European Journal of Economics, Finance and Administrative Sciences ISSN 1450-2275 Issue 48 (2012) © EuroJournals, Inc. 2012 http://www.eurojournals.com/EJEFAS.htm An Empirical Analysis of Tax Leakages and Economic Growth in Nigeria Adedeji, Titilayo Olaseyitan Department of Accounting, University of Lagos, Nigeria Tel: +2348125151091 E-mail: floraeyi@yahoo.com Oboh, Collins Sankay Department of Accounting, University of Lagos, Nigeria Tel: +234-806961340 E-mail: colsanky@yahoo.com Abstract The government has for the umpteenth time complained of the widespread incidence of tax avoidance and evasion in the country as companies and other taxable persons employ various tax avoidance devices to escape or minimize their taxes or deliberately employ fraudulent ways and means of evading tax altogether, sometimes with the active connivance of the tax officials. This paper empirically examined the economic implication of tax leakages on the Nigerian economy. A survey research design was adopted and responses were obtained through the use of a well structured questionnaire administered to 185 respondents. Findings from the empirical analysis using Kendall’s w-test and Chi- square test statistics reveal that tax evasion and avoidance have adversely affected economic growth and development in Nigeria, and also, that lack of good governance is the basis for which tax leakages activities is perpetrated. The study therefore recommends that the government should embrace and promote good governance so as to encourage voluntary compliance of tax liability by the citizenry. Keywords: Tax avoidance, tax evasion, economic growth and development, good governance 1. Introduction Plausibly, the concept of taxation has been a concern of global significance as it affects every economy irrespective of national differences (Oboh et al., 2012). Within the context of Africa, tax, a concept as old as mankind can be described as an amount, effort, contribution or service rendered either in kind (i.e. goat, cow, farm produce, clearing of grass etc.) or monetary value (i.e. cash) contributed into a common purse for the running of the society. According to Omotoso (2001), in his definition of the modern taxes, defined tax as a compulsory charge imposed by a public authority on the income of individuals and companies as stipulated by the government decrees, acts or cases laws irrespective of the exact amount of services rendered to the payer in return. Thus, taxes constitute the principal source of government revenue and the beauty of any government is for its citizen to voluntarily execute their tax obligations without much coercion and harassment.