____________________________________ ___________________ ESV. D.E. OMOROGIEVA ANIVS, RSV DATE Head of Department _____________________________________ ___________________ TPL. V.A. OKHANI PPE NIESV, MNITP, RTP DATE Dean of School DEDICATION This project is dedicated to God Almighty the giver of life, strength, wisdom, understanding and knowledge for availing himself at every point of need. It is also dedicated to my lovely parents and siblings for their love, concern, encouragement, intellectual and financial contributions all through my academic chase and in producing this project work up to its completion. ACKNOWLEDGEMENTS I wish to first and foremost give my sincere appreciation to God Almighty for his indescribable mercy over my life ever since I was conceived until now, God I say a big thank you. I am sincerely grateful to my magnificent supervisor in the person of ESV A.O. Eribo for his constructive criticisms that has left an indelible mark in my educational chase and whose disciplinarian efforts made this project a success. I humbly express my sincere appreciation to my so wonderful parents in the persons of Mr. & Mrs. Zebulon Akawabem for their never-ceasing support and sacrifices having struggled tirelessly in molding me to what I have become. I am indeed indebted to you sir/ma. My lovely siblings, Aunty Queen, Aunty Caro, Brother Junior, Precious, Chisom, Divine. I am also indebted to you. My profound gratitude also extends to my amiable HOD in the person of ESV. D.E. Omorogieva and all my wonderful lecturers, instructors and technologists for their pertinent efforts in equipping and restructuring me with the needful knowledge. I also extend my heartfelt gratitude to all my respondents who provided me with the data and information that I requested for during the time I visited Ado-Odo Ota local government area. I must also gladly acknowledge the kind efforts to my course mates in the Department of Estate Management who helped me see reasons to come up with a reasonable project by their continued arguments and advice about my research, in the persons of Love Chiemela, Godwin Aisien, Indomie, Eghosasere Eribo, Ruth Eze, Lauretto, Princess, Amaka Joy and many others to mention but a few. My friends and well-wishers, Tessy-White, Sister Becky, Ambrose, Beauty, Mr. Okoro, Tobi, Gift, Leke, Franklin, Daniel, Precious and many more of you out there. I am indebted to you all by your assistance. Lastly, big kudos to the various authors of the works cited in this project work. May God bless and reward all of you abundantly in Jesus name Amen. ABSTRACT Sustainable infrastructural development as a key ingredient for sustained economic growth has thus far received poor attention in Ado-Odo Ota local government area. The intense shortage of infrastructure constitutes a huge threat to survival in the study area. Despite the efforts made to enhance this “Social Overhead Capital”, it still currently does not meet the requirement of economic development. The study emphasizes on the extent the tax irregularities hinder sustainable infrastructural development, the short and long-run effects and the possible causes of tax evasion and avoidance, drawbacks of tax revenue, in the study area. The opinions of the population of study comprising tax payers and authorities were not left out as a structured questionnaire was used to elicit the opinions of seventy (70) respondents in the study area, after then analyzed using the simple percentage method and the formulated hypotheses were later on tested using the chi-square goodness of fit technique at 0.05 level of significance. After a statistical analysis of results, it was concluded amongst others that the practice of tax evasion and avoidance has negative effects only, on sustainable infrastructural development ranging from short to long-run effects. A lot still needs to be harnessed towards improving the quality and condition of infrastructures. It was recommended amongst others that we should always pay our tax correctly and as at when due because greediness and selfishness constitutes one of the major causes of tax evasion and avoidance on the part of the tax payers. TABLE OF CONTENTS COVER PAGE ………………………………………………………………..……….. TITLE PAGE ........................................................................................... CERTIFICATION …………………………………………………………………… DEDICATION …………………………………………………………………….…. ACKNOWLEDGEMENTS …………………………………………………………. ABSTRACT ……………………………………………….………………………….. TABLE OF CONTENTS ........................................................................... LIST OF TABLES ……………………………………………………..……………. CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY.................................................... 1.2 STATEMENT OF THE PROBLEM .................................................. 1.3 RESEARCH QUESTIONS .............................................................. 1.4 AIM AND OBJECTIVES OF THE STUDY ………….......................... 1.5 STATEMENT OF HYPOTHESES ………………………….…………….. 1.6 SIGNIFICANCE OF THE STUDY ................................................... 1.7 SCOPE OF STUDY ….................................................................... 1.8 STUDY AREA ................................................................................. 1.9 LIMITATION OF STUDY ............................................................... 1.10 DEFINITION OF TERMS ............................................................... CHAPTER TWO LITERATURE REVIEW 2.1 UNDERSTANDING TAX AS A TERM .............................................. 2.2 THE PRINCIPLES OF TAXATION ................................................... 2.3 TYPES OF TAX ............................................................................. 2.4 HISTORICAL ACCOUNT OF TAXATION IN NIGERIA .................... 2.5 TAX ADMINSTRATION IN NIGERIA ................................................ 2.6 REASONS FOR TAXATION ............................................................ 2.7 TAX AVOIDANCE AND EVASION …................................................ 2.7.1 TAX EVASION ............................................................................... 2.7.2 TAX AVOIDANCE .......................................................................... 2.8 DIFFERENCES BETWEEN TAX EVASION AND TAX AVOIDANCE ... 2.9 TECHNIQUE OF TAX AVOIDANCE AND EVASION ......................... 2.10 CAUSES OF TAX AVOIDANCE AND EVASION ............................... 2.11 SUSTAINABITY AND SUSTAINABLE DEVELOPMENT …................. 2.12 IMPACT OF TAX EVASION AND TAX AVOIDANCE ON THE……...... ECONOMY 2.13 OVERVIEW OF EXISTING INSTITUTIONAL RESPONSIBITIES ..…… FOR THE CONSTRUCTION AND MAINTENANCE OF INFRASTRUCTURE AND SERVICES IN NIGERIA CHAPTER THREE RESEARCH METHODOLOGY 3.1 RESEARCH DESIGN ..................................................................... 3.1.1 SOURCE OF DATA ………………………………………………………… 3.1.2 POPULATION OF STUDY ................................................................ 3.1.3 SAMPLE SIZE AND SAMPLING TECHNIQUE ................................. 3.1.4 INSTRUMENTATION/DATA COLLECTION PROCEDURE ............... 3.2 RELIABILITY TEST ………………………………………………………….. 3.3 VALIDITY TEST …………………………………………………………..….. 3.4 METHOD OF DATA ANALYSIS ...................................................... 3.4.1 DECISION RULE ……………………………………………………………... CHAPTER FOUR DATA PRESENTATION, ANALYSIS AND INTERPRETATION 4.1 DATA PRESENTATION ……………………………………………………… 4.2 ANALYSIS OF QUESTIONS ………………………………………………… 4.3 TEST OF HYPOTHESES ……………………………………………………. CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS 5.1 SUMMARY OF FINDINGS ………………………………………………… .. 5.2 CONCLUSION ………………………………………………………………… 5.3 RECOMMENDATIONS ……………………………………………………… REFERENCES ............................................................................................ APPENDICES …………………………………………………………………………… LIST OF TABLES PAGES Table 2.1 Differences between tax evasion and tax avoidance …………. Table 2.2 Existing institutional responsibilities for the construction … and maintenance of infrastructure and services in the country. Table 2.3 Nigeria expenditure assignments ………………………………… Table 4.1 Pattern of retrieval of questionnaires …………………………… Table 4.2 Sex of Respondents …………………………………..………….. ... Table 4.3 Location of respondents …………………………..…………….. … Table 4.4 Age group of respondents ………………………………………….. Table 4.5 Marital status of respondents …………………………….………. Table 4.6 Employment status of respondents ……………………………… Table 4.7 Analysis to know if the respondents pay their tax ……………. Table 4.8 How often the respondents pay their tax ……………………….. Table 4.9 Highest Academic Qualification of Respondents…………..….. Table 4.10 Analysis to show the respondents’ opinion on the ………… … quantity and condition of infrastructures in Ado-Odo Ota local government Table 4.11 Analysis to show the respondents’ opinion on how ……..……. effective tax administration is undertaken in Ado-Odo Ota local government area Table 4.12 Respondents’ description of the practice of tax evasion...……. and avoidance Table 4.13 Analysis to show the respondents’ opinion on how they……… consider the practice of tax evasion and avoidance Table 4.14 Tax evasion and avoidance hinder sustainable…………..……. infrastructural developmental in Ado-Odo Ota local government area. Table 4.15 The extent tax evasion and avoidance hinder sustainable…… infrastructural development in Ado-Odo Ota local government area Table 4.16 Analysis to show the respondents’ opinion on whether ………. the effects of tax evasion and avoidance on sustainable infrastructural development in Ado-Odo Ota local government area are in the short-or-long-run. Table 4.17 The respondents’ opinion on the short-run effects of tax ….. and avoidance on sustainable infrastructural development in Ado-Odo Ota local government Table 4.18 The respondents’ opinion on the long-run effects of tax ….. and avoidance on sustainable infrastructural development in Ado-Odo Ota local government Table 4.19 Analysis to show the respondents’ opinion on the possible... causes of tax evasion and avoidance in Ado-Odo Ota local government area. Table 4.20 There is a difference between the number of persons that… pay tax and the number of persons that are liable to pay tax in Ado-Odo Ota local government area. Table 4.21 The number of persons that are liable to pay tax is ………. greater than the number the number of persons that pay tax in Ado-Odo local government area. Table 4.22 Tax revenue gotten from tax payers is for their betterment… and welfare. Table 4.23 Respondents’ opinion on whether sustainable ……………… infrastructural development can be advanced in Ado-Odo Ota local government area. Table 4.24 Respondents’ opinion on whether we should always pay..… our tax correctly and as at when due. Table 4.25 Exemption of religious properties …………………………….… Table 4.26 Analysis to show the respondents’ recommendations…….… Table 4.14 Analysis to show the respondents’ opinion on Question 5 … in Section B which was used to test for the hypothesis one stated. Table 4.20 Analysis to show the respondents’ opinion on Question 11… in Section B which was used to test for the hypothesis two stated.