Effects of Tax Compliance Determinants on Tax Evasion in Nigeria: An Empirical Insight

Abstract

Tax evasion is an illegal activity common in the Nigerian environment, especially among operators in the informal sector of the economy. It is for this reason that measures have been put in place by the government to motivate compliance of taxpayers with relevant tax laws in Nigeria. However, there are contradictory views regarding the effectiveness of the compliance measures. The study, therefore, seeks to examine the effects of the tax compliance determinant on tax evasion in Nigeria. The study employed a survey design research approach to achieve the stated objective. A quantitative method was used where data were collected using a structured questionnaire from a sample of Small and Medium Enterprises (SMEs) operators in six states in North-eastern, North-central zones, and Federal Capital Territory (FCT) Abuja. The reliability and viability of the measuring instrument were done using Cronbach’s Alpha and Kaiser-Meyer Olkin (KMO) tests. Tax Morale (TM), Tax Education (TE), Tax Holiday (TH), and Tax Deterrent (TD) are explanatory variables while Tax compliance (TC) is the response variable. The analysis of the data was done using multiple regression.  The result showed that while TM, TE, and TH have positive impact on the TC behaviour of taxpayers that of TD was negative. The study recommended that government should use tax compliance factors such as TM, TE and TH rather than punitive TD measures that triggers alienation of taxpayers instead of compliance.

Keywords: Tax compliance, Tax Morale, Tax education, Tax deterrent, Taxpayer