TAX AVOIDANCE AND EVASION AND ITS EFFECTS ON THE COMMERCIAL TRANSACTIONS IN NIGERIA: NAVIGATING THE CHALLENGES

Abstract

This paper looked at Nigeria's ongoing problems with tax evasion and avoidance and how they affect business dealings. Taxation is recognised as a fundamental instrument for state-building, public service provision, and commercial stability; however, Nigeria’s fiscal system continues to suffer significant losses due to widespread avoidance and evasion. The paper adopted the doctrinal method which is desktop research or library-oriented research. The paper also relied on two sources of law which are the primary sources and secondary sources. The primary sources include: statutes, case laws, protocols, treaties, gazettes, and recommendations. The secondary sources include: journal articles, books, internet sources, newspapers, periodicals, magazines, unpublished works, and conference papers. The findings revealed that taxpayers frequently exploit loopholes or deliberately conceal income, resulting in substantial revenue gaps, administrative inefficiencies, and weakened commercial confidence. The paper further showed that corruption, inadequate enforcement mechanisms, and low taxpayer compliance culture aggravate the problem, with significant negative implications for economic development.The paper assessed how the changes in Nigeria’s 2025 tax reform package, referred to as the Nigeria Tax Act 2025 will influence taxpayer behaviour under Nigeria’s fiscal system. The paper concludes that although reform efforts exist, Nigeria’s tax system remains vulnerable to abuse. It recommended strengthening anti-avoidance legislation, expanding digital tax administration, improving institutional coordination, enhancing taxpayer education, and ensuring that tax revenues are channeled into employment-generating initiatives to support sustainable economic growth. It is hoped that the forgoing recommendations will help to prevent tax evasion and avoidance and also strengthen commerce.