Tax evasion in Nigeria



According to the Black’s Law Dictionary “Tax is a charge usually monetary, imposed by the government on persons, entities, transactions or property to yield public revenue”. It has been a vital source of any government’s revenue for time immemorial as the government uses the money accrued from tax to perform welfare and social programs, improve the education and healthcare sector, develop public infrastructure, payment of salaries of government employees and a plethora of schemes that would aid the effective running of a country or state.

In Nigeria, the payment of tax is a fundamental obligation under Section 24(f) of the Constitution of the Federal Republic of Nigeria 1999, which provides that it shall be the duty of every citizen to declare his income honestly to appropriate and lawful agencies and pay his tax promptly. Therefore, where an organization or an individual or a company refuse to perform their civic responsibility to pay tax, it is necessary for the State or Federal Government to create laws that imposes penalties.

Tax Evasion

Tax evasion is the deliberate misrepresentation of one’s true financial standing to the tax authorities so as to minimize his/her tax liabilities. It is a willful illegal act to avoid or reduce the payment of a lawful tax demand. It includes fraudulent tax reporting, revealing less income, profits or gains than the amounts actually earned and inflating deductions

Tax evasion is recognized in Nigeria as a criminal offence punishable under Section 40 of the Federal Inland Revenue Services Act 2007 and any person convicted shall be liable to pay the tax withheld or not remitted in addition to a penalty of 10 per cent of the tax withheld or not remitted per annum and interest at the prevailing Central Bank of Nigeria minimum re-discount rate and imprisonment for a period of not more than three years. Some of the reasons for tax evasion may be attributed to lack of adequate tax knowledge on the various tax liabilities and misappropriation of the remitted taxes to the appropriate government’s projects which in turn discourages taxable persons from complying.

With the current decline of oil, which has been a significant source of government revenue, the Nigerian government is taking tax compliance and implementation with utmost seriousness particularly with the provisions of the Finance Act 2021. It has been reported that Nigeria lost $178 billion to tax evasion by multi-nationals in ten years  and this has prompted the Federal Inland Revenue Service to seek out more tax evaders as seen in the case of Multichoice Nigeria Ltd v Federal Inland Revenue Service, the FIRS alleged that it conducted a tax assessment on Multichoice Nigeria and the company has a tax liability of N1.822 trillion. The Tax Appeal Tribunal ordered the company to deposit with the FIRS 50% of the disputed sum as security for prosecuting the appeal in line with the provisions of the FIRS Act.

The various taxes applicable to individuals and corporate entities are regulated by laws which imposes penalties for non-compliance. Taxable companies who fail to remit their assessable profits under the Companies Income Tax Act will be liable to pay N25,000 for the first month of default and N5,000 for each subsequent month of default

Similarly, an employer is tasked with the responsibility to deduct Personal income tax from the salaries of the employee and remitted to the relevant tax authority and failure to do so is punishable under Personal Income Tax Act  In Independent Television/Radio v Edo State Board of Internal Revenue the appellant (the company) failed to remit to the appropriate authority PAYE tax that were deducted for the period of 2005-2010. The Court ordered the appellant to pay the tax liability sum of N12.8 million into the Edo State Government Treasury.

In conclusion, taxes are required for the smooth running of a country, therefore, the effect of tax evasion on the economic growth of a developing country like Nigeria is crippling. The combined provisions of the Finance Act and various tax laws show that tax evasion is a major concern of the Nigerian government and the relevant tax authorities are ensuring stringent tax compliance by taxable entities, consequently, the Tax Appeal Tribunal and the Courts have set precedents which indicate tax evasion is punishable under the law by fine and/or imprisonment.



  1. Bryan A. Garner (2009) Black’s Law Dictionary, 9th Edition, St. Paul Minnesota: West Publishing Co, Pg 1594
  2. Adenekan A. (2000) “Tax Avoidance and Evasion in Nigeria” Insight: Michaelmas chambers ( nigeria#:~:text=It%20is%20a%20criminal%20offence,the%20performance%20of%20his%20duties.) accessed 02/03/2022
  3.  “Tax evasion” ) accessed 2nd February 2022.
  4. Ujah E. (February 11, 2021) “How Nigeria lost $178bn to tax evasion by multi-nationals ― FIRS boss” Vanguard  Newspaper  ( accessed 1/03/2022
  5. TAT/LZ/CIT/062/2021 
  6. Paragraph 15(7) (c) Fifth Schedule Federal Inland Revenue Service (Establishment) Act 2007. 
  7. Section 55(4) Companies Income Tax Act 2007 
  8. Section 81(3) Personal Income Tax Act 2011
  9. (2014)LCN/7241(CA)

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