Abstract
Taxation is not just a means for generating revenue for the country, it is also a tool used to regulate the economy using fiscal policy, to control inflation, prices of goods and services and bridge the gap between the rich and the poor. However, the awareness for this all-important component of any goal-oriented government is poor. It is against this backdrop that this study aimed at developing a Tax Awareness Index for use in the Nigerian context. The study adopted descriptive survey approach with a cross-sectional design. The sampling approach to recruit participants for the study was the convenience sampling method. Data analysis involved the use of principal component analysis (PCA) with Varimax rotation. Results showed that the initially proposed 10-factor solution of 94 questionnaire items was not supported with the data gathered. However, a 5-factor solution emerged that made substantive sense for the purpose of developing a Tax. Awareness Index. A composite score on the 5-factor solution indicates the level of tax awareness for a respondent. It was concluded that this index would serve as a viable tool to measure how much the general populace is aware of tax and its components.
Highlights
Tax is conceptualized as a compulsory contribution by tax payers regardless of any matching return of services or goods by the government (James & Nobes, 2000)
Based on the scree plot, the 10 factor solution indicated in table 1 was difference in the sense that there were likely less than 10 factors in the solution
Rather it was found that a 5-factor structure of Tax Awareness Index was most plausible in the given circumstance
Summary
Tax is conceptualized as a compulsory contribution by tax payers regardless of any matching return of services or goods by the government (James & Nobes, 2000). Taxation is a compulsory levy imposed by the government on its citizens on their profits, consumption and income while Tax awareness is basically how informed or how well people know and are familiar with the relevant taxes levied on them by the government and the impact of those taxes on their individual lives and the economy as a whole. Taxation is not just a means for generating revenue for the country, it is a tool used to regulate the economy using fiscal policy, and with taxation, inflation can be controlled, prices of goods and services can be controlled and the gap between the rich and the poor can be bridged if proper tax awareness is created and enforced. When the level of tax compliance is high the level to the gross domestic product (GDP) ratio will be high and government would have more money to fund projects and effectively regulate and stir the economy in the right part.
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