Tax Fraud and National Development of Democratic Societies: Evidence from Nigeria

Abstract

The main purpose of this study is to examine the impact of tax fraud on national development in Nigeria for the period of 1999 tos 2018. To achieve this objective, a review of the extant literature was made and it was hypothesized that tax fraud has on significant impact on national development in Nigeria. In generating the necessary data for this study, reports of various years of the Federal Inland Revenue Service and United Nations were used. The data were analysed using simple mean and standard deviation while the impact of tax fraud on national development was tested using the ordinary least square (OLS) regression technique. The findings of the study show that the average tax fraud in personal income tax is N7.58billion; customs and excise duty is N416.53 billion, and value added tax is N8.53 billion during the period under review. This implies that the level of tax fraud is higher with customs and excise duty followed by value added tax with personal income tax being the least. Although fraud occurs in petroleum profit tax in 1999, 2001, 2002, 2006, and 2007, and company income tax in 2005 and 2011, the overall actual tax collections for petroleum profit tax and company income tax during the period under review exceeds the targeted tax collections, thereby resulting to a positive tax gap during the period. The findings also revealed that personal income tax, customs and excise duty, and value added tax have a negative significant impact on national development. In view of the above, the following recommendations were made: the federal government of Nigeria should guide against all manner of tax fraud by bringing fraudsters particularly smugglers and others to book no matter how highly placed; there should be a periodic review of the Nigerian tax laws in a bid to block possible loopholes that could give rise to fraudulent activities in the Nigerian tax administration; tax amnesty should be granted to fraudsters to encourage them to stop further acts of tax fraud for increased tax revenue, which consequently will lead to national development; it is advisable to employ only qualified persons of high integrity to work in the revenue house, since some tax officials are fraudsters in the assessment and collection of taxes.