IMPACT OF TAX EVASION ON NIGERIA’S HIGHER INSTITUTIONS

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The Nigerian educational system follows the 9-3-4 format (kindergarten/primary school for 9 years, junior secondary school for 3 years, senior secondary school for 3 years, and university first degree for 4 years). Universities, polytechnics, and colleges of education constitute the tertiary education subset of every nation's educational system (Peters, 2022). Universities are created to fulfill the triple functions of teaching, research, and community service, so contributing significantly to the nation's social and economic growth. They are tasked with imparting high-level skills to a significant segment of the labor force, fostering the intellectual capacities of individuals, and educating competent and accountable professionals required in nearly all facets of human endeavor. According to Okoh, (2022), polytechnics are essential to the educational, scientific, and technical development of Nigeria. They are developed to train and generate the technical workforce required to implement the nation's development plans, objectives, and strategies. The colleges of education are "train-the-trainers" institutions designed to prepare and equip teachers for their prestigious roles (Okoh, 2022).

Education, an indispensable instrument in nation building, is a process of systematic training and instruction designed to transmit knowledge and facilitate the acquisition of skills, potentials, and abilities that enable an individual to effectively contribute to the growth and development of his society and country. Education encompasses a person's whole physical, social, moral, intellectual, and mental growth (Osakwe, 2022). Education is the process of supporting learning or the development of information, abilities, values, attitudes, and behaviors.

Tax is a civic contribution imposed by the government on its subjects (individuals and corporations) in order to finance its social, economic, and political obligations of maintaining public welfare (Kiable & Nwankwo, 2022).

All Nigerian corporations are required to pay a 2 percent education levy on their profits. This tax is considered as a civic duty imposed on all businesses to ensure that they give their fair share to the development of educational institutions in the nation. When the federal government of Nigeria announced the establishment of the Education Trust Fund (E.T.F) through the Education Tax, decree no 7 of 1993, before it later morphed into Tertiary Education Trust Fund (TETFUND) because Universal Basic Education (UBE) already takes care of basic education, the intention was to create an intermediary agency to manage the two percent of all assessable profit of companies registered in Nigeria on its behalf as a special fund (Peters, 2022).

According to reports, a variety of obstacles impeded the proper administration of taxes in Nigeria. Tax avoidance, however, is a significant obstacle. Tax evasion is defined as the deliberate, criminal act of directly violating tax regulations in order to evade tax payment. In all nations, tax evasion is a common occurrence. Indeed, regardless of the measures implemented, some Nigerian corporations continue to circumvent government legislation and avoid paying taxes. The practice of circumventing educational tax regulations is deemed unlawful and must thus be handled by tax officials.

Tax evasion occurs when a tax payer or business entity conducts its financial affairs in violation of the law in order to pay the least amount of tax feasible (Foe &           Lawrence 2022). It can be performed by intentional acts of omission or commission, such as understating income, recording false transactions, overstating costs, and failing to file tax returns.

1.2 STATEMENT OF THE PROBLEM

According to Peters, (2022), tax evasion has led to the loss of money that is owed to the government, hence resulting in insufficient Tertiary Education Trust Fund revenue (TETFUND). The government is unable to meet its expenditure obligations, which include the supply of facilities and the enhancement of the quality of education at Nigeria's higher institutions, due to the insufficiency of available money. Therefore, the government relies completely on the cash generated by the sale of crude petroleum oil in order to meet its financial obligations to Nigeria's higher education institutions. However, university education in Nigeria presently faces the issues of insufficient funding, brain drain, lack of supply and upkeep of critical physical infrastructures for teaching and learning, etc., which will result in quality educational output in Nigerian higher education institutions (Bell, 2022).

This public outcry over the various challenges confronting university education in Nigeria, such as inadequate funding, brain drain, lack of provision and maintenance of essential physical infrastructures for teaching and learning, etc., can be traced to the government's revenue loss due to tax evasion by Nigerian companies. Consequently, the researcher seeks to investigate the impact of tax evasion on Nigeria's higher educational system (Peters, 2022).

1.3 OBJECTIVES OF THE STUDY

The main objective of this study is to assess the impact of tax evasion on Nigeria’s higher institution. Specifically, other objectives of this study are:

i.          To determine the extent of Nigeria’s higher institutions tax evasion.

ii.        To determine whether tax evasion has an impact on Nigeria’s higher institutions.

iii.      To find out whether the creation of TETFUND has helped to reduce tax evasion by Nigeria’s higher institutions.

iv.      To examine ways tax evasion by Nigeria’s higher institutions can be reduced.

1.4 RESEARCH QUESTIONS

The following research questions will be answered in this study:

i.          To what extent is Nigeria’s higher institutions tax evasion?

ii.        Does tax evasion have an impact on Nigeria’s higher institutions?

iii.      Has the creation of TETFUND helped to reduce tax evasion by Nigeria’s higher institutions?

iv.      What are the ways tax evasion by Nigeria’s higher institutions can be reduced?

1.5 SIGNIFICANCE OF THE STUDY

It is anticipated that the findings of this research would assist the government in formulating policies that will aid in eradicating the problem of tax evasion in our tax collection system in order to efficiently support education in the country.

The findings of this research would also assist the government understand why so many Nigerian businesses escape educational tax.

Lastly, this research will aid the tax authority in assessing, making judgments, and identifying effective ways of collecting the necessary educational tax for the development and proper funding of our educational sector.

1.6 SCOPE OF THE STUDY

This study is focused on assessing the impact of tax evasion on Nigeria’s higher institution. Specifically, this study is focused on determining the extent of Nigeria’s higher institutions tax evasion, determining whether tax evasion has an impact on Nigeria’s higher institutions, finding out whether the creation of TETFUND has helped to reduce tax evasion by Nigeria’s higher institutions and examining ways tax evasion by Nigeria’s higher institutions can be reduced.

Staff of selected higher institutions in Nigeria will serve as the respondents of this study.

1.7 LIMITATIONS OF THE STUDY

This study is limited to assessing the impact of tax evasion on Nigeria’s higher institution. Specifically, this study is limited to determining the extent of Nigeria’s higher institutions tax evasion, determining whether tax evasion has an impact on Nigeria’s higher institutions, finding out whether the creation of TETFUND has helped to reduce tax evasion by Nigeria’s higher institutions and examining ways tax evasion by Nigeria’s higher institutions can be reduced.

Staff of selected higher institutions in Nigeria will serve as the respondents of this study, thus the sample size was limited because only a few respondents were chosen to answer the research instrument, therefore the results cannot be generalized to other secondary schools outside the state.

1.8 DEFINITION OF TERMS

Impact: A marked effect or influence.

Tax evasion: Tax evasion is an illegal attempt to defeat the imposition of taxes by individuals, corporations, trusts, and others.

Higher Institutions: Higher education is tertiary education leading to award of an academic degree. Higher education, also called post-secondary education, third-level or tertiary education, is an optional final stage of formal learning that occurs after completion of secondary education.