Tax administration, trust in tax authorities, and personal income tax compliance: Evidence from Nigeria
-
DOIhttp://dx.doi.org/10.21511/pmf.12(1).2023.02
-
Article InfoVolume 12 2023, Issue #1, pp. 12-21
- Cited by
- 603 Views
-
211 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Developing countries are characterized by a low level of tax compliance arising from weaknesses in tax administration and trust deficits. This poses a critical challenge toward the attainment of developmental goals. This paper aims to examine the moderating role of trust in tax authorities for the relationship between tax administration and personal income tax compliance in Nigeria. The study used a survey design to obtain data through a structured questionnaire administered to randomly selected individual taxpayers from Nigeria; 365 responses were collected. The OLS results revealed that tax administration significantly influences personal income tax compliance (β = 0.301, t = 4.068, and p-value = 0.000). Trust in tax authorities significantly influences personal income tax compliance (β = 0.183, t-value = 3.650, and p-value = 0.000). Furthermore, the result showed that trust in tax authorities positively moderates the relationship between tax administration and personal income tax compliance (β = 0.323, t = 4.098, and p-value = 0.000). This study concludes that tax administration significantly affects personal income tax compliance, and trust in tax authorities moderates this relationship in Nigeria.
- Keywords
-
JEL Classification (Paper profile tab)Н11, Н25, Н30
-
References40
-
Tables6
-
Figures0
-
- Table 1. Questionnaire distribution and response rate
- Table 2. Demographic profile of respondents
- Table 3. Descriptive statistics
- Table 4. Regression results of study variables
- Table 5. Model summary
- Table 6. ANOVAa
-
- Adekoya, A. A., Adegbie, F. F., & Agbetunde, L. A. (2020). Quality of tax services, moderated by trust in State Internal Revenue Service and voluntary tax compliance behaviour among individual taxpayers in South-West, Nigeria. Journal of Accounting, Business and Finance Research, 8(2), 47-57.
- Ali, M., Fjeldstad, O., & Sjursen, I. H. (2013). To pay or not to pay? Citizens’ attitude toward taxation in Kenya, Tanzania, Uganda, and South Africa (Working Paper No. 143).
- Allingham, M., & Sandmo, A. (1972). Income tax evasion: A theoretical analysis. Journal of Public Economics, 1(3-4), 323-338.
- Alm, J., Cherry, T., Jones, M., & McKee, M. (2010). Taxpayer information assistance services and tax compliance behavior. Journal of Economic Psychology, 31(4), 577-586.
- Alm, J., Kirchler, E., Muehlbacher, S., Gangl, K., Hofmann, E., Kogler, C., & Pollai, M. (2012). Rethinking the research paradigms for analysing tax compliance behaviour. CESifo Forum, 13(2), 33-40.
- Batrancea, L., Nichita, A., Olsen, J., Kogler, Ch., Kirchler, E., Hoelzl, E., Weiss, A., Torgler, B., Fooken, J., Fuller, J., Schaffner, M., Banuri, Sh., Hassanein, M., Alarcón-García, G., Aldemir, C., Apostol, O., Weinberg, D. B., Batrancea, I., Belianin, A., … Zukauskas, S. (2019). Trust and power as determinants of tax compliance across 44 nations. Journal of Economic Psychology, 74.
- Damayanti, T., & Supramono, S. (2019). Trust reciprocity and power: An integration to create tax compliance. Montenegrin Journal of Economics, 15(1), 131-139.
- De Neve, J.-E., Imbert, C., Spinnewijn, J., Tsankova, T., & Luts, M. (2019). How to improve tax compliance? Evidence from population-wide experiments in Belgium (CEPR Discussion Paper No. DP13733). Centre for Economic Performance.
- Dom, R., Custers, A., Davenport, S., & Prichard, W. (2022). Innovations in tax compliance: Building trust, navigating politics, and tailoring reform. Washington, DC: World Bank.
- Faizal, S. M., Palil, M. R., Maelah, R., & Ramli, R. (2017). Power and trust as factors influencing tax compliance behavior in Malaysia. Asian Journal of Accounting and Governance, 8, 79-85.
- Gangl, K., Hofmann, E., & Kirchler, E. (2015). Tax authorities’ interaction with taxpayers: A conception of compliance in social dilemmas by power and trust. New Ideas in Psychology, 37, 13-23.
- Gilligan, G., & Richardson, G. (2005). Perceptions of tax fairness and tax compliance in Australia and Hong Kong – a preliminary study. Journal of Financial Crime, 12(4), 331-343.
- Hair, J. F., Wolfinbarger, M. F., & Ortinall, D. J. (2008). Essential of marketing research. Boston: McGraw Hill/Irwin.
- Hassan, I., Naeem, A., & Gulzar, S. (2021). Voluntary tax compliance behaviour of individual taxpayers in Pakistan. Financial Innovation, 7(21), 21-23.
- Hauptman, L., Gürarda, S., & Korez-Vide, R. (2015). Exploring voluntary tax compliance factors in Slovenia: Implications for tax administration and policymakers. Lex Localis – Journal of Local Self Government, 13(3), 1-20.
- Inasius, F. (2019). Voluntary and enforced tax compliance: Evidence from small and medium-sized enterprises in Indonesia. In Advances in taxation, 26 (pp. 99-111). Bingley: Emerald Publishing Limited.
- International Monetary Fund (IMF). (2018). Nigeria: Selected issues (IMF Country Report No. 18/64). Washington, D.C.
- Isbell, T. (2017). Tax compliance: Africans affirm civic duty but lack trust in tax department (Afrobarometer Policy Paper No. 43). Accra, Ghana.
- Jimenez, P., & Iyer, G. S. (2016). Tax compliance in a social setting: The influence of social norms, trust in government, and perceived fairness on taxpayer compliance. Advances in Accounting, 34, 17-26.
- Kirchler, E., Hoelzl, E., & Wahl, I. (2008). Enforced versus voluntary tax compliance: The “slippery slope” framework. Journal of Economic Psychology, 29(2), 210-225.
- Kirchler, E., Muehlbacher, S., Kastlunger, B., & Wahl, I. (2007). Why pay taxes? A review of tax compliance decisions (International Studies Program Working Paper 07-30).
- Kogler, C., Muehlbacher, S., & Kirchler, F. (2015). Testing the “slippery slope framework” among self-employed taxpayers. Economics of Governance, 16(2), 125-142.
- Kostritsa, M., & Sittler, I. (2017). The impact of social norms, trust, and fairness on voluntary tax compliance in Austria. Management, 12(4), 333-353.
- Lisi, G. (2019). Slippery slope framework, tax morale and tax compliance: A theoretical integration and an empirical assessment (Discussion Papers in Economic Behaviour No. 219). University of Valencia, ERI-CES.
- Mardhiah, M., Miranti, R., & Tanton, R. (2019). The slippery slope framework: Extending the analysis by investigating factors affecting trust and power (CESifo Working Paper No. 7494).
- Modica, E., Laudage, S., & Harding, M. (2018). Domestic revenue mobilisation: A new database on tax levels and structures in 80 countries (OECD Taxation Working Papers No. 36). Paris: OECD Publishing.
- Muehlbacher, S., & Kirchler, E. (2010). Tax compliance by trust and power of authorities. International Economic Journal, 24(4), 607-610.
- Muehlbacher, S., Kirchler, E., & Schwarzenberger, H. (2011). Voluntary versus enforced tax compliance: Empirical evidence for the slippery slope framework. European Journal of Law and Economics, 32, 89-97.
- Mzalendo, R., & Chimilila, C. (2020). Tax administration, taxpayer’s reciprocity and compliance in Tanzania: Empirical evidence from a survey. African Journal of Economic Review, 8(2), 276-290.
- Oats, L. (2012). Taxation: A fieldwork research handbook. Abingdon: Routledge.
- OECD. (2021). Revenue statistics 2021: Initial impact of COVID-19 on OECD tax revenue. Paris.
- Okello, A. (2014). Managing income tax compliance through self-assessment (IMF Working Paper No. WP/14/41). International Monetary Fund.
- Olaoye, C. O., Ayeni-Agbaje, A. R., & Alaran-Ajewole, A. P. (2017). Tax information, administration and knowledge on taxpayers’ compliance of block moulding firms in Ekiti State. Journal of Finance and Accounting, 5(4), 131-138.
- Olise, C. N., & Emeh, I. E. (2020). Interrogating the impact of voluntary asset and income declaration scheme (VAIDS) on tax administration in Nigeria. Journal of Public Administration and Governance, 10(3), 38-52.
- Oyedele, T. (2016). Guess how many Nigerians pay tax and how our government spends the money. PWC.
- Paramaduhita, A. V., & Mustikasari, E. (2018). Non-employee individual taxpayer compliance, relationship with income and perception of taxpayer. Asian Journal of Accounting Research, 3(1), 112-122.
- Peprah, C., Abdulai, I., Agyemang-Duah, W., & McMillan, D. (rev.ed.). (2020). Compliance with income tax administration among micro, small and medium enterprises in Ghana. Cogent Economics & Finance, 8(1), 1-25.
- Richardson, G. (2006). Determinants of tax evasion: A cross-country investigation. Journal of International Accounting, Auditing and Taxation, 15(2), 150-169.
- Susuawu, D., Ofori-Boateng, K., & Amoh, J. K. (2020). Does service quality influence tax compliance behaviour of SMEs? A new perspective from Ghana. International Journal of Economics and Financial Issues, 10(6), 50-56.
- Yesegat, W. A., & Fjeldstad, O-H. (2016). Business people’s view of paying taxes in Ethiopia (ICTD Working Paper No. 43). Brighton: IDS.