Business Characteristics, Tax Administration and Tax Compliance by Smes in Nigeria

Abstract

This study evaluates the relative impacts of tax administration and business characteristics on the tax compliance behaviour of small scale businesses in Nigeria. The role of tax education as an effective tax administration strategy is also considered. Results show that tax education stimulates small businesses tax compliance behaviour, a result that is robust for both business taxes and personal taxes. It is also found that overall tax administration system in Nigeria does not have significant impact on tax compliance among small businesses in Nigeria due to inefficiencies and corruption in the system. Business ownership structure, registration status, and management qualification/experience are all found to promote tax compliance by small businesses in Nigeria.

Non-Oil Revenue and Economic Growth in Nigeria

“…This outcome is particularly important since it highlights the importance of focusing on tax revenues in particular. It also shows that there is need to set up strong institutional settings that tend to critically examine tax components more stringently in order to note the growth-enhancing patterns (Adegboye, Alao-Owunna & Egharevba, 2018). This shows that aggregate tax compositions in Nigeria do not Vol.11, No.8, 2020…”

“…The negative impact of direct taxation on economic growth is clear since it has strong inhibition to performance by workers (Adegboye et al, 2018). Taxes influence the sharing of income before-tax by altering economic incentives and also influence the after tax allocation of income through progressive income taxation.…”

The impact of trade facilitation on African SMEs’ performance

“…African countries undoubtedly struggle with providing institutions to support their markets (Beck et al, 2008b). Inadequate access to formal business registration and support services, such as entrepreneurship capacity building (Atiase et al, 2018); weak economic institutions (Alhassan & Kilishi, 2019); poor access to essential finance and business development services, such as training and innovation (Brijlal, 2008;Fowowe, 2017;Mazanai & Fatoki, 2012); poor tax regimes, which include high taxes (Adegboye et al, 2018;Adeniyi & Imade, 2018); and poor and outdated labour regulations, such as minimum wage requirements, labour protection, and health and safety regulations (Kingdon & Knight, 2007;Nieuwenhuizen, 2019), are commonplace in Africa. When present, these institutional arrangements are often ineffective or obstructive (Xiaowei & Chi-Nien, 2013), and such constraints generally hinder SMEs' operations and performance (Dethier et al, 2011;Weill, 2008).…”

“…Complementarily, extant literature emphasises that African countries have poor tax regulation and administration systems that result in significant noncompliance with taxation (Adegboye et al, 2018). Businesses in African countries view tax regulation and administration as a burden on their businesses, stifling productivity to the extent that tax compliance requirements are considered a stumbling block for businesses in Nigeria and South Africa (Abrie & Doussy, 2006;Adegboye et al, 2018). According to Adeniyi and Imade (2018), there is a significant negative relationship between multiple tax burdens and the performance of businesses in Nigeria, due to poor tax administration.…”

“…Among the numerous developing countries, African countries have recently been of great interest to scholars and international organisations (Asongu & Odhiambo, 2019;Atiase et al, 2018;Dana et al, 2018;Kansheba, 2020) because these countries present a unique and challenging context for entrepreneurship. For example, poor access to finance and business development services (Brijlal, 2008;Fowowe, 2017;Mazanai & Fatoki, 2012), poor tax regimes (Adegboye et al, 2018;Adeniyi & Imade, 2018), corruption (d 'Agostino et al, 2016), weak institutions (Alhassan & Kilishi, 2019), and inadequate infrastructure (Bond, 2016) are commonplace in African countries. In addition, SMEs contribute up to 70% of GDP in many countries and are often drivers of economic growth in developing countries (Ayyagari et al, 2007;Beck et al, 2005aBeck et al, , 2005b.…”