Tax Compliance Behaviour and Revenue Generation in Nigeria

Abstract

This research aims to investigate the nexus between tax compliance behavior and revenue generation in Nigeriafrom 1994 to 2022. The study investigates the level of compliance across different types of tax elements such as Value Added Tax (VAT), Corporate Income Tax (CIT), Personal Income Tax (PIT), Capital Gains Tax (CGT), Education Cess (CED), and Professional Property Tax (PPT). Data was sourced from the Federal Inland Revenue Services and the Central Bank of Nigeria. Employing an ARDL Cointegrating model, the study reveals varying degrees of compliance based on coefficients and statistical significance. High compliance rates are observed in VAT, followed by CIT. PIT, CGT, and CED show lower levels of compliance, and PPT shows a lagged but positive relationship. The study concluded that the key factors influencing compliance include the complexity of the tax code, enforcement mechanisms, and societal attitudes toward each type of tax. VAT shows high compliance due to its simplicity and strong enforcement, while CIT compliance is influenced by audit likelihood and reputational risks. PIT has complex regulations, which may lead to lower compliance rates. CGT and CED may suffer from a lack of understanding and lower enforcement. PPT compliance varies significantly depending on local administration efficacy. The study recommends that the nature of compliance can be improved through simplification of tax codes, better enforcement, and public education campaigns. The study integrates insights from previous research and offers a comprehensive framework to understand tax compliance across different revenue streams.