Aggressive Tax Avoidance Scheme: The Emergence of the Continuous Distortion of the Fine Line Between Tax Avoidance and Tax Evasion

Description

ABSTRACT

Aggressive Tax Avoidance Scheme: The Emergence of the Continuous Distortion of the Fine Line Between Tax Avoidance and Tax Evasion

Isaiah Folarin Akano*

‘A person may use lawful means to avoid income tax. What he may not do is to try to evade it. What he does should be genuine, not merely a veil to hide or dissemble the reality of things₁

ABSTRACT
Tax is one of the significant sources of revenue of the government in Nigeria. As a matter of fact, at the inception of the year 2024, the Federal Government tasked the Federal Inland Revenue Service to generate a whopping sum of N19.4 trillion, which amounts to about a sixty percent increase from the sum of N12.3 trillion generated by it in 2023 in a bid to raise the overall government revenue as a percentage of the Gross Domestic Product (GDP) to 25%.₂ The above revenues are meant to be generated by individuals, companies, and other legal entities through tax. Hence, there is a need for citizens and corporate bodies to arrange their affairs in such a way that they can attract a minimal tax, especially given the harsh economic condition in the country, the high inflation rate, the weak value of the naira and high interest rate on loans which most businesses resorted to, as their primary source of capital. Tax lawyers, Accountants and other tax consultants had at different times proffered different ‘tax avoidance schemes’ to their clients. Some of the Schemes are aggressive and complex in nature, and there are instances wherein they were eventually interpreted by the Court to amount to tax evasion. This article seeks to take a critical look at the line of differences between tax avoidance and tax evasion and also discuss the continuous distortion of the same due to the advent of aggressive tax avoidance schemes in recent years.

Keywords: Tax, Tax evasion, Tax avoidance, Aggressive tax avoidance schemes, anti-avoidance provisions.

INTRODUCTION
The above quoted immutable words of Bairamian JSC, in Akinsete v Senior Inspector of Income Tax₃ aptly captured the truism of the topic of this discussion, especially to the effect that although lawful means may be used to avoid income tax, no attempt should be made to evade it.

* LL.B (Unilorin), BL.

1. Bairamian JSC in the case of Akinsete Syndicate Nigeria Limited v Senior Inspector of Income Tax (FSC
   164/163, 30/10/64).
2. ‘Nduka Chiejina, A. Fed govt sets N19.4tr Tax Revenue Target for FIRS in 2024’ The Nation (Abuja,
   24 January 2024) accessed 20 February 2024.
3. ibid

THE GRAVITAS REVIEW OF BUSINESS & PROPERTY LAW Vol.15 No.4