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Tax System, Behaviour, Justice, and Voluntary
Compliance Culture in Nigeria
Being Paper Presented at the Presented at the 5th International Annual Academic Conference on Taxation
from Monday August 15 to Wednesday 17, 2022.
ND (Fin), HND (Acct.), BSc. (Acct. Ed), BSc (Acct. & Fin.), BSc. (Bus. Admin), MBA (Acct. & Fin.), MSc. (Acct.), MSc.
(Bus &Econs), MSc (Tax), MTP (SA), PhD (Acct), PhD (Fin), PhD (FA), FCA, FCTI, ACIB, ACS, ACIS, MNIM, FCNA,
FCFIP, FCE, FERP, CICA, CFA, CFE, CIPFA, CPFA, ACAMS, ABR, CertIFR, IPA, IFA, FFAR, FPD-CR, FSEAN
Tax System, Behaviour,
Justice, and Voluntary
Compliance Culture in
Nigeria
Content
Introduction The Tax System
Basis of Tax
Administration
Tax Compliance
Determinants of Tax
Compliance
Tax Behaviour
Taxpayer Behaviour
and Compliance
Tax Justice
Tax Rate, Compliance
Cost, and Tax Penalty
Tax Compliance, Tax
Evasion, and Tax
Avoidance: A Nexus?
Tax Revenue, Audit,
Compliance, and
Remittance
Conclusion Recommendations
Introduction
A tax is a mandatory levy imposed by the government on individuals, families, communities, corporate or unincorporated
organisations' income, profit, or wealth for the purpose of supporting public expenditures
Taxation is the state's inherent power, exerted through the legislature, to impose financial burdens on persons under its
jurisdiction to raise revenue in carrying out the lawful tasks of government
Globally, governments spend huge amounts of money to provide basic utilities and other social services to their citizenry,
which are the primary responsibilities of an elected public official
A country's revenue can be generated through both an external and internal structured tax system
The amount of revenue collected has an impact on the country's economic progress
Taxation is a legitimate and sustainable source of government revenue, as well as a tool for macroeconomic policy and fiscal
management.
The tax system allows the government to collect additional income that is required to meet its pressing commitments
A tax system is one of the most effective strategies of mobilising a country's internal resources, and it contributes to the
creation of an environment conducive to economic progress
Government may not run effectively or efficiently unless people pay the taxes that they are required by law to pay
Nigeria has a range of alternatives for financing its public expenditures and implementing its fiscal policies
The Tax System
A set of tax regulations, institutes,
and norms, bound in a unique
mechanism for the purposes of
achieving a certain tax policy
This system is a set of institutes and
instruments available to tax
authorities for achieving certain
fiscal, economic, social and political
goals within the economic system
The Tax System
Fairness/Equity Adequacy Simplicity Transparency
Administrative
Ease
Basis of Tax Administration
Registration of
Taxpayer
Assessment of
Taxpayers
Returns Tax Collection
Compliance
Monitoring
Compliance
Enforcement
Tax Compliance
Compliance with reporting obligations involves filing all required tax returns on
time and accurately reporting tax liability in compliance with the Internal Revenue
Code, regulations, and court rulings in effect at the time the return is submitted
Individuals' readiness to comply with appropriate tax authorities by paying their
taxes is referred to as tax compliance
It can be characterised as a multifaceted metric and conceptually by evaluating
three various categories of compliance: payment compliance, filing compliance,
and reporting compliance
The Organisation for Economic Cooperation and Development (OECD) classified
compliance as administrative or technical
Fiscal knowledge connects with attitudes toward taxation and a greater
understanding of tax rules could enhance tax behaviour
Determinants of Tax Compliance
Economic Factors
• Tax rates
• Tax audits
• Perceptions of
government spending
Institutional Factors
• Role of tax authority
• Simplicity of tax returns
and administration
• Likelihood of detection
Social Factors
• Ethics and attitude
• Perceptions of equity
and fairness
• Political
affiliation/changes in
government policy
• Referent groups
Individual Factors
• Personal financial
constraints
• Awareness of offenses
and penalties
• Age
• Income level
• Culture
• Education
• Gender
Tax Behaviour
Tax behaviour describes
an individual's approach
towards tax compliance
It is the level at which
taxpayers follow their
tax duties (contrary to
the degree of tax
evasion and avoidance)
Taxpayer Behaviour and Compliance
Behavioural Factors
Individual
differences
Perceived
inequity
Perception of
minimal risk
Risk-taking Equity
Opportunity
for non-
compliance
Social norms
Dissatisfaction
with revenue
authorities
Economic Factors
Financial burden The cost of compliance Disincentives Incentives
Tax Justice
Tax justice seeks to restore the taxes to
whom they are due
This occurs through mechanisms which
are legal (tax avoidance) and illegal (tax
evasion)
Tax justice are ideas, policies and
advocacy that seek to achieve equality
and social justice through fair taxes on
wealthier members of society and
multinational corporations
Tax Rate, Compliance Cost, and Tax Penalty
The financial value
of tax compliance is
determined by the
tax rate and penalty
structure, which
influences taxpayer
compliance habits
Penalising tax
evaders can make
others feel certain
that they are doing
the right thing
Taxation is widely
perceived as a
burden by
taxpayers,
particularly small
and medium-sized
businesses
Tax compliance cost
investigations can
provide important
insight into how
small firms might
reduce compliance
costs and hazards
Individual taxpayers
do not exist in this
world alone as they
must interact with
others regularly
Tax Rate, Compliance Cost, and Tax Penalty (Con’t)
High compliance costs can lead to tax evasion and fraud, as well
as deter investment by lowering the country's competitiveness in
terms of taxation attractiveness
Influence of tax rates on tax compliance is still unclear and
debatable, lowering tax rates is not the only strategy to reduce tax
evasion
Increased tax rates discourage tax compliance, whereas lower tax
rates do not prevent tax evasion
Tax rates had a favourable and considerable influence on income
tax compliance
Tax Compliance, Tax Evasion, and Tax Avoidance: A Nexus?
On the surface, the distinction between tax compliance and non-compliance is evident
Tax evasion is the purposeful violation of tax law to lower tax liability
Tax avoidance refers to measures to lower tax burdens that are questionably legal
Tax compliance necessitates sufficient record keeping, timely and accurate filing of tax forms, and payment of all taxes
owed
The fundamental distinction between avoidance and evasion is the latter's illegality: Tax evasion occurs when
noncompliance is demonstrated legally to be an intentional effort to reduce tax liability
However, the distinction between the two is hazy
Tax authorities, lawyers, and taxpayers struggle to reach an agreement on many ambiguous instances
Tax Revenue, Audit, Compliance, and Remittance
The goal of tax auditing is to guarantee
that taxpayers follow tax rules and
regulations to increase the government's
income stream
Tax audits assist the government in
collecting taxes, which are critical in
financing the budget and ensuring
economic and financial order and
stability
Tax compliance is based on taxpayers'
willingness to cooperate with tax rules
and regulations without being pushed or
pressured
Taxpayer non-compliance with tax rules
and regulations is a key challenge for tax
administration in developing countries,
and it necessitates an urgent solution
due to the importance of tax revenue to
state development
Tax Revenue, Audit, Compliance, and Remittance (Con’t)
The goal of tax auditing is
to guarantee that taxpayers
follow tax rules and
regulations to increase the
government's income
stream
Tax audits assist the
government in collecting
taxes, which are critical in
financing the budget and
ensuring economic and
financial order and stability
Tax compliance is based on
taxpayers' willingness to
cooperate with tax rules
and regulations without
being pushed or pressured
Taxpayer non-compliance
with tax rules and
regulations is a key
challenge for tax
administration in
developing countries, and it
necessitates an urgent
solution due to the
importance of tax revenue
to state development
Conclusion
This revealed several measures to curb
tax evasion and strengthen tax
compliance culture in Nigeria
Tax compliance in Nigeria seems to be
low and this can be ascribed to the
combination of the Nigerian tax system,
tax behaviour and tax justice
The Nigerian tax system has failed in
various ways such as its unjust attributes,
insufficiency to cover societal needs, lack
of transparency amongst the masses and
its complexity in tax administration
Compliance level of individuals may be
influenced by incentives and perceived
values, however, the compliance level can
reduce drastically because of high
financial burden and cost of compliance
Meanwhile, the tax justice in Nigeria has
been less effective in tax matters as tax
laws are not equal to all and the
penalties that were set up for tax evaders
are not strictly implemented.
Recommendations
Government should continue to provide basic amenities to its citizens and be accountable
Tax education should be carried out frequently
Tax administrators should administer taxes within the ambit of the law
The use of technology and professionally trained employees should be encouraged
Government should put in place structures that will make it difficult to evade tax
Tax authorities should seek to be honest and be people of integrity
Tax evaders should be prosecuted, and a fair judgement should be carried out to the knowledge
of the public
Tax administrators should ensure that updated records of individuals and companies are
maintained
Tax System, Behaviour, Justice, and Voluntary Compliance Culture in Nigeria - Prof Oyedokun.pptx

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Tax System, Behaviour, Justice, and Voluntary Compliance Culture in Nigeria - Prof Oyedokun.pptx

  • 1. Tax System, Behaviour, Justice, and Voluntary Compliance Culture in Nigeria Being Paper Presented at the Presented at the 5th International Annual Academic Conference on Taxation from Monday August 15 to Wednesday 17, 2022.
  • 2. ND (Fin), HND (Acct.), BSc. (Acct. Ed), BSc (Acct. & Fin.), BSc. (Bus. Admin), MBA (Acct. & Fin.), MSc. (Acct.), MSc. (Bus &Econs), MSc (Tax), MTP (SA), PhD (Acct), PhD (Fin), PhD (FA), FCA, FCTI, ACIB, ACS, ACIS, MNIM, FCNA, FCFIP, FCE, FERP, CICA, CFA, CFE, CIPFA, CPFA, ACAMS, ABR, CertIFR, IPA, IFA, FFAR, FPD-CR, FSEAN
  • 3. Tax System, Behaviour, Justice, and Voluntary Compliance Culture in Nigeria
  • 4. Content Introduction The Tax System Basis of Tax Administration Tax Compliance Determinants of Tax Compliance Tax Behaviour Taxpayer Behaviour and Compliance Tax Justice Tax Rate, Compliance Cost, and Tax Penalty Tax Compliance, Tax Evasion, and Tax Avoidance: A Nexus? Tax Revenue, Audit, Compliance, and Remittance Conclusion Recommendations
  • 5. Introduction A tax is a mandatory levy imposed by the government on individuals, families, communities, corporate or unincorporated organisations' income, profit, or wealth for the purpose of supporting public expenditures Taxation is the state's inherent power, exerted through the legislature, to impose financial burdens on persons under its jurisdiction to raise revenue in carrying out the lawful tasks of government Globally, governments spend huge amounts of money to provide basic utilities and other social services to their citizenry, which are the primary responsibilities of an elected public official A country's revenue can be generated through both an external and internal structured tax system The amount of revenue collected has an impact on the country's economic progress Taxation is a legitimate and sustainable source of government revenue, as well as a tool for macroeconomic policy and fiscal management. The tax system allows the government to collect additional income that is required to meet its pressing commitments A tax system is one of the most effective strategies of mobilising a country's internal resources, and it contributes to the creation of an environment conducive to economic progress Government may not run effectively or efficiently unless people pay the taxes that they are required by law to pay Nigeria has a range of alternatives for financing its public expenditures and implementing its fiscal policies
  • 6. The Tax System A set of tax regulations, institutes, and norms, bound in a unique mechanism for the purposes of achieving a certain tax policy This system is a set of institutes and instruments available to tax authorities for achieving certain fiscal, economic, social and political goals within the economic system
  • 7. The Tax System Fairness/Equity Adequacy Simplicity Transparency Administrative Ease
  • 8. Basis of Tax Administration Registration of Taxpayer Assessment of Taxpayers Returns Tax Collection Compliance Monitoring Compliance Enforcement
  • 9. Tax Compliance Compliance with reporting obligations involves filing all required tax returns on time and accurately reporting tax liability in compliance with the Internal Revenue Code, regulations, and court rulings in effect at the time the return is submitted Individuals' readiness to comply with appropriate tax authorities by paying their taxes is referred to as tax compliance It can be characterised as a multifaceted metric and conceptually by evaluating three various categories of compliance: payment compliance, filing compliance, and reporting compliance The Organisation for Economic Cooperation and Development (OECD) classified compliance as administrative or technical Fiscal knowledge connects with attitudes toward taxation and a greater understanding of tax rules could enhance tax behaviour
  • 10. Determinants of Tax Compliance Economic Factors • Tax rates • Tax audits • Perceptions of government spending Institutional Factors • Role of tax authority • Simplicity of tax returns and administration • Likelihood of detection Social Factors • Ethics and attitude • Perceptions of equity and fairness • Political affiliation/changes in government policy • Referent groups Individual Factors • Personal financial constraints • Awareness of offenses and penalties • Age • Income level • Culture • Education • Gender
  • 11. Tax Behaviour Tax behaviour describes an individual's approach towards tax compliance It is the level at which taxpayers follow their tax duties (contrary to the degree of tax evasion and avoidance)
  • 12. Taxpayer Behaviour and Compliance Behavioural Factors Individual differences Perceived inequity Perception of minimal risk Risk-taking Equity Opportunity for non- compliance Social norms Dissatisfaction with revenue authorities Economic Factors Financial burden The cost of compliance Disincentives Incentives
  • 13. Tax Justice Tax justice seeks to restore the taxes to whom they are due This occurs through mechanisms which are legal (tax avoidance) and illegal (tax evasion) Tax justice are ideas, policies and advocacy that seek to achieve equality and social justice through fair taxes on wealthier members of society and multinational corporations
  • 14. Tax Rate, Compliance Cost, and Tax Penalty The financial value of tax compliance is determined by the tax rate and penalty structure, which influences taxpayer compliance habits Penalising tax evaders can make others feel certain that they are doing the right thing Taxation is widely perceived as a burden by taxpayers, particularly small and medium-sized businesses Tax compliance cost investigations can provide important insight into how small firms might reduce compliance costs and hazards Individual taxpayers do not exist in this world alone as they must interact with others regularly
  • 15. Tax Rate, Compliance Cost, and Tax Penalty (Con’t) High compliance costs can lead to tax evasion and fraud, as well as deter investment by lowering the country's competitiveness in terms of taxation attractiveness Influence of tax rates on tax compliance is still unclear and debatable, lowering tax rates is not the only strategy to reduce tax evasion Increased tax rates discourage tax compliance, whereas lower tax rates do not prevent tax evasion Tax rates had a favourable and considerable influence on income tax compliance
  • 16. Tax Compliance, Tax Evasion, and Tax Avoidance: A Nexus? On the surface, the distinction between tax compliance and non-compliance is evident Tax evasion is the purposeful violation of tax law to lower tax liability Tax avoidance refers to measures to lower tax burdens that are questionably legal Tax compliance necessitates sufficient record keeping, timely and accurate filing of tax forms, and payment of all taxes owed The fundamental distinction between avoidance and evasion is the latter's illegality: Tax evasion occurs when noncompliance is demonstrated legally to be an intentional effort to reduce tax liability However, the distinction between the two is hazy Tax authorities, lawyers, and taxpayers struggle to reach an agreement on many ambiguous instances
  • 17. Tax Revenue, Audit, Compliance, and Remittance The goal of tax auditing is to guarantee that taxpayers follow tax rules and regulations to increase the government's income stream Tax audits assist the government in collecting taxes, which are critical in financing the budget and ensuring economic and financial order and stability Tax compliance is based on taxpayers' willingness to cooperate with tax rules and regulations without being pushed or pressured Taxpayer non-compliance with tax rules and regulations is a key challenge for tax administration in developing countries, and it necessitates an urgent solution due to the importance of tax revenue to state development
  • 18. Tax Revenue, Audit, Compliance, and Remittance (Con’t) The goal of tax auditing is to guarantee that taxpayers follow tax rules and regulations to increase the government's income stream Tax audits assist the government in collecting taxes, which are critical in financing the budget and ensuring economic and financial order and stability Tax compliance is based on taxpayers' willingness to cooperate with tax rules and regulations without being pushed or pressured Taxpayer non-compliance with tax rules and regulations is a key challenge for tax administration in developing countries, and it necessitates an urgent solution due to the importance of tax revenue to state development
  • 19. Conclusion This revealed several measures to curb tax evasion and strengthen tax compliance culture in Nigeria Tax compliance in Nigeria seems to be low and this can be ascribed to the combination of the Nigerian tax system, tax behaviour and tax justice The Nigerian tax system has failed in various ways such as its unjust attributes, insufficiency to cover societal needs, lack of transparency amongst the masses and its complexity in tax administration Compliance level of individuals may be influenced by incentives and perceived values, however, the compliance level can reduce drastically because of high financial burden and cost of compliance Meanwhile, the tax justice in Nigeria has been less effective in tax matters as tax laws are not equal to all and the penalties that were set up for tax evaders are not strictly implemented.
  • 20. Recommendations Government should continue to provide basic amenities to its citizens and be accountable Tax education should be carried out frequently Tax administrators should administer taxes within the ambit of the law The use of technology and professionally trained employees should be encouraged Government should put in place structures that will make it difficult to evade tax Tax authorities should seek to be honest and be people of integrity Tax evaders should be prosecuted, and a fair judgement should be carried out to the knowledge of the public Tax administrators should ensure that updated records of individuals and companies are maintained