Abstract
Income tax noncompliance is a huge problem in Nigeria making the country one of the lowest income tax countries in the world based on percentage of GDP. The study reviews and integrate previous research and causes of noncompliance were identified – Socio economic condition, tax knowledge, perceived audit probability and prevailing social norm . However, as acknowledged by researchers, over fifty years of research on noncompliance is yet to produce a formula that can solve noncompliance problems applicable to all jurisdictions hence the need to develop country-specific models. Given that Nigeria has one of the largest informal sectors in the world, this study adds perceived attractiveness of the informal sector as a factor and reconstructs public governance quality as moderator of other factors. The study argues that the above factors are present in all countries of the world; if they are worse in Nigeria, then a moderator could be the problem and public governance quality is plausible given Nigeria’s poor record. Facts from previous research support this position. It is recommended that Nigerian government urgently improve on public governance to reduce the size of the informal sector and mitigate the effects of the other factors. Further research is needed to statistically analyse the suggested framework. DOI: 10.5901/mjss.2016.v7n6p339
Highlights
Nigeria is classified as a middle income country
Despite consistent high economic growth over a decade (OECD, 2014B) and the GDP rated as one of the highest in the world and highest in Africa, why has Nigeria not been able to translate these economic figures into tax revenue urgently needed for development? Jenkins, Kuo and Shukla (2000) stated that the amount of tax revenue a government can collect depend on these variables: Tax base, tax rate, administrative efficiency and the compliance rate. This position is in line with the mainstream philosophy of tax scholars. Examining these variables; this study argues that with the current high level of GDP, which is dominated by the service sector, there exists adequate tax base to significantly increase the current level of income tax revenue in Nigeria
Given the enormity of research by scholars over the last fifty years, the remarkable progress made by many countries in generating income tax and the below average performance of Nigeria, this study decides to search for a conceptual framework that can possibly explain the Nigerian income tax noncompliance case in line with Walliman (2011)
Summary
Nigeria is classified as a middle income country. It has witnessed a consistently high growth rate of over 6% over the last decade. (OECD, 2014). This study argues that noncompliance could possibly explain the dismal income tax statistics of Nigeria This position can be supported with research findings that measured Nigeria’s informal economy. Setting the motivation for this study is Bird (2013) who lamented that there have been over fifty years of active research in the area of taxation which has not yet resolved the issues He posited that it is difficult to find any model that can solve all the problems of tax noncompliance in all countries and that developing countries display an array and a wide range of tax compliance levels which are reflective of their respective tax administrations, attitudes towards their governments amidst other conditions. This study responds to Bird’s call and seeks to understand the peculiarities of Nigeria income tax non-compliance and factors responsible
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