TAX COMPLIANCE AND GOVERNMENT REVENUE GROWTH IN NIGERIA

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TAX COMPLIANCE AND GOVERNMENT REVENUE GROWTH IN NIGERIA is a well researched Project Topic for final year students and undergraduates, it can be used as a guide or framework for your Academic Research, etc. 

Abstract

The study examines the effects of tax compliance on the growth of government revenue in Nigeria with an emphasis on federally collected non-oil revenue. Secondary data was sourced from the Federal Inland Revenue Service management bulletin. The data were analyzed using ordinary least square regression. The findings revealed that tax compliance has a significant effect on boosting tax revenue generation and that tax default can cause significant variation in government revenue.

The variable in the model is significant at the 5% critical level and the
regression coefficient reveals that 88.8% of the total variation in revenue is accounted for by tax compliance with other variables in the stochastic term accounting for the remaining 11.2%.

It is recommended that Federal Inland Revenue Service should open more offices across the federation to increase the ease of paying taxes, set performance targets for managers of tax offices and sanction for non-performance, improve on leadership accountability at all levels of government, and ensure that tax revenue is transparently utilized so that taxpayers can see the benefits accruable from tax payment and take ownership of public infrastructures.

Introduction

Tax is a compulsory levy imposed on individuals and companies by the government which serves as a source of income to the government to perform the various legitimate functions of the state (Olaoye, Ashaolu and Adewoye, 2009). The purpose of taxation in the performance of the expected roles of the citizens by the government is very germane. Taxes the major source of revenue to the government as it assists in infrastructure development at all levels of government and this is the reason for the existence of government. As a result, Ojo (2003) posits that tax is a tool for civilization.

The deployment of an efficient tax collection mechanism is expected to achieve set goals for society. Similarly, governments around the world need tax revenue to assist them in fulfilling their societal obligations (Fagbemi, Uadiale, and Noah 2010).

However, this great opportunity of revenue generation has not been exploited to the maximum by most governments around the world (Akintoye and Dada, 2013) especially the developing nations in sub-Saharan Africa, like Nigeria. This might possibly be as a result of the taxation system; tax laws; tax administration and policy challenges; overdependence on other revenue sources such as grants and aids from the foreign nations; systemic corruption as it relates to the tax collection system, behavior of citizens towards payment of tax and the simplicity in the tax payment procedure.

Despite the benefits of tax revenue to a country’s economy, some citizens consider tax as an undesirable levy imposed on them by the government and accuse the government of not utilizing the tax revenue in a manner that achieves efficiency, economy, and effectiveness of spending (Ekoja and Saratu, 2014).

Compliance with tax laws typically means the true reporting of the taxable income, appropriate computation of the tax payable, filling of the returns, and timely payment of tax liability (Franzoni, 1999). If taxpayers feel that their interests are served by the government, their willingness to pay taxes may grow.

In developing countries such as Nigeria characterized by government insensitivity to the plight and aspirations of the citizens, fiscal recklessness, corruption, low standard of living, and infrastructural decay, the willingness to pay tax is at the lowest ebb. Akintoye and Tashie (2013) examine the effect of tax compliance on economic growth and development in Nigeria while Abata (2014) focuses on the effect of tax revenue on economic growth.

However, these studies do not state the impact of tax compliance on revenue growth, which is the main focus of this work. This study focuses on the impact of tax compliance on revenue growth in Nigeria with an emphasis on non-oil revenue. Federally collected revenue in Nigeria which includes, company income tax, petroleum profit tax, and value-added tax, can be classified into oil and non-oil revenue.

The non-oil revenue includes value-added tax, education tax, and companies’ income tax. This study covers mainly the non-oil revenue collected by the Federal Government of Nigeria and this information is derived from the Federal Inland Revenue Service (FIRS) management bulletin for 2015. The reason for the choice of this data is that this is the record that shows the companies that filed in their returns and the companies that eventually paid tax with corresponding revenue generated for each period.

The study objectives are to investigate the effect of tax compliance on tax revenue generation in Nigeria and ascertain the effect of tax default on the variation in tax revenue in Nigeria.

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Additional information

Type

Project Topic and Material

Category

Accounting

No of Chapters

5

Reference

Yes

Format

PDF

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