AN EXPLORATIVE PERSPECTIVE OF TAX HAVENS AND FISCAL EROSION IN NIGERIA

Abstract

The study uses an exploratory research design to examine the impact of tax haven jurisdictions on domestic revenue generation in Nigeria. Through an adoption of a qualitative, interpretative methodology, the study synthesizes evidence from corporate relocation patterns, financial statements, and extant literature to analyze the mechanisms of fiscal erosion. The findings reveal a concerning trend of major companies that include Dunlop Nigeria Plc and Michelin Nigeria Plc, relocating their operations to countries like Ghana, motivated by a combination of macroeconomic instability and the pursuit of favourable tax regimes. The migration of these firms increases capital flight which directly diminishes the corporate income tax base thereby worsening Nigeria’s revenue constraints and fostering an increased reliance on debt financing. The study concludes that tax havens exert a significant negative effect by facilitating profit shifting and capital flight, thereby undermining domestic fiscal sovereignty. To mitigate this, recommendations are advanced for the strengthening of domestic fiscal governance through a more transparent and competitive tax code, a robust commitment to international transparency agreements like the automatic exchange of information, and holistic improvements to the business investment climate in Nigeria beyond taxation alone with the aim of discouraging such relocations and further strengthen fiscal resilience.