THE DETERMINANTS OF TAX PAYERS ATTITUDE IN SOME SELECTED STATES (NIGERIA)
ABSTRACT
In the tax administration of any
country, in-depth knowledge of tax paying attitude is very pertinent.
This is very consistent with this study the determinants of tax payers
attitude in Nigeria and whose purpose was to examine the variables that
account for the attitudes of tax payers and to ascertain whether or not
such determinants allow for the payment compliance, in view of tax
assessment. Sample sizes of 320 taxable adults were selected from four
(4) states in Nigeria as representative of the tax payer’s population.
Chi-square tool of analysis was adopted to test the hypotheses. As a
consequence, a significant relationship was revealed between religious
beliefs and willingness to honour tax obligation. Also, it was found
that family pressure has a relationship with taxpayers’ attitude, while
compliance was shown between tax assessment and the Nigeria tax law. On
discussion of these findings, it was recommended that government should
ensure equitable distribution of the nation’s wealth to justify the
money collected from tax and that government should equally provide
meaningful social infrastructure to reflect the money paid; moreover,
government was expected to give adequate attention to financing
education, to eradicate illiteracy and create employment. Finally, an
ethical element in tax planning has been suggested for further study to
stress the effect of tax avoidance and tax evasion.
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In developed economies of the world,
taxation provides the bulk of government revenue for administration and
development. Some goods and services that are consumed by private sector
cannot be equal amount. These include social and economic
infrastructures like health services, basic education, motorable roads,
the maintenance of law and order and the provision of public utilities.
These are goods which structure is such that the consumption of the
products by various individuals is non-rival in the sense that one
person’s partaking of the benefits does not reduce the benefit available
to another (Musgrave: 1985:10). That is, the benefit derived by one
person is externalized, in that. It becomes available to another person
at the same time (Umoh: 1997:24).
The private sector cannot provide these
types of goods (social goods), the structure of the goods provided by
them is internalized, and the benefit of consumption excludes
consumption by another “the market mechanism is well suited for the
provision of private goods” Musgrave (1985:10). It is based on exchange
and this can occur only where there is an exclusive title to property,
which is to be exchanged. It furnishes a signaling system where by
procedures are guided by consumer demands. On the other hand, it is
inefficient to exclude any consumer from partaking of the benefit of
social goods when it is quite obvious that participation would not
reduce consumption by another regardless of earning differential.
However, the provision of these social and economic infrastructures and
other complementary facilities obviously requires financial resources
and supply of which is from the imposition of tax.
In spite of the multiple benefits of
taxation creation amongst the populace, taxable persons are still
cajoled and compelled to pay their taxes. They seem to put up resistance
that create the impression that they are not happy paying the tax or
that they are paying more than they are receiving in terms of social
amenities.
As a further measure to reduce the
assumed tax burden and motivate the people to be tax-active, the Federal
Government in the 1998 budget announced tax relied and allowances
packages whose entitlement does not discriminate against gender,
provided there is no two allowance claim by husband and wife on the same
child for children allowance; exemption of the capital gains tax on
gains from worker whose total annual income is below N30, 000 from
paying tax, abrogation of disposal of the scope of graduate rates;
taxing gas development projects under companies income tax Act of
petroleum profit tax act; the extension of gas utilization down stream
operations to industrial projects, extension of the initial tax holiday
period of three years to five years; transmission of gas at zero percent
Petroleum Profit Tax (PPT) and zero percent royalty etc.
These fiscal measures enunciated have not
only the potential of reducing tax burden but also to stimulate
production and generate employment thereby fostering economic
advancement. But this requires the voluntary compliance, no matter how
reduced the burden is whether at the individual or at the corporate
level.
Most people take pleasure in evading tax,
others exhibit recalcitrant disposition when it comes to fulfilling
their tax obligation, a situation which Naiyeru in his article titled
“Taxation and Economic Development” attributed to value orientation
(Naiyeru 1988).
According to Brain and Paul
(1996:269-287) “the lack of adequate and imperfect information process
is responsible for this situation (i.e. Tax agent, tax payer of
conflict). He further asserts that the tax agent is ignorant of what the
taxpayer is to pay, since he or she cannot capture a complete and
accurate assessment of what he owed.
Corporate taxpayers have elaborate
records which are simply too voluminous to analyze completely and
individual taxpayer may have no records at all. Situations like this
compel the revenue agent to look beyond the superficial appearance as
presented in the tax forms and the supporting documentation. Records can
be forged and books can be cooked, so the revenue agent must adopt a
skeptical stance that gives to the informal motto of the tax examination
division (Audit the taxpayers not the return” Brain (1996:15).
In spite of the aforementioned and
bearing in mind several investigations already conduct on issues
relating to taxation in Nigeria, a missing link which is very
conspicuous has been a complete lack of an empirical perception or study
on the determinants of tax payers behaviour. It is based on this
premise that the study anchors. Therefore, attempts shall be made to
adequately delve into these determinants to unravel how they influence
attitudes of taxpayers’ payments.
1.2 STATEMENT OF THE PROBLEM
The provision of social and economic
infrastructure and other complementary facilities requires financial
resources, the supply of which is from tax imposition (which is a
compulsory levy on persons residing in a country). But a baffling
situation is revealed in the attitude of most people to tax payment. In
spite of the obvious benefit, some people’s actions tend to imply that
they do not believe in the reasons for tax imposition. But if we may
ask, is it that the government is not doing enough to reassure the
masses on the use to which tax is put? Or that the government is biased
in its application? Why? Could it be that it is an inherent desire to be
fraudulent? Some commentaries appear to elude the instinct to evade or
avoid tax to be attributed to either individual or situational pressures
on the tax payer and not on the degree of business specialization,
investment or capitalization of the taxpayers, neither is it caused by
the weakness of the law (Buba and Oyedele 1994:4).
The general outcry is that the problem or
attitudinal problems associated with payment of tax might be
conjectured on: family pressure, peer group pressure, financial status,
religious beliefs, educational level, and willingness to comply with tax
law. What we are not sure however is which of these reasons explain the
prevailing attitude to tax by persons, residing in Enugu, Imo, Anambra
and Ebonyi State of Nigeria. The need arises for a fact-finding activity
in this respect.
1.3 OBJECTIVES OF THE STUDY
The aim of this study is to analyze the
determinants of taxpayer’s in some selected states and also to analysis
the situational and individual variables like income, education level
etc. more specifically, we scrutinize or examine the relative effects of
the situational variables and individual variables on an individual
behaviour (or attitude) and how it can mingles to spur them to be tax
complaint or not.
1.4 RELEVANT RESEARCH QUESTIONS
In order to give direction to and shed more light on the study, the following research questions were formulated:
- Does family pressure affect attitude to pay tax?
- How does income level influence attitudes to pay tax?
- Does the level of Education determine pay attitude?
- To what extent do religious beliefs attitude to pay tax?
- What is the procedure of tax assessment in Nigeria?
- What are attitudinal problems of taxpayers?
1.5 STATEMENT OF HYPOTHESES
The following hypotheses have been tested in the course of this research work.
Ho1: There is no significant relationship between religious beliefs and willingness to honour tax obligation.
Ho2: There is no significant relationship between tax paying attitude and the level of education attained by taxpayers.
Ho3: There is no significant relationship between family pressures and attitude to tax.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
The determinants of taxpayers attitude is
wide and therefore cannot be covered in this research. Because of this,
this research is going to restrict itself to some selected states in
Nigeria.
Time constraints dearth of data and
financial constraints to enable the research extent beyond the
aforementioned will limit the extent of this research.
1.7 SIGNIFICANCE OF THE STUDY
This work will be of much significance to
the Federal Inland Revenue Services Staff, the entire taxpayers and to
employers. It is also of much relevance to scholars, academics and
students.
All companies would want to be adjudged
as tax complaint and therefore would persuade their employees by
whatever incentive to see that they comply so as to enhance their image.
This study would therefore help them to know how to relate more with
their staff and the limit within which they could persuade their staff
to be tax complaint.
1.8 ORGANIZATION OF THE STUDY
This research is arranged into five parts or chapter. Chapter one contains introduction to the research work, made up of
Background of the study, statement of the
problems, objective of the study, relevant research questions,
statement of hypotheses, scope and limitations of the study,
significance of the study and organization of the study. Chapter two
contains the Review of related literature.
Chapter three provides a conceptual
framework of the entire research design, sampling procedure/sample size
determination, data collection methods, and operational measures of the
variables and data analysis techniques. Chapter four deals with
presentation and analysis of data,
Finally chapter focuses on findings, discussion of findings, conclusions and recommendations.
1.9 DEFINITION OF TERMS
Tax Audit: Is the examination of and investigation of the field company tax return to ascertain the truth in the amount asserted.
Tax Avoidance: It is defined as a deliberate and legal act of the taxpayer to pay less than they ought to pay.
Tax Delinquency: This refers to a failure to pay taxes on the due date.
Tax Evasion: This is usually a fraudulent effort by a taxpayer to escape his legal tax obligations.
Tax Capacity: Is the extent to which the tax basis can bear the burden of taxation without a rupture of the fiscal symbiosis.
Tax Compliance: Is the act or process of subjecting oneself, one’s incomes, business asset or expenditure to the demands of the tax law.
Tax Consultant: These are private agent contracted by the government to collect taxes.
Tax Incentive: Is all the measures adopted by government to motivate taxpayers to respond favourably to their obligations.
Tax Policy Strategy: Is the Pathway to the achievement of maximum tax compliance from taxpayer.
Best of Judgment (BOJ): This is the use of
tax agent initiatives in determining the estimated amount of tax payable.
tax agent initiatives in determining the estimated amount of tax payable.
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