ANALYSIS OF TAX MORALE AND TAX COMPLIANCE IN NIGERIA

BY

FAKILE ADENIRAN SAMUEL

(CUGP040115)

JUNE, 2011

ANALYSIS OF TAX MORALE AND TAX COMPLIANCE IN NIGERIA

BY

FAKILE ADENIRAN SAMUEL

(CUGP040115)

A THESIS IN THE DEPARTMENT OF ACCOUNTING, SUBMITTED

TO THE SCHOOL OF POSTGRADUATE STUDIES

COVENANT UNIVERSITY,

OTA, OGUN STATE

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF DOCTOR OF PHILOSOPHY (Ph. D) IN ACCOUNTING.

JUNE, 2011

DECLARATION

I declare that:

  1. This project is based on a study undertaken by me, Fakile Adeniran Samuel of the Department of Accounting, School of Business, College of Development Studies, Covenant University, Ota.
  2. The research work is based on my desire to statistically determine the effect of tax morale on tax compliance in Nigeria
  3. This research work has not been submitted elsewhere for a PhD degree.
  4. The ideas and views of the research work are products of research undertaken by me. The ideas and views of other researchers, authors and scholars expressed in the work are duly acknowledged.

Fakile Adeniran Samuel

Date

CERTIFICATION

We certify that this research work titled “Analysis of Tax Morale and Tax Compliance in Nigeria” was undertaken and completed by Mr. Fakile Adeniran Samuel and that the research work was supervised by us and submitted to the Department of Accounting, School of Business Studies, College of Development Studies, Covenant University, Ota forthe award of Doctor of Philosophy (PhD) degree in Accounting.

Prof. E.P. Enyi

Main Supervisor Signature and Date.

Prof. T. O. Asaolu

………………………………………. ……………………………………….

Co-Supervisor Signature and Date

Dr. A. O. Umoren

Head Department of Accounting Signature and Date

Prof. I. D. Nworji

…………………………………………… …………………………………………

External Examiner Signature and Date

DEDICATION

To the Almighty God, the Ancient of Days, the Alpha and Omega, the Source of all good things, for making this work a reality

ACKNOWLEDMENTS

I must first thank the Almighty God, for making my dream of having a Ph.D become a reality and for blessing me with good people, who are genuinely committed to my progress.

How do I describe my supervisor, Prof. E.P. Enyi? He is such a wonderful mentor; he admonished if that was the best approach, he chided if that would work, he threatened if that was the only option left. I sincerely say thank you Sir for the interest and for a thorough supervision. Your commitment towards my success as an academic is highly appreciated. My appreciation also goes to my Co-Supervisor, Prof. T. O. Asaolu for his input, encouragement and interest in me. Thank you for your support Sir.

I thank the chancellor of Covenant University, Dr. David Oyedepo, for giving the vision of Covenant University a practical expression and for his passion for the Staff Development Programmme of the University.

My appreciation goes to the Vice Chancellor Covenant University, Professor Aize Obayan. You are such a wonderful mentor and role model. To the past Registrars, Pastor Yemi Nathaniel, Dr. D. A. Rotimiand the current Acting Registrar Mr. E. O. Ojo, I say thank you for your encouragement and support, which really propelled my determination to succeed.

I want to acknowledge the support and encouragement of Professor M.O. Ajayi, former DeanCollege of Development Studies and Prof. K. Soremekun the current Dean,College of Development Studies, towards timely completion of the work. I am grateful to Professor C. O. Awonuga, Dean, School of Postgraduate Studies for his forthright approach and his words of encouragement.

I am grateful to Professor S. O. Otokiti whose advisory capacity from the topic of the research and completion was very fundamental to the success of this work. I say thank you to Professor J .A. Bello for his wonderful support and input, I greatly appreciate Dr. I. O. Ogunrinola, Dr. J. Ayam, and Professor D. A. Omoweh for their contributions. I thank Distinguish Professor J. A. T. Ojo for his words of encouragement. I wish to acknowledge the inputs of my colleagues in the Department of Accounting, Covenant University, Dr. (Mrs.) B. Umoren, Dr J. A. Enahoro, Dr. D. Mukoro,Dr. F. Iyoha, Dr. F. F. Adegbie Mr. K. Adeyemo, Mr. S. Faboyede, Dr.Dr. (Mrs.) U Uwalomwa, Mrs. D. Oyerinde, Mr. E. Ben-Caleb, Mrs. A. Obigbemi, Mr. U. Efobi, Mr. S. Ayodele, Miss. A. Umobu, Miss. S. Oyewole, Miss, P. Okougbo, and Miss O. Akinlesi and Mr. C. Roy.

I always remember and acknowledge the contributions from my lecturers and senior colleagues from other Universities. Professor Ben Osisioma and Dr. E. Okoye of Nnamdi Azikwe University, Awka, Professor Lanre Nassar of Obafemi Awolowo University, Ile-Ife, Professor A. E. Okoye of the University of Benin and Professor Bayo Oloyede of the University of Ado-Ekiti. I say God bless you all.

My appreciation also goes to the following people – Mr. O. Kazim, who works tirelessly in the postgraduate school to ensure timely and accurate information dissemination, Mr. T. Fadipe, Secretary, Department of Accounting, Mr. O. Oleh, Mrs. M. Obot, Mrs. O. Afolabi, Mr. O. R. Olanrewaju and Mr. O. G. Vincent for their immeasurable support.

I am grateful to the staff and management of all the organizations visited during my field work for their love and support.

Finally, I appreciate my wife, Roseline Bolanle Fakile, and my Children, Adebisi, Oluwatobi and Adebola for their love and moral support.

I wish to acknowledge the financial support of the university through the School of Postgraduate Studies towards the fieldwork. May God Almighty touch the life of everyone who in one way or the order contributed to the success of this work.

ABSTRACT

This study attempts to analyse tax morale and tax compliance in Nigeria. Taxation is one of the most volatile subjects in governance both in the developing and developed nations. Tax refers to a compulsory contribution, imposed by government, and while taxpayers may receive nothing identifiable in return for their contribution, they nevertheless have the benefit of living in a relatively educated, healthy and safe society. The advent of democratic rule in 1999 has put greater pressure on the three-tier of governments to generate enough revenue and meet electoral promises in terms of provision of basic necessities and infrastructure for the economic empowerment of the people. To achieve these goals, a high tax morale is required to achieve a high degree of tax compliance.The general objective of this study is to determine the effect of Tax Morale on the taxpayer in compliance to tax policies of government in Nigeria. Cross-sectional survey was used with questionnaire as the major tool of data collection. Six organizations in the public, private, and informal sector form the sample size of this study Questionnaire was administered to 600 randomly selected respondents. Multiple regression analysis was used to analyze the data. The result shows that there are a number of significant correlations between tax compliance and tax morale. The study recommended that: there is a need to provide strong taxpayer’s services particularly during the tax filing stage, tax returns be scrutinized under the supervision, or be jointly examined with a senior tax official so that the discretionary powers being exercised by tax officials are not abused.

Keywords: Tax Compliance, Tax Morale, Tax Evasion, Social Norms, Traditional Institution

TABLE OF CONTENTS

Declaration …………………………………………………………………………………….....……ii

Certification ……………………………………………………………………………………………..iii

Dedication ……………………………………………………………………………………….……….iv

Acknowledgement …………………………………………………………..………………….…..v

Abstract………………………………………………………………………………………………….….viii

Table of Content …………………………………………………………………………………..….ix

List of Tables ……………………………………………………………………………………….……xii

CHAPTER ONE: INTRODUCTION

1.1Background of the Study…………………………………………………………………1

1.2Statement of Research Problem…………………………………………………….. 4

1.3Objectives of the Study……………………………………………………………….…5

1.4Research Questions…………………………………………………………………………6

1.5Research Hypothesis………………………………………………………………….……6

1.6Significance of the Study………………………………………………………...……7

1.7Scope and Limitation of the study…………………………………………………….8

1.8Summary of Research Methodology…………………………………………...... 9

1.9Sources of Data………………………………………………………………………….……10

1.10Definitions of Terms…………………………………………………………………..……10

CHAPTER TWO: LITERATURE REVIEW

2.1Conceptual Framework of the Research………………………….………………..27

2.2Theoretical Framework of the Research…………………………………………….55

CHAPTER THREE: RESEARCH METHODOLOGY

3.1Research Design………………………………………………………………………………58

3.2Population of Study………………………………………………………….………….……..…59

3.3Sample Size and Sample Technique………………………………….…………………..…59

3.4Data Gathering Method……………………………………………………….……..….61

3.4.1Sources of Data……………………………………………………….……….…61

3.4.2Instruments for Data Collection…………………………….…………………..……61

3.4.3Description of Questionnaire…………………………………….…………..……...62

3.4.4Validity and Reliability of Instrument………………….………………………....62

3.4.5 Administration of Instruments……………………………………….……………….63

3.5Data Analysis Method

3.5.1Method of Data Analysis…………………………………………….……….…….….64

3.5.1 Instrument for Data Analysis……………………….………..……………..64

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

3.6Data Presentation…………………………………………………………….………..…66

3.7Data Analysis-Preliminary…………………………………….…………….………..66

3.8Data Analysis-Advance…………………………………………………….………..…101

3.9Hypotheses Testing………………………………………………………….………..…111

CHAPTER FIVE: SUMMARY OF FINDINGS CONCLUSION AND RECOMMENDATION

5.1 Summary finding…………………………………………………………………………………114

5:1:1 Theoretical finding……………………………………………………….………114

5:1:2 Empirical……………………………………………………………………………..117

5.3Conclusion ……………………………………………………………………………..118

5.4Recommendations…………………………………………………………………..119

5.5Suggestions for further Study………………………………………………..…121

REFERENCES AND BIBLIOGRAPHY…………………………………………………….……122

APPENDICES

APPENDIX 1 QUESTIONNAIRE SCHEDULE ……………………………………….……135

LIST OF TABLES

Table 3.4.1: Reliability Statistics……………………………………………………….…63

Table 4.1.1: Frequency Distribution by Socio-demographic Attribute ……………..69

Table 4.1.2: Frequency by tax morale ……………………………..………………….……73

Table: 4.1.3: Frequency Distribution By Social Norms ………………………..….……78

Table: 4.1.4: Frequency Distribution by Tax Evasion ………………………………….…82

Table: 4.1.5: Attitude towards Legal System, Government,

Tax Administration and Fairness of Tax official …….……..……….…86

Table 4.1.6: Tax Compliance ……………………………………………………………….…90

Table 4.1.7: Attitude of taxpayer towards Traditional Institution

(Monarch) ……………………………………………………………………………92

Table 4.2.1: Mean score by tax morale factor ………………………..……………………93

Table 4.2.2: Mean Score by Social Norms ……………..…………….……………………95

Table 4.2.3: Mean Score by Tax Evasion ………………………………………………….96

Table 4.2.4: Mean score by trust in legal system, in government at all

levels tax administration, fairness of tax officials and tax/

avoidance ……………………………………………………………………..97

Table 4.2.5: Means score by attitude of taxpayers towards traditional

institutions (Monarch) ………………..…………………………………………98

Table 4.2.6: Mean score by tax compliance …………….………………………………….99

Table 4.3.1: Variables Entered / Removed (b)……………………………………..101

Table 4..3.2: Correlation. ……………………………………………………………………….102

Table 4.3.3: Model Summary ……………………………….………………………...... 102 Table: 4.3.4: ANOVA (b) ……………………………………………………………………..… 103 Table: 4.3.5: Co-efficients (a) ………..…………………………………………...... 103

Table 4.3.6: Variables Entered (Re.. moved (b))……………..……………………..107

Table 4.3.7: Correlations ……………………………………………………………………..107

Table 4.3.8: Model Summary ………………………………………………………...... 108 Table: 4.3.9: ANOVA (b) ………………………………………………………………………… 108

Table: 4.3.10:Coefficients (a) ……………………………….………………………………...109

Table 4.3.11: Correlations …………………………….…………………………………………110

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