It has been noted that tax system in Nigeria has come to play a significant role, as a major source of revenue to the federal government by way of imposing tax on tax payers and it is for them to pay up the tax.

The act of evading and avoiding tax by most registered companies and some individuals has however affected the revenue base of the government especially in providing essential services in the society. People naturally prefer to reduce their tax liabilities by deliberately overstating their expenses and make false entries and fictions in their books of account. Thus, their act however, causes tremendous reduction in the revenue accruable to the government which eventually shrinks revenue to the treasure of government.

Tax is a financial issue and its payment is a civil duty. It is the imposition of a financial burden for the government on individual firm and companies. In general based, the word tax means any contribution imposed by the government upon individual and companies for the use of government to provide facilities or services as rendered by the state. It is not a voluntary payment or donation but an enforced contribution made on the pronouncement or directive of legislative authorities.

Osita (2004:1) stated, taxation may be define as the compulsory leave by the government through it’s various agencies in the income, capital or consumption of it’s subject such as salaries, business profits, interest, dividends, commission regularities, rent etc.

It could be said that there are three main methods of financial economic expedition open to meet developing countries there are:-

(a) LOANS 

(b) GRANT 

(c) TAX AND OTHER CURRENT RECEIPT 

Of these sources, tax is perhaps the most important since the level of government expenditure is to a great extent dependent on the ability of the tax system to generate the required revenue at the disposal of the government.

In spite of this benefit from tax most people still indulge in tax evasion and avoidance. Attempt to avoid some portion of liability or not to pay tax will affect the revenue of the government that is the reason why the government frown at the issue of tax evasion and avoidance, and uses it’s authorities to enforce compliance.

ARONOMOLE and OLUWALAYODE (2006:39). Define tax avoidance as legal ways by which a tax payer reduces in tax liabilities.

Tax evasion is a deliberate on the part of the tax payers to reduce their tax liabilities through illegal means or an attempt not to pay tax due.

The distinction between this tax avoidance and tax evasion is that tax avoidance is not considered a criminal offence where as tax evasion is a criminal offence.

According to ANYAELE (1990:225) a tax may be defined as a compulsory contribution imposed by a government authority on goods, individual and co-operate bodies irrespective of the exact amount of services rendered to the tax payer in return and not imposed as a penalty for our legal offence. Both direct and indirect taxes that are collected for the government inform of income tax, exercise duty, import and export duties. Purchase and sales taxes and so on help the government to generate a lot of revenue for the smooth administration in the nation.

There are two elements in every form of taxation and that is the BASE AND RATE. The tax base is the object which is taxed or a measure of the private sector income or wealth that can be taxed, while the tax rate is the percentage of the measured amount taken off from the tax base. In this case the money realized from it is used to provide social goods and services, so that everybody both the rich and poor will have equal chances of making use of them, that is the goods and services. They include pipe borne water, electricity, good roads, hospital, schools etc. most people in Nigeria has the habit of evading or avoiding tax payment i.e. they always avoiding paying their taxes. With this state of affairs the various tier of government in the country don’t usually generate enough revenue which will enable them to effectively execute all the development projects which are highlighted in their budgets.

It has to be pointed out that the successive Nigeria governments have not made adequate and sincere efforts toward informing the tax dodger or evader on the need for them to pay the taxes. All attentions have been directed on the revenue from oil sector while taxes and agriculture, which supposed to be generating a lot of revenue to the country, are deliberately over looked.

Also the researcher wants to look into the problems of paying tax by the public, such problem are as follows

a) Tax evasion and tax avoidance by the public 

b) Poor system of tax collection 

c) Inability of the government to prosecute tax avoidance.