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    CamScanner 04-12-2023 08.31

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    Me [a TAXATION & FISCAL POLICY cousin oe teanopucrios , H TAXATION & FISCAL POLICY 3S Anar israxariOn” pat ‘TALIM rows a sae os eSIOBUECTIVESIUSES OF/ . oe oer R/PRINCIPLES OF TAXATION oy on “CATIONS OF TAX sacar 8 A MANIAGES OF DIRECT TAXATION 9 eure or ecanunes +S antovaracs oF BIECT tion : geass aaa snes ao peiNDIRECT TAXATION oy Seo. 2 beabwtemnoes oranomecr = i - : Bac a INTRO! ( i ' DUCTION CONT. INTRODUCTION Al a 11 ‘Jevels of Government need Some of’ the sources. of “finances: - hide" funds to finance their activities. They must find ways of obtaining money to pay for their expenditure. available to the Government incl taxes, royalties, levies, fines penalties, loans, grants, and |. donations given to the Government, ‘h.. proceeds" from, the sale’ Of}, government-owned companies, a “ lands, buildings. r I i} CONT. INTRODUCTION CONT. INTRODUCTION @ And other assets, profits or The maj i 5 i , 7 yjor sdurce of federal. +)! surpluses made by . government government revenue in Nigeria is’. to government on shares ‘owned in companies, » interest. received on foank made’ by , the government, seat: received on’ government- Sened properties, income'from the Oto of overnment services, among owhed enterprises, dividends paid others. the revenue fiom the sale of crude’ oil: On the other hand, state~and - || local’ governments’ in Nigeria are financed ~ mostly». through ~ the», } statutory. allocations from the | - federation account. Scanned with CamScanner CONT. INTRODUCTION @ Nevertheless, taxation is:still a very | important source of revenue to the || federal, state and local governments. CONT. INTRODUCTION «Therefore, the taxes is the removal of resources from private hands of the individual, corporate bodies, trusts, - families, societies and communities into the public sector to finance activities that have to do with whole society. ‘WHAT IS TAXATION? * y'|-@ There are ‘ quite ‘a’ number -of |, 1 definitions of Tax. and . Taxation | depending om the qualities it possesses which are as follo CONT. WHAT IS TAXATION? © Bea compulsory payment: A tax is a compulsory payment. A levy, the payment of which is voluntary is not a tax but a contribution or donation; | CONT. WHAT IS TAXATION? ‘Be a payment to the Government: |, .Tax must be'a payment. to a public authority or a Government. Where a tax is paid to an individual, it must ’ be in his capacity as embodiment of v| the Society or state. If not, then, it is an extortion and nota tax; CONT. WHAT IS TAXATION? © Be,common benefit: A tax must be -for common -use. It must be for common good. This has to.do with the intended purpose(s) of the tax. Thus, where such contribution is made for the use of the an’ individual, itis not a tax; Scanned with CamScanner ao CONT. WHAT IS TAXATION? @A tax. is the “levy “by: public authorities with a tax jurisdiction, of compulsory contributions, by the citizens to defray part of the cost of government activities in providing the needs of the society”. _aTaxation is “the process or CONT. WHAT IS.TAXATION?. } machinery by which communities or | groups of persons are made “to contribute’ in some’ agreed. quantum, ( and method for the purpose of the administration and development of the society”. CONT. WHAT IS TAXATION? @*Taxation is the transfer,.of real economic resources-from the private sector to the public sector to finance public sector activities” * ota ora sn lag CONT. WHAT IS TAXATION? : | Tax can simply be defined\as a ( charge’on income of individuals and. corporate bodies: by. the. |) Government, 4 we sens - CONT. WHAT IS TAXATION? More teclinically, tax can be defined ‘as compulsory payment imposed by the Government through its_agents on__incomeof—individuals__and corporate bodies as well as-on-goods and services. CONT. WHAT IS TAXATION? a A tax is_a compulsory payment inode by individuals “and organizations tothe Government in » accordance with predetermined. criteria_for_which_no_direct—or. specific \ tax payer, Scanned with CamScanner 5 7 CONT. WHAT IS TAXATION? Lo This definition is similar to:the one given by Pritchard and’ Murphy | (998), According to them, a tax is “a payment to central Government, calculated by laid_down-rules. for, which nothing specifically usable by CONT. WHAT IS TAXATION? @ In Mathews v Chikory Marketing Boars | (Victoria) (1938), Chief Justice Latham | of the Australian Supreme Court defined money by, a public authority: for public purposes”, or taxation is raising money for the purpose of Government by means | that taxpayer alone is transferred of contributions from individual =o sv te tn si “enmP ESOS.” rune renee E et geet lente (ate ay cok (1981 ¢ CONT. WHAT IS TAXATION? As defined by Black (1990), a tax is “an ¥ enforced’ contribution}of money or other property, assessed in:accordance with some reasonable rule or apportionment “by authority of a sovereign, state._on persons or property “within its jurisdiction for the purpose of defraying- the public expenses. CONT. WHAT IS TAXATION? «It is important to note that tax is imposed’ by “the government and not’. individuals or corporate bodies. Revenue generated from taxation is usually “ used for developmental purposes. CONT. WHAT IS TAXATION? GA tax is a’ compulsory levy on individuals and legal-entities. A tax could be ,levied on income, “comiodities and so on. PURPOSES/OBJECTIVES/USES OF TAXATION t @ Government imposes tax not just for | revenue generation but to accomplish various economic objectives, Tax is imposed for the following reasons: Scanned with CamScanner CONT. PURPOSES/OBJECTIVES/USES OF ‘TAXATION |g To: generate revenue,. in order. to finance Government activities t if PURPOSES /OBIECTIVES(USES OF. | a "TAXATION: @ To cover the cost of administration, internal and. external defence,, maintenance ‘of law and order as | well’as social services required by | the citizens. a CONT, PURPOSES/OBJECTIVES/USES OF {TAXATION a To protect companies in infant stage industries by reducing their tariffs which will invariably reduce the cost , of production relative ‘to imported products that_are substitutes. L ‘CONT. PURPOSES/OBJECTIVES/USES OF | ‘TAXATION \ To discourage the consumption of dangerous/harmful products. \ a | CONT. PURPOSES/OBJECTIVESIUSES OF TAXATION a To___cositrol__the __importation, produetion_and_eonsuimption of certain goods ‘and services thereby reventing dumping. This can be achieved by increasing tax payable on such goods and services. * CONT. PURPOSES/OBJECTIVES/USES OF ‘TAXATION @To redistribute wealth and income, among various income _earers. through progressive tax system. This’ helps to reduce income inequality. Scanned with CamScanner [ “CONT. PURPOSES/OBJECTIVES/USES OF ‘CONT, PURPOSES/OBJECTIVESIUSES OF “TAXATION TAXATION | | 5 To__counter_inflation by" reducing a To_provide subsidies in favour_of volume of purchasing power. sof the economy, ; : eg agriculture and selected: | . industries. | \conr: PURPOSES/OBJECTIVES/USES OF TAXATION TAXATION ' a is ional debt and provide wTo_enables_the_gov' nt_to ret ong others rqvide social ’and merit goods ‘CONT. PURPOSES/OBJECTIVES/USES OF. TAXATION ‘TAXATION = To_helps to et ¢ eTolused.to fund orfinance | } imperfections e.g. a monopoly zesearch and development. ——, firm is taxed heavily to it abuses | monopoly power i ome snl Secs BAe hates -| CONT, PURPOSES/OBJECTIVES/USES OF CONT. PURFOSESOBIECTIVESIUSES OF || Scanned with CamScanner “aisrpoz3 CONT: PURPOSES/OBJECTIVES/OSES OF | TAXATION a To reallocate resources from one sectgr to another sector « CANONS/PRINCIPLES OF TAXATION @ Canons/Principles of Taxation ,@For a tax. system to achieve its + objective, it must possess certain principles which include: CANONS/PRINCIPLES OF TAXATION Principle of Equity: A good tax. system_shoul ‘CANONS/PRINCIPLES OF “TAXATION Principle of Convenience:. This is, in_respect ‘of ‘timing ‘and_mode_of. distribution of tax “burden Tt | payment: The timing-and_mode_of requires that, the tax. burden payment should be convenient tothe |! should not fall more on the poor. taxpayer. Any. inconvenience, Example progressive tax ‘ caused by the mode of payment and : timing should be avoided. . : oo consent I o ‘CANONS/PRINCIPLES OF CANONS/PRINCIPLES OF ‘TAXATION TAXATION Principle of Certaint stipulates that the time, mode and amount to be paid should bé clear ‘and certain to the taxpayer. The procedure for computation should be stated. Principle of Simplicity: A good tax systém should be coherent, simple and straightforward. It_should_be. ‘well_understood’_b he tax should not be complicated _or ambiguous. payer and tox ‘administrators. It. payer_and tax ‘ admin! Scanned with CamScanner CANONS/PRINCIPLES OF TAXATION a Principle of Economy: This slats , to_cost_of. to cost of administeringtax. It i pectin oc ‘CANONS/PRINCIPLES OF TAXATION ePrinciplé of Impartiality: This advocates that a tax system should not discriminate between tax payers a z aise under similar circumstances. 1 Tt cess_of revenue requires’ that all persons should ee similarly be placed-under the same genera condition, to pay the same tax. | ; CANONS/PRINCIPLES OF CANONS/PRINCIPLES OF TAXATION TAXATION Principle of Productivity/Fiscal Adequacy: This recognizes that the yield from a tax.should be adequate penditure in to cover Gove Principle of Flexibility: It. requires that there should be no obstacle. in the way taxes are imposed. it,” Hence, i wing standard of the citizens. (tax } payers). ‘ is : CANONS/PRINCIPLES OF CANONS/PRINCIPLES OF TAXATION TAXATION * \@ Principle of Elasticity: 3 Heine toa ie ete abide Gory . ee a Principle of Diversity:. Tt requixes_that_there_shou'd ifferent taxes so _that_the tax different taxes so ths burden falls on different peo) Scanned with CamScanner wer 2023 TYPES/CLASSIFICATIONS OF ‘TAXATION: * | Taxes have been’ classified in various ways by various authors, In the light of the above, the structure of Nigerian tax system, ‘basically, deals with classification and types of taxes. CONT. TYPES/CLASSIFICATION: OF TAXATION. @ Classification of Nigerian Tax Nigerian taxes canbe classified iri any of the following ways: , Proportional, Progressive. and, Regressive” taxes and ‘Direct and] Indirect taxes (incidence). ° CONT. TYPES/CLASSIFICATIONS OF TAXATION & Proportional Tax: A proportional tax is.one in which’ each taxpayer pays the same-rate or_pereentage of his income_as tax, for example, an come_tax_ may, be levied on all: eligible ssxpayerd at the rate of saj-10%, CONT. TYPES/CLASSIFICATIONS OF TAXATION @For example in Nigeria, companies’ income tax is levied | at the rate of 30% on companies’! profits. CONT. TYPES/CLASSIFICATIONS. OF TAXATION CONT. TYPES/CLASSIFICATIONS * OF TAXATION @ Figure 1: Proportional Tax Tora] es Lo I aT sao sana *cteore |) Scanned with CamScanner | CONT. TYPES/CLASSIFICATIONS OF TAXATION arom: the Figure 1, presents the proportional tax rate , which is perfectly clastic:showing.that, at all +, taxable incomé levels, the "percentage of tax rate paid does not | change, CONT. TYPES/CLASSIFICATIONS OF TAXATION Progressive Tax: A progressive tax | is one in which the rate of tax’ increases as the income: of the taxpayer increases. In other words, the higher the income, the higher the rate of tax. Personal income tax is @ ‘good example of progressive tax! i | CONT. TYPES/CLASSIFICATIONS i “OF TAXATION CONT. TYPES/CLASSIFICATIONS OF TAXATION 18 Figure 2: Progressive Tax CONT. TYPES/CLASSIFICATIONS OF TAXATION @From: the Figure 2, presents the progressive tax rate , which shows that, increase, in taxable income | tevels;. leads , to .a. more * than proportionate increase inthe percentage of tax rate paid. CONT. TYPES/CLASSIFICATIONS OF TAXATION @ Regressive Tax: A regressive tax is the opposite of a progressive tax. It is one in which the rate of tax decréases: as the income of the taxpayer increases. In other words, the higher the income, the lower the rate of.tax. So the poor man pays tax at a higher rate than the rich man, Scanned with CamScanner | | 4/6/2023 CONT. TYPES/CLASSIFICATIONS OF TAXATION © Table3: Regressive Tax A OF-TAXATION . . CONT. TYPES/CLASSIFICATIONS :° @ Figure 3: Regressive Tax Tecra CONT. TYPES/CLASSIFICATIONS : OF TAXATION , From the Figure 3, presents the regressive tax rate , which shows that, increases in taxable income levels,‘ leads to decreases ‘in. the percentage of tax rate paid. CONT. TYPES/CLASSIFICATIONS OF TAXATION | © Classification based.on Burden. | Under; this, taxés are classified as | direct and indirect ‘| CONT. TYPES/CLASSIFICATIONS OF TAXATION Direct ‘Taxes: These are imposed directly.on the income of individuals and companies. The burden of direct tax is borne by the tax payer ie. it cannot be shifted to another pérson. CONT. TTYPES/CLASSIFICATIONS - H OF TAXATION Examples are; personal income tax, company. income ‘tax, petroleum, | profit tax, capital gains tax etc. ; Scanned with CamScanner 1. | CONT. TYPES/CLASSIFICATIONS OF TAXATION | Indirect Taxest These are taxes imposed on goods and services. They are sometimes referred to as expenditure taxes. CONT; PES SN TONS. of an indirect tx can be oT ae oe pul om hes payer (manufacturer, seller) «to Phother «person (consumer) depending on the elasticity point facing the commodities. & Examples include, Excise Duties, Value “Added Tax,’ Import’ Duties, |) Export Duties ete. CONT. TYPES/CLASSIFICATIONS , OF TAXATION Indirect ‘taxes can be specific or ad varolem “| “a Specific Tax: ‘This ‘is a situation Viste a cerain’_amht- of sais beg each unit of:a commodity fi ; | commodity. VAT is an example of CONT, TYPES/CLASSIFICATIONS OF TAXATION @Ad varolem: Ad_varolern tax is levied ‘on: the value of the e being taxed. In. other words, ad varolem tax is calculated as a certain percentage of the -price of the. ad varolem tax. Scanned with CamScanner OTs. i it CONT. TYPES/CLASSIFICATIONS OF TAXATION ln Nigeria, VAT is levied at the rate of 7.5% on the value of taxable goads and services. If the price of a crate of beer sold by brewery is N800, the amount of VAT..payable on 10,000 crates sold° would’ be 8,000,000 x 5% =N600,000. 4 ADVANTAGES OF DIRECT TAXES | @ Advantages of Direct Taxes * “The following are the advantages of | diréct taxes: | ‘ CONT. ADVANTAGES OF DIRECT ‘TAXES, Equitable: Direct’ taxes, are \ considered to be more equitable than indirect taxes since they are based on the ability to pay principle. Direct taxes can be progressive .so that different tax rates apply. to different: income levels, with the |. rates increasing as income increases. CONT. ADVANTAGES OF DIRECT | ‘TAXES © Redistribution of Income: Since direct taxes are often progressive, they can be'|4 used as an instrument for the reduction of f° inequality in the distribution of income and wealth. The rich’ people are taxed more heavily than the poor people so that the’ gap: between the rich and poor is narrowed down. CONT. ADVANTAGES OF DIRECT TAXES 1 a Therefore, the tax collected can be that will be more beneficial to. the poor than the rich. used to provide goods and services - CONT. ADVANTAGES OF DIRECT. ‘TAXES eCertain: The amount Government expects to realize: fiom direct taxes |’ canbe estimated: in advance with a‘ reagonable degree of accuracy. Hence, the taxpayer also knows how much’tax he ought to pay and time for payment. Scanned with CamScanner CONT. ADVANTAGES OF DIRECT — TAXES @ Control of Inflation: Unlike indirect taxes which are added to’ the’ prices of goods and’ services and. can cause inflation, direct taxes reduce the disposable income of the taxpayer (i ‘aimotint available for. the’ taxpayer to spend after tax) and that has the effect of reducing demand and prices. CONT. “ADVANTAGES OF DIRECT + TAXES \ w Civil, Consciousness: The taxpayer | knows exactly how much direct taxes he is paying to the Government unlike indirect taxes which are wrapped up itt the prices of goods and services and may not be known by the taxpayer: Hence, taxpayer is aware that he/she is making financial commitment to government (civil responsibility) ‘CONT. ADVANTAGES OF DIRECT <* . DISADVANTAGES OF DIRECT TAXES "TAXES: a Economieal:' “Direct taxes, for © Disadvantages of Direct Taxes 4 exartiple. pay? as- you qnenis-(PAYE), @ (a) Unpopular/ Inconvenient:: Direct "1 3 likely uncomfortable do not cost much mon aes eT ey ad tae ich_ monty to collect. because people know exactly how much Secondly, mostdirect taxes are_paid they’ are being taxed unlike indirect to the tax authority by the taxpayers taxes Which are hidden in the prices of themselves, 3 goods and services. Generally, people do not! feel happy to pay tax especially when no direct benefit is derived. L ‘oom sominereonre | hy al ¥ CONT. DISADVANTAGES OF DIRECT CONT, DISADVANTAGES OF DIRECT | TAXES 8 Tax Evasion: The tax.rate of invasion is (fc high. Apart, from’ PAYE: income” tax ‘i which, is deducted” from’ workers’ salaries by employers and’ paid’ over: to the tax authorities, many businessmen “|. -and companies are not always willing to come. forward! and declare, their true TAXES, @ Disincentive to Work: In a progressive system of taxation where a high income is taxed at a higher rate a lower income, people may be’ discouraged from ‘working harder since they know that the more they éam, the larger the proportion of thieir income that would be taker by incomes and profits to the tax authorities the Government through taxation. ‘ Sr a eet : oo wmstecreasel A Ee i putecdveint rye = KPI PIne oowtey =: BERS be wee 2DiSintech prmert tf Scanned with CamScanner tga sagss CONT, DISADVANTAGES OF DIRECT TAXES a Disincentive to Investment: Where 1a high rate of tax is imposed on a firm’s profits, entrepreneurs may be discouraged from - establishing businesses in the country. i CONT. DISADVANTAGES OF DIRECT TAXES | This could lead to capital flight to. other places where taxes are | mininial (tax haven). Secondly, a high’ income tax will leave the: firm | with less profit to plough’ back’ into: : the business. ' \ ADVANTAGES OF INDIRECT, TAXES. © Advantages of Indirect Taxes @ Some of the advantages’ of indirect taxes are as follows: we senna als CONT: ADVANTAGES OF INDJRECT | | q ~ TAXES a | Wider Tax Base: Indirect taxes are levied ona wide range of goods and services. Many of the people and}: organizations (e.g children, students, unemployed, government agencies, religious organizations etc). i CONT: ADVANTAGES OF INDIRECT TAXES | Difficult to Evade: Since. indirect taxes are hidden in the. prices of. goods and services, the consumer cannot evade payment of. indirect taxes as long as he buys the goods and services on which they are imposed. The degree of voluntary compliance is high CONT. ADVANTAGESOF INDIRECT | TAXES, © a Convenient: We pay an indirect tax °| | when we buy.the goods and services” |” on which-it is imposed (i.e Pay-AS- You-Buy). We ‘pay in installment, whenever .we. want. to -buy, -unlike, direct tax that usually pay in lump sum. Scanned with CamScanner T CONT. ADVANTAGES OF INDIRECT TAXES J’ Beneficial Social Effects: Indirect taxes can be imposed’ on. certain goods considered to be, harmful to raise their prices -and discourage people from consuming them, for |) example alcohol, cigarettes, etc CONT. ADVANTAGES OF INDIREG> TAXES 9 Equitable: Indirect taxes can be made mors | equitable by imposing a higher rate of tay | ‘on goods and services consumed mostly; the rich (ie luxuries) and a lower rate of tx | on goods and services consumed mainly by the poor (i.e necessities or essential) or complete exemption of such goods and services from tax. | | sm se i i =e) DISADVANTAGES OF INDIRECT TAXES } @ Disadvantages of Indirect Taxes [© The following are the disadvantages of indirect taxes: CONT: DISADVANTAGES ‘OF INDIRECT TAXES w Inequality: Direct taxes can be made progressive; indirect, taxes ‘can create| inequality. Both the rich and ‘the poor| buy in the same market. For example, it is regressive since it felts more by| the poor. (CONT, DISADVANTAGES OF el INDIRECT TAXES ~~ '@ Inflation: Indirect taxes are added to the {prices of goods and services so they ‘end | up increasing the prices of such goods and services: In our economy where the prices of goods and services are always rising, indirect taxes have helped to worsen the situation, Imagine what will happen when the.rate of VAT of import duty or excise duty is inicreased. Hence, it iricreases the cost of living through high prices. L CONT: DISADVANTAGES OF INDIRECT TAXES @ Uncertain: ‘The revenue that the government expects to raise from indirect taxes: (ie tax yield) cannot be estimated in advance with a fair degree of accuracy. It’s not eady to, determine the incidence on this tax. | Ine Scanned with CamScanner INDIRECT TAXES Loss of Revenue: There. ane many intermediaries involved in the collection of indirect taxes for, the government, for ‘example, the manufacturer, wholesaler, reiniler; ete are registered’ to, collect value dded tax (VAT). For example.some of them may collect the indirect taxes and fail to remit the whole or part of the amount to the tax authority. "Some may even understate the amount collected. 1 74/6/2023 CONT. DISADVANTAGES OF 4 E INDIRECT. TAXES Tax Evasion: Some indirect taxes are easily evaded. For example, some: | importers:and exporters who smuggled: -- goods into of out of the country do-not! pay ‘customs duties on -such goods. Government spends a lot of money to! maintain custom officials, police, etc to: cheek smuggling. 4 Scanned with CamScanner ‘TAXATION & FISCAL POLICY y ECOUSHTAXATION’A FISCAL POLICY TALKING POINTS TAX AVOIDANCE & TAX EVASION Deranratent oF coNoMi¢S 4O¢VELOPMENT ‘Sroores: FACULTY OF SOCIAL SCIENCES, FEDERAL UNIVERSITY DUTSIN-MA FEpeani0a) ACADEMIC SESSION CONTENTS: i ————O- eemoncnon Senet x aromwer fy Seertamon a ‘ Seer mete evwownnorts ere ee eee easing INTRODUCTION, CONT. INTRODUCTION oy \ ®) «Introduction: +o Tax! avoidance «and evasions constitute a problem in almost all the countries: of. the world. Tax avoidance’ is. different from. tax evasion, while evasion .is “against ‘the law; avoidance is within the ambit of law. Every assesse wants to ‘escape from paying taxes, which encourages them, fo use various’ meatis to avoid such! payment, And when it’s about savings if taxes, the two most common practices that can be seen all around the world are tax avoidance and ‘tax'} evasion. \ a SI “CONT. INTRODUCTION ———©} 3 oTax avoidance and evasion are| ‘most commonly. thought of. in relation to income taxes, but tax javoidance. and evasion can be practiced by businesses on state} sales taxes and on employment ONo one likes to pay taxes. But! - taxes are the law: The terms “tax avoidance" and "tax cvasion" are often used. interchangeably, but ! they are very different concepts. | Basically, tax avoidance is legal, while tax evasion is not. Scanned with CamScanner DEFINATION OF TAX AVOIDANCE _ |’ con'r. DEFINATION OF TAX AVOIPAN s ‘O- y ! sh ~©) Oo ; Me. «Wena aceon © in another words it refers to finding | 4 | Definitions of Tax Avoidant: : ‘out new methods or tools to avoid the | avoidance is the legitimate ayment of taxes which are within the ' ) Cninimizing of taxes, using mits of the law. My jmethods approved by the ‘appropriate tax authorities. CONT, DEFINATION OF TAX AVOIDANCE, ‘CONT. DEFINATION OF TAX AVOIDANCE = @ oTax avoidance isan exercise in which © Tax avoidance is the endeavour on the assesse legally tries to defeat the the.part of the taxpayer to, reduce his. {. basic intention of the law, by taking ||. * tax liability by, taking -advantage of dvantage of the shortcomings in the specific «provisions, of the. Jaw to Jegislature. \ on) reduce his tax liability. I | oTax avoidance is perfectly legal. .X AVOLDANCE. ‘CONT. DEFINATION OF TAX. AVOIDANCE )—— : © Examples of Tax Avoidance: © An individual sells his let out hoitse | Suppose .a, taxpayer's total income property, (long-term capital asset) for surres the maximum tax-free 83,000,000 making a capital gain of }) | | amount, then he has to pay the tax on Birr 150,000. ‘This capital. gain | | such excess amount. But if he invests would normally be taxed. But, i he invests the sale proceeds” in’ a the excess amount ‘in any of the Rs + hpproved schemes for which there is a articular: manner stipulated by law, ie e need not pay any tax. ief in the tax law, he can save on | tax altogether. Scanned with CamScanner = CONT. DEFINATION OF TAX AVOIDANCE DEFINATION OF TA; oDivoreing the wife on paper so.that her income is not added together with husband’s income. is also a common device for tax avoidance. * Definitions of Tax Evasion: i oTax evasion as defined by the Canadian Department of National Revenue is “the omission or | i commission of an act knowingly with H intent to deceive so that the tax | reported by the Jaxpayer is less than | 2 the tax payable under the law, or, a | | conspiracy to commit such an offence. i. EEE = CONT. DEFINATION OF TAX EVASION CONT. DEFINATION OF TAX EVASION Tax evasion, ms other hand, is the illegal practice of not, paying’ taxes, by not reporting income, reporting expenses not legally allowed, or by not paying taxes owed. failure to:meet tax! illegal?means, such olt is:also viewed as an illegal agt ‘which implies ‘paying ‘less taxgs |) than ‘established by law or not paying them at all. Tax Evasion is a criminal activity for which the assesee is subject to punishment under the law Ve |[ Cont. DEFINATION OF TAX EVASION CONT. DEFINATION OF TAX EVASION | © | | oTax; evasion is a practice of reducing tax liability ° through! illegal means, i.e. by suppressing | income or inflating expenses or b showing lower ‘income. In so words, it's considered ‘tax evasiot if you knowingly fail to repo income . | In other words, it's considered taxy | evasion if you knowingly fail to report income illegal. Scanned with CamScanner pe geen = + [| eon, DEFINATION OF TAX EVASION CONT. DEFINATION OF TAX EVASION evasion is the illegal act or «Examples of Tax Evasion: : practice of failing to pay taxes wale oA trader:‘makes a sale for 410,000 fre owed. In businesses, tm cree ‘and does not account it, in his books} are Oveur in conneetion with income |), st Bos te ipovadliy tae if ty employment faxes, _ sales and excise taxes, and other federal, state, and local taxes Tax evasion is perfectly, illegal. CAUSES OF TAX AVOIDANCE & EVASION = : CONT, DEFINATIO! :VASION IN NIGERIA ie ——@)— & | 0 An individual Tends hig money of + Causes fT Avoidance & Evasion Ia Nis ; N300,000 to another person at oLack of Principle of Economic 120% interest per annum and does ‘Justice: Inability of Nigerian tax -|| #not incltide this income in his total system : to. satisfy the. principle || , if economic. justice, that. is, ina eae Situation. where Government cannot | live-up to-expectation there is‘bound i -|| “tobe problem. of tax avoidance and ' evasion. 1 CONT. CAUSES OF TAX AVOIDANCE & EVASION NNIGERIA Gel o Multiplicity of Tax Laws: A number’ of laws enacted for the recovery of a variety of taxes often leads to widespread tax evasion. ‘AVOIDANCE & NIGERIA. -& Information: ;.in an ¢ Nigeria where activities have not been fully monetized, there will be room for tax avoidance and i H ! vevasion “olmadequate ‘economy lik ‘ 4 ‘ ‘ : i ‘sas aaa val Scanned with CamScanner ; CONT. CAUSES OF TAX AVOIDANCE & ‘CONT. CAUSES OF TAX AVOIDANCE S| EVASION IN NIGERTA EVASION NIGERIA. o,Complicated Tax, Lavs:,Com cated | © High Rates of Taxation: High rates | : evasion. ‘The tax laws contain a number (OE stacey 1 causes widespread) ney ee eee eee, evasion, because the greater the risk felief surcharges and so’ on. For undertaken for the purpose of tax example: the Income Tax Act has 28 evasion, the greater is the reward. chapters and 298 sections including sub- Sections. So, such complication in tax- : 1 laws, is also a root-cause for the tax i evasion. 2 ~ CONT. CAUSES OF TAX AVOIDANCE & [-CONT. CAUSES OF TAX AVOIDANCE © EVASION ] EVASION JN NIGERIA IN NIGERIA | —@)— 4 o Nature of the Economy: The nature © Corruption: Because of unpatriotic __ Of the economy is too informal. + |) attitude of tax. collectors «and { taxpayers- for their own personal : benefivgain tax collectors will always like to collude with taxpayers toevade tax * : va 151 Ay E FON TO PROMLENS OF TAX AVOIDANCE FVASION ‘CONT. CAUSES OF TAX AVOIDANCE & EVASION BOLUTION TO FROM CERIN IN NIGERIA ~@)— nf Econom: + Solution to Problems of Tx Avec & Evasion i ‘0 The Problems of Porous Economy Sie Up. to, xpectation neta 2 is, borders are not Ati aor aater security, and the ||” necessary for Government to live up situations that \ allow’ smuggling to expectation so that the tax system activities’ to take place. Hence, ||" will satisfy the principle of economic increasing tax evasion _, dustice ii ; : | Scanned with CamScanner j Cost soLuTON TO: TROBLENSOF TAX AVOIDANCE & f TiAsON I RICERIA Thorough Qverhauling. of Tax ‘Laws: One of the main reasons for tax avoidance and tax evasion is loose Grafting. of tax laws which, contain several loop-holes and’ weak points Nhat enable the tax evaders to.carry on “the unlawful activities. Hence, it is unecessary (0. re-draft the tax. laws ‘ly without any loopholes and I thoroughly wi a eas or RNG TORT SOLUTIONTO PROM NIGERIA place emphasis cannot be eas ini SOLUTION TO PROULENS OF WAX AXDIDANCE & EVASION IN RIGEKIA CONT SOLUTION TO PRODLEMS OF TAX AVOIDANCE & EVASION IN NIGERIA, 6 Monitoring Agtnts:: The use of ‘monitoring agents to. check - the unpatriotic attitudes of tax collectors © Punishinen: Peay for.tax evaders ‘and disciplinary ‘action _ against unpatriotic. tax’. _collectors:. . The taxpayer should be made to pay to evaded tax in arréars plus market rate of ‘interest. The . unpatriotic tax collector should be dismissed from service. : Coxir SOLUTION TO PROBLEMS OF TAX AVOIDANCE & bf EVASION IN NIGERIA ‘CONT. SOLUTION TO PRODLENS OF TAX AVOIDANCE & "EVASION IN NIGERIA . “o Effective Usesaf Tax Clearance |Certificate: Government should 'nrovide effeétive tax clearance to ‘avoid tax avoidance and evasion, oEffective policing of borders to check . smuggling: Government should use’ effective ways and device to avoid evading tax. Scanned with CamScanner i ZEaT SOLUTION TO PRODLEMS OF TAX AVOIDANCE & EVASION IN NIGERIA. * © : © Public Enlightenment Campaign: Government should make use of official megaphone to educate the people of the damage that will be | done to the economy anytime tax is 4) evaded ot avoided CONCLUSION -@— Conclusion: ' o Both Tax Avoidance and Tat Evasion are. meant (0 reduce the tax liability ultimately but what_makés the difference is that the former! is | justified ‘in the eyes of the Jaw as it does not make any offence or breaks any lav, while the latter breaks law CONT. CONCLUSION « lgacereey te on enaeeecel ‘© However, it is biased as the honest tax payers are not fools, but they can also Take; arrangements for postponing unnectssary tax. If we talk-about the latter, it is compietely unjustified because it, is a fraudulent activity, ~ because itLinvolves the acts which are’ forbidden by the law and hence it is punishable because _ onl: those means ar employed which are legal, while T: Evasion is considered as a crime if the whole world, as_it resorts to | various Kinds" of, manipulations. deliberate | | Scanned with CamScanner — : PAXATION & FISCAL POLICY T warren rane 022/202) ACADEMIC SE! @ INTRODUCTION | Q)DEFINATION OF TAX IMPACT \ QDEFINATION OF TAX INCIDENCE @ DEFINATION OF TAX SHIFTING 4 {@ TYPES OF TAX SHIFTING QTAX SHIFTING & NATURE OF ELASTICITY CONTENTS © Hl INTRODUCTION INTRODUCTION } © * Introduction: i o'Who' :pay? Who: really, pays? Does: it matter..imposes ‘the statutory incidence of thé tax on? The tax shifting can’ be: possible | depending on the ‘demand and supply elasticity of a commodity ultimate burden of tax? The burden of @ fax does not always, tie on the person from whom it is: collected. In many: cases, it is borne’ by the other: people also. Thus, the! person who initially pays the tax’ may. hot be actually bearing -its_money. burden as such: Hence, itis necessary | to know who bears the immediate burden of tax and who. bears. the. | DEFINATION OF ‘FAX IMPACT DEFINATION‘OF TAXIMPACT: Definition of Tax Impact: o The impact of a tax is on the person who pays the tax in first instance. In other words, the person! who pays the tax to the goverriment in’the first instance bears its impact. a © Therefore, the impact of a tax is the immeédiate’ result of the:} imposition ‘of a tax on. the person! " who pays it in the first instance. It} refers to the immediate burden of'|y the. fax and-not ‘to the ultimate burden of the tax. 4 Scanned with CamScanner fe © )\ DEFINATION ee INCIDENCE XIN CONT. DEFINATION OF TAX INCIDENCE | 'sDefinition of Tax Incidence: "©The concept’ was. brought to attention ‘by the French | Physiocrats and in _ particular | Frangois Quesnay who.argued that ; the incidence of all: taxation falls | ultimately on landowners and is at the nse of land rent. oThis is also called the } burden of taxation, refers | to who ultimately bear the | burden of taxation and also | incidence of tax is the final | resting place of tax burden. | OThis is the process where by, the economic ‘agent that bears the initial impact of the tax is able to pass the whole or part of the tax. burden to another: economic agent through changes in prices, size or quality ‘change. in of the. product. This is. a | © taxation that eliminates:or reduces one or ‘1s. several taxes and-establishes'or increases otters, while keeping the: overall revenue the same i ve Ti a = |, DEFINATION ee SHIFTING DEFINATION & TAX SHIFTING \ }¢Tax Shifting: o.In another words it refers to the process by which the,. money urden of a tax is transfetred from one-person to another, Whenever there is a shifting of taxation, the | tax may be shifted either forward | or backward. | | ff ! TYPES OF TAX SHIFTING TYPES OF TAX SHIFTING i © «Types of Tax Shifting: the tax burden to the consumer, it is known as "Forward Shifting". i i © For example if a producer increase | the price of his/her product as a result | of tax imposed on him/her. To the | consumer in the form of higher prices | for the ‘goods and services they buy. | However, this causes a risc in the lj price Sf the taxed commodity. Scanned with CamScanner [ ‘TYPES OF TAX SHIFTING [ TYPES OF TAX SHIFTING al) © | oBackward ‘Tax Shifting: On’ the other hand, this is a situation where by producer shifts the tax burden to the factors of production i.e, to-the suppliers of raw materials etc., it is known as "Backward Shifting". The backward shifting can be taken place by compelling the supplier to reduce the price of raw materials etc. -oFor example if a producer decrease the price of his/her inputs (cost of production) as a result of tax imposed on him/her. To’ the producer/owner of the business in the form of lower retums on investment or to. the employees of the business in the form of lower wages for their labour or some combination of these. This causes a({ reduction in the prices of factors of! production. ‘TAX SHIFTING & NATURE OF ELASTICITY CONT-TAX SHIFTING & NATURE OF ELASTICITY 3 © Perfectly Inelastic Demand: | Of the demand for a commodity is perfectly inelastic (i.e elasticity. is | equal toizero), the consimer: bears the burden of the tax. This is because at | whatever price, chiange in: quantity | demanded remain constant, which | implies that consumer cannot change. jure 1: Perfectly Inelastic Demand "CONT. TAX SIFTING & NATURE OF ! BLASIICITY CONT. TAX SHIFTING & NATURE OF ELASTICITY i © Froin Figure 1, the original equilibrium price is given a$ P,, as a result of tax on the commodity, the supply curve shifts from $S to $,S,, resulting sin a new equilibrium price P,. Under this elasticity, the output remains the same but the price is increased by the full amount of the tax Chest pean oe ercaanwiv alan Basha Kaa GS tween ne | © The eet fa rnin the pie cost of prodesion isthe sito the supply curve to the left Ls oe | (© There is an irease in the price of tie commodity, however, the incense inpace waufred orbomgy tconsansy © The equilib quantity ren at the vga qa he iher pice a by te spe producer wil be wling to spy arte © The Govemmentresevesaional revenue to the mune ofr Be Oey won rm ee ia | Scanned with CamScanner CONT. TAX SHIFTING & NATURE OF CONT. TAX SHIPTING & NATUREOF ELASTICITY i . BLAgayciTY * Perfectly Elastic Demand: © If the demand is perfectly elastic so that the price does not rise at all the incidence of the tax is entirely on. the |, seller/producer. ‘This “is. becaise. price remain constant, only quantity demanded Keep changing, which implies that a slight increase in the: ice, may results consumer to stop buying, + Figure 2:Perfectly Elastic Demand | i | ! “4 « Quant (he t ‘CONT. TAX SHIFTING & NATURE OF Wes ELASTICITY CQNT-TAX SHIFTING & NATUREOF 1CITY | OFrom Figure 2,'the imposition of a tax shifts the supply curvé to $,S,. The new equilibrium — output.“is Qu and. price |], remains the same at P,. © Tags rapid hewn Pay getline ss i} | oper st niematcial aes | * others ten nce ih pe pe gine wine | TTS SL a ee | ° RSS nsec sea lisa | ° RSs Rae alten Ross ‘ ia CONT: TAX SHIFTING & NATURE OF CONT. TAX SHIFTING & NATURE OF ELASTICITY ELAGEITY | ¢ Inelastic Demand: |’, -Olf the:demand for a commodity is inelastic (O

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