Tax Reform and Tax Compliance Behaviour of Companies in Nigeria

Okeke, Clement Ejiofor and Saluadeen, Yinka Mashood (2021): Tax Reform and Tax Compliance Behaviour of Companies in Nigeria. Forthcoming in: Bulletin of Applied Economics

Abstract

This paper evaluates the 2007 Company Income Tax (CIT) Reform with respect to improving the tax compliance behaviour of companies in Nigeria. Data for total annual company income tax paid and the total GDP for the respective years of the study were extracted from National Bureau of Statistics records. The study covers a period of twenty years (ten years, 1997-2006 before and ten years, 2008-2017 after the reform). The Wilcoxon Rank Sum Test was used as analysis tool. The study finds companies to be more complaint after the reform than before. The study recommends further reforms in terms of increase in the level of incentives to companies to enhance tax compliance.

• Item Type: MPRA Paper
• Language: English
• Keywords: Compliance Behaviour, Tax Reform, Political Support, Fiscal Contract Enforcement
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents; K - Law and Economics > K3 - Other Substantive Areas of Law > K34 - Tax Law

References

Abdulsalam, M., Almustapha, A. A., & El-Maude, J.G. (2014). Tax Rate and Tax Compliance in Africa. European Journal of Accounting Auditing and Finance Research, 2(3), 22-30.

Abdulsalam, M., & Dandago, K. I. (2014). Public Governance Quality and Tax Compliance in Africa. Journal of the Chartered Institute of Taxation of Nigeria, 12(2), 29-42.

Ali, M., Fjeldstad, O.-H., & Sjursen, I. H. (2013). To Pay or Not to Pay? Citizens' Attitudes Towards Taxation in Kenya, Tanzania, Uganda, and South Africa. Afrobarometer Working Paper no. 143. East Lansing: Retrieved from: http://www.afrobarometer.org/files/documents/working_papers/Afropaperno143.pdf

Alm, J. (2019). What Motivates Tax Compliance? Journal of Economic Surveys (2019) Vol. 33, No. 2, pp. 353–388

Anyanwu, J. C. (1997). Nigerian Public Finance. Onitsha: Joanne educational publisher.

Appah, E. and Oyandonghan, J.K (2011). The Challenges of Tax Mobilization and Management in the Nigerian Economy. J. Bus. Admin. Manage, 6(2), 128-136

Arindam D., Shanto G. & Dilip M. (2003. Tax Administration Reform and Taxpayer Compliance In India. JEL Classification Nos: H26, K42, O17

Azubuike, J. U. B. (2009). Challenges of Tax Authorities, Taxpayers in the Management of Tax Reforms. Nigerian Accountant, 42(2), 36-42.

Barbara, K., , Edoardo, L. & Alfred, S. (2013). Powerful Authorities and Trusting Citizens: The Slippery Slope Framework and tax compliance in Italy. Journal of Economic Psychology 34, 36-45

Central Bank of Nigeria (2000). Annual Report and Statistical Bulletin. Nigeria.

Central Bank of Nigeria (2008). Annual Report and Statistical Bulletin. Nigeria.

Central Bank of Nigeria (2015). Economic and Financial Review Quarterly. Nigeria.

Central Bank of Nigeria (2018). Economic and Financial Review Quarterly. Nigeria

Erich K. & Erik H. (2008). Enforced Versus Voluntary Tax Compliance: The ''Slippery Slope'' Framework. Journal of Economic Psychology 29 (2008) 210–225

Federal Inland Revenue Service (2018). Performance, Research, and Statistics report. Nigeria.

Grant R. (2008). The Relationship between Culture and Tax Evasion across Countries: Additional evidence and extensions. Journal of International Accounting, Auditing and Taxation 17, 67–78

Ifurueze, M. & Ekezie, C.A. (2014) The Nigeria Tax System and Economic Growth: A Time Series Analysis. International Journal of Economics and Empirical Research, 2(4), 163-169

Jackson, B. R., & Milliron, V. C. (1986). Tax Compliance Research: Findings, Problems, and Prospects. Journal of Accounting Literature, 5(1), 25-65.

Kirchler, E, Hoelzl, E., and Wahl, I. (2008). Enforced versus Voluntary Tax Compliance: The "Slippery Slope" framework. Journal of Economic Psychology, 29:210-225

Marcelo S. B. (2003). Tax Reforms and Tax Compliance: The Divergent Paths of Chile and Argentina. Journal of Latin American Studies, 3, 593-624

National Bureau of Statistics: GDP by Production backcasting Series from 1981-2017. Retrieved from: https://nigerianstat.gov.ng/resource/GDP%20by%20Production%20Backcasting%20Series%20from%201981-2017%20post%20rebasing%20fn.xlsx

Ndoricumpa, A. (2021) “Tax Reforms, Civil Conflicts and Tax Revenue Performance in Burundi”, Scientific African. 13(2021), [Online]. Available at: https://doi.org/10.1016/j.sciaf.2021.e00927 (Accessed 11 October 2021)

Odusola, A. (2006). Tax Policy Reforms in Nigeria – United Nations University – World Institute for Development Economics Research. Research Paper No. 2006/3

Ogbonna, G. A. & Ebimobowei, A. (2011). Impact of Tax Reforms on Economic Growth of Nigeria: A Time Series Analysis, Current Research Journal of Social Sciences. 4(1), 62-68.

OECD (2020) Revenue Statistics 2020: Tax Revenue Trends in OECD Retrieved from: https://www.oecd.org/tax/tax-policy/revenue-statistics-highlights-brochure.pdf

OECD (2008). Compendium of Productivity Indicators 2008. Retrieved from: https://www.oecd.org/sdd/productivity-stats/37574961.pdf

Palil, M. R., & Mustapha, A. F. (2011a). Determinants of Tax Compliance in Asia: A case of Malaysia. European Journal of Social Sciences 24(1), 8-32.

Palil, M. R., & Mustapha, A. F. (2011b). Factors affecting Tax Compliance Behavior in Self-assessment System. African Journal of Business Management, 5(33), 12864-12872.

Salaudeen, Y.M. and Atoyebi, T.A. (2018). Tax Burden Implication of Tax Reform. Open Journal of Business and Management, 6, 761-777.

Sohee K & Taekyoon K. (2018). Tax Reform, Tax Compliance and State-building in Tanzania and Uganda. Africa Development, 43(2), 35-64

World Bank Group. (2017). World development report 2017: Governance and the Law. Washington: World Bank.