This Research work attempts to look at the effect of Tax evasion and avoidance on economy of Nigeria and its capacity to reduce tax revenue growth (A case study of Lagos State Internal Revenue Service). Tax is a compulsory levy imposed by government on income individual, firms and household. It was also find out that an individual tax evader or avoider may engage in it simply because he is unable to appreciate any benefit that would accrue to him after payment of such tax. The study made use of secondary data obtained from Lagos internal revenue service on total revenue from taxation and total value of tax evasion. Questionnaires were also used to gathered information on the effect tax administration on tax evasion and avoidance. Data collected were analyzed using both Ordinary Least Square and Descriptive statistics (Chi-square) were used to analyze the questionnaire administered to Lagos state internal revenue service staff. Hypothesis on was tested using OLS while hypothesis two was tested using Chi-square techniques. Empirical results shown that increasing tax evasion and avoidance reduce government revenue growth in Lagos .It was also found that Tax Administration is responsible for the tax evasion and avoidance in Lagos State. This was due to lack of enforcement machineries which include, adequate manpower, computers and effective postal and communication system. Finally, it is therefore recommended that the government should create awareness in the mind of tax payers about the importance of taxation in development of national economy and the effects of tax evasion and avoidance in government revenue growth.




Nigeria is richly blessed with oil and gas among other mineral resources, but the over dependence on oil revenue for the economic development of the country has left much to be deserved. According to Ariyo (1997) Nigeria's over dependence on oil revenue to the total neglect of other revenue source was encouraged by the oil boom of 1973/74. This is unsustainable due to the fluctuation in the oil market which have in most cases plunged the nation into deficit budgets. It was the view of Popoola (2009) that Nigerian tax administration and practice be structured towards economic goal achievement since government budget for the year centres on the oil sector. While decrying the low productivity of the Nigerian tax system, "deficiencies in the tax administration and collection system, complex legislations and apathy on the part of those outside the tax net" were identified as some of the root causes says Ijewere 1991 and Ndekwu 1991 as cited in (Ariyo 1997). Those working in the informal sector of Nigerian economy do not see the need to pay tax whereas they dominate the economy. To them only, civil servants should pay tax on their earnings and this amount to over flogging the willing horse. Besides, the activities of the strong union in the formal sector do not even pave way for a successful tax policy implementation in the formal sector (Ayodele 2006). Even revenue collection officers seem to be lenient or even connive with those in the informal sector during enforcement of tax policies. All this leads to revenue loss. In other to reawaken the consciousness of Nigerian government and citizens on the effective use of taxation as a developmental tool, and examine the effect the tax system have so far on the economy; this research work becomes very relevant. There is no doubt that taxation must have affected the economic development of Nigeria. Effort shall therefore be made in this research to see how much Nigeria have been able to achieve her economic goals with her tax policies and administration. The administrative role of the Federal, state and local government shall as well be examined in other to identify the causes of tax evasion and avoidance.


The first need of any modern government is to generate enough revenue which is indeed lithe breath of its nostril". Thus taxation is by far the most significant source of revenue for the government. Nigerians regard payment of tax as a means whereby government raises revenue on herself at the expense of their sweat. The issue of Tax evasion and avoidance and its effect on the Nigerian economy and revenue generation has lately drawn concerns to many Nigerian. In an attempt to find out how taxation can be used to boost revenue generation or revive the Nigerian economy, tax evasion and avoidance were noted to be on the increase in the Nigerian economy. Tax avoidance and tax evasion are sensitive issues in taxation therefore making the study a very sensitive one too.

Therefore the above mention problems motivated the researchers to carry a research work on the effects of tax evasion and avoidance on Nigeria economy.


The following research questions were formulated by the researcher in order to arrive at reliable conclusion and provide solutions to the problems of tax administration, tax evasion and avoidance in Nigeria.

i.        Does tax evasion and avoidance really affect the revenue growth of the government?

ii.      What management and organizational approach will decrease tax evasion level and increase administration autonomy?

iii.     Is there any relationship between tax administrators and tax payers, what influencing factors could produce a high level of tax evasion?

iv.      To what extent does tax evasion and avoidance affect Nigeria economy?


The general objective of this study is to assess the effect of Tax evasion and avoidance on the Nigerian economy, its role in expanding the revenue base of the government and the overall economic development of the country.

Therefore, the objective of this study is to show:

i.        To examine how effective the tax administration machinery is, in reducing tax evasion and avoidance

ii.       To determine to what extent tax evasion and avoidance affect government revenue especially in Lagos State.

iii.      To know the extent to which tax evasion and avoidance affect Nigeria economy?

iv.      To examines how the problem of evasion and avoidance in Nigeria could be          solved.


Hypothesis one

Ho:    Tax evasion does not affect Revenue growth in Lagos State Government.

Hi:     Tax evasion does affect Revenue growth in Lagos State Government.

Hypothesis two

Ho:    Tax Administration is not responsible for the tax evasion and avoidance in Lagos State.

Hi:     Tax Administration is responsible for the tax evasion and avoidance in Lagos State.


The relevance of this study can first be appraised in the light of its usefulness to the Nigerian nation as a whole.

This study, among other things, will expose the effect of tax evasion and avoidance on government revenue and economic growth. Concern over the economy wide effect of Tax is important because of the possibility that the tax evasion and avoidance may cause government to cut some expenditure of certain essential services, hence affecting government effectiveness and efficiency.

Essentially, this research work is intended to expose the role of Taxation in the economic development of Nigeria, the knowledge of which therefore makes the research important to policy makers, the Lagos State Internal Revenue Service (LIRS), Tax administrator, students as well as the general public who may require information about Taxation and its performance.


This research work covered the effect Tax evasion and avoidance on the Nigerian economy, its role in expanding the revenue base of the government and the overall economic development of the country using Lagos internal Revenue Service as A case study.


Among the factors limiting and constraining the scope of this study are:­

i.                   The inadequacy of data and relevant literature on the subject;

ii.                 Insufficient financial resources;

iii.      The poor response to questionnaires by respondents and sometimes-outright refusal;

iii.              There is also the issue of lack of time to carry out a more in-depth study.

However, since these factors were foreseen, proper care was taken in constructing the questionnaires so that the questions asked were not so exact or direct is warrant reluctance in their response.

Also, all efforts were made to ensure that correct information was gathered and adequate provisions were made for errors so that the authenticity and credibility of the research finding are not several affected.

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