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Enhancing Tax Compliance in Non-Enabling Institutional Contexts

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Presentation by Bongo Adi, Kenneth Amaeshi and Godson Ikiebey at the second annual Nigerian Tax Research Network meeting which took place in Abuja on 24th and 25th November 2018.

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Enhancing Tax Compliance in Non-Enabling Institutional Contexts

  1. 1. Enhancing tax compliance in non-enabling institutional contexts October 24, 2018 Dr Bongo Adi (Lagos Business School) Professor Kenneth Amaeshi (University of Edinburgh, UK) Godson Ikiebey (ESG Advisory)
  2. 2. 2 Research Premise  Taxation is a social behaviour underpinned by legal and ethical norms.  As such, the framing of taxation as a responsible business behavior may enhance tax compliance (Sikka, 2010).  However, to understand taxation as a social behavior underpinned by legal and ethical norms, context matters!
  3. 3. 3 Research Problem  The Slippery Slope Framework (Kirchler et al. 2008) claims that tax compliance is a function of the perceived power of and trust in tax authorities.  Tax compliance is highest where perceived power and trust are high and lowest where perceived power and trust are low.  Most weak or non-enabling environments are characterised by low trust and low power (Amaeshi et al., 2015; Sikka, 2010). Does it then mean that tax compliance is not possible in such contexts?  However, we see evidence of tax compliance in non-enabling environments despite the predictions of the Slippery Slope Framework.
  4. 4. 4 Research Questions  How can one explain tax compliance in non- enabling institutional contexts?  How can tax compliance be enhance in non- enabling institutional contexts?
  5. 5. 5 Methodology We analysed data from the following sources:  Three focus group discussion (FGD)sessions (FGDs) with diverse participation of business owners, tax practitioners and tax authorities- 28 participants in all.  Followed by five key informant interviews with subject matter experts.  A Tax Research Group with 38 participants on WhatsApp.
  6. 6. 6 Findings  The Nigeria tax environment is low trust and low enforcement as voluntary tax compliance is low. Tax as CSR is secondary!  Those who easily comply and those who do not easily comply rationalise their justifications for or against from similar broad themes/repertoires.  However they differ in the framing of their justifications; positive for compliance and negative for non-compliance.  These disparate framing sustain both compliance and non- compliance behaviours.
  7. 7. Compliance Non-compliance 1. Development 2. Legal 3. Moral Low trust and enforcement Negative Frames “Why will l encourage tax payment by citizens where individuals provide borehole, buy generators and construct roads leading to their houses”? (WhatsApp Group) Positive Frames “Tax payment is a responsible business practice because of its developmental purpose, which include: social amenities, public facilities, security and safety, creating an enabling environment for employment opportunities” (Interview) Rationalisation & Justifications
  8. 8. 8 Tentative Findings (examples) 1st order coding Compliance framing Non-compliance framing 2nd order rationalisation Economic, social and governance issues “Tax payment is a responsible business practice because of its developmental purpose, which include: social amenities, public facilities, security and safety, creating an enabling environment for employment opportunities” (Interview) “Why will l encourage tax payment by citizens where individuals provide borehole, buy generators and construct roads leading to their houses”? (WhatsApp Group) Development Enforcement and compliance risks and duty “I pay my taxes because I want to sleep and sleep well” (Interview) “But why will l support tax payment in an environment where such funds will end up in politicians pocket without any consequences” (WhatsApp Group) Legal Social responsibility, virtuousness and education “I pay my taxes. I pay because it is moral and a civic responsibility” (FCDs) “he nor dey pay tax, na me go come pay?”(If he does not pay tax, am I the one to pay?- FCDs) Moral
  9. 9. 9 Tentative Findings  In essence, justification for tax behaviours is not homogenous  To counteract or enhance the disparate framing deployed in sustaining the justification of tax behaviours, the tax authority would require an heterogeneous messaging approach.  Framing of tax compliance as a responsible business practice in the light of these justification frames needs to be further explored for messaging fit
  10. 10. 10 Tentative Implications Contribution to the literature:  Understanding rationalisations is important to understanding tax behaviours and motivations. Contribution to practice and policy:  The findings will enable tax authorities to develop strategies to fit the rationalisations advanced by the heterogeneous groups.
  11. 11. 11 Emerging areas of research interests  How can the tax ecosystem in Nigeria be strengthened?  What do government officials (apart from the FIRS) make of the trust and accountability deficits in the system?  Is there a place for an independent tax accountability/communication body in the Nigerian tax ecosystem?
  12. 12. 12 Thank you

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