TAX LITERACY AND VOLUNTARY TAX COMPLIANCE AMONG NIGERIAN TAXPAYERS

Abstract

The problem of tax evasion has been acknowledged as a major challenge in public finance administration everywhere, as governments rely on tax revenues for economic development and provision of basic public services. Nigeria has a low rate of tax compliance even though there have been several tax reforms. The low tax compliance is largely attributed to tax illiteracy of taxpayers. The effect of tax literacy on voluntary tax compliance among the Nigerian taxpayers was the major focus of this study. The study was specifically to look at the impact of tax knowledge, taxpayer education and awareness of tax laws on taxpayer compliance. The study was of a survey research design, using a structured questionnaire which was given to tax officials in South-West Nigeria. The population consisted of 3,737 tax officers from the Nigeria Revenue Service (NRS), in the Lagos, Ogun, Oyo, Osun, Ondo and Ekiti States. Stratified sampling was done and the sample size of 361 respondents was calculated using Taro-Yamane formula. Descriptive statistics and multiple linear regression were used to analyse the data collected. The results showed that taxpayer education (β = 0.479, t = 7.350, p < 0.05) has positive and statistically significant effect on the level of voluntary tax compliance. On the other hand, the tax knowledge negatively affected voluntarily tax compliance, but not significantly (β = -0.112, t = -1.226, p > 0.05). In a like manner, awareness of tax laws had a positive but statistically insignificant effect on voluntary tax compliance (β = 0.082, t = 0.822, p > 0.05). The model accounted for 22.5% of the variation in voluntary tax compliance (R² = 0.225) and the regression model was significant (F = 28.976, p < 0.05). The study found that taxpayer education make a significant contribution to voluntary tax compliance, but taxpayer tax knowledge and tax awareness of tax laws does not make a significant contribution to tax compliance behaviour. Intensified taxpayer education programmes, better engagement with taxpayers and policy implementation to boost trust in the tax administration to improve voluntary tax compliance in Nigeria were recommended.