THE DETERMINANTS OF TAX PAYERS ATTITUDE IN SOME SELECTED STATES (NIGERIA)

ABSTRACT

This study sought to obtain the determinant of taxpayers’ attitude in the South-eastern part of Nigeria. It was premised on the belief that the taxpayers’ level of education, level of income, family pressure, and religious beliefs could be responsible for the various attitudes they show towards tax payment which include: Complete tax evasion attitude, Partial tax evasion attitude, and Compliance attitude.

The study covered 334 taxpayers from four work sectors; Civil service, Businessmen, Company workers, and Academics in four states of the country’s southeast zone; Abia, Anambra, Enugu and Imo state, in a research survey. Data were collected from them using a Structured – Undisguised questionnaire sensitively designed to capture their attitudinal constructs towards tax payment. The data collected were analysed using Pearson’s Product Moment Correlation (γ) simply because the study would need to obtain the degree of association (correlation) between some sensitive data and the three general attitudes towards tax payment.

The  study  found  that  296  of  the  respondents  responded  favourably  in  the  survey conducted on them. This produced a significant percentage response rate of 89.16%. Also, the survey could be said to be approximately equally distributed among the respondents’ gender as it covered 139(46.96%) females and 157(53.04%) males. On the objectives set for this study, it was found that there is a significant positive relationship between the respondents’ (Married and Widows) family pressure and attitudes (Complete evasion, Partial evasion and Compliance) to tax given the Pearson’s correlation (γ) of.776**, .740**, .492** respectively. In addition to this, the study found that, majority of the those that said they have family pressure, their area of family pressure is finance, and of course, the study’s objective two was achieved through the findings that substantiate the significant correlation between the respondents’ level of income and the attitude they all show towards tax payment, given the Pearson’s correlation (γ) of .844**, .874**, .582**.  Also,  the  study  found  that  there  is  a  significant  relationship  between  the respondents’ level of education and there tax compliance level (γ = .792**) as well as the respondents’ religious belief and their tax compliance level (γ = .665**) Found in the study, it was concluded that there would be a complete tax evasion attitude from a taxpayer who has high family pressure resulting from his/her financial problem. More so, any taxpayer who perceives that his/her take home income is small compared to his/her family responsibilities can show unfavourable attitude towards tax payment. In the same vein, the taxpayers’ religious beliefs have something crucial to do as far as their attitude towards tax payment is. Those whose beliefs are strong will hardly evade tax payment let alone the low believers who would not see how unjustified it is to evade tax. Finally therefore, it should be remembered that the taxpayers’ level of education coupled with how much aware they are about tax payment, can make them hardly evade tax except for those who, despite the attended school but do not know what the tax are actually collected for.

For generalization purpose, further similar studies can be carried out to cover other five geo-political zones of the country as well as in other African countries so that the attitude of taxpayers in the nation and in the continent of Africa can be well understood.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

In developed economies of the world, taxation provides the bulk of government revenue for administration and development. Government requires these taxed funds to finance some basic amenities which include social and economic infrastructures like health services, basic education, motorable roads, the maintenance of law and order and the provision of public utilities etc. These are benefits of the state and are structured in such a way that the consumption of the products by all individuals in the state 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 (Urnoh: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  downstream  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 (i996:269-287) “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 hearing 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 he 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 allude the instinct to evade or avoid tax to be attributed to either individual or situational pressures on the tax payer arid 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 he conjectured on: family pressure, peer group pressure, financial status, religious beliefs, educational level, and willingness to comply to tax law. What we are not sure however is which of these explains the prevailing attitude to tax by persons, residing in Enugu, Imo, Anambra and Ebonyi State of Nigeria. The need arises for a fact-fining activity in this respect.

1.3 OBJECTIVES OF THE STUDY

The main objective of this study is to analyze the determinants of taxpayers in some selected states.

•   To determine if there is a relationship between family pressure and tax payers’

attitude in Nigeria

•   To ascertain how income level influences tax payers’ attitude in Nigeria

•    To determine the relationship between level of education and tax payers compliance in Nigeria

•   To determine the extent to which religious beliefs affect taxpayers compliance in

Nigeria.

1.4 RESEARCH QUESTIONS

In order to give direction to and shed more light on the study, the following research questions were formulated:

•   What is the relationship between family pressure and tax payer’s attitude in Nigeria?

•   How does income level influence tax payers’ attitude in Nigeria?

•   What is the relationship between level of education and tax payers’ compliance in Nigeria?

•   To what extent do religious beliefs influence tax payers’ compliance in Nigeria?

1.5       RESEARCH HYPOTHESES

The following hypotheses will be tested in the course of this research work.

Ho:      There is no significant relationship between family pressures and tax payers’ attitude in Nigeria

Ho:      Income level does not has a significant influence on tax payers’ attitude in Nigeria.

Ho :    There is no significant relationship between level of education and tax payers’ compliance in Nigeria

Ho     Religious beliefs do not significantly influence tax payers’ compliance in Nigeria.

1.6   SCOPE OF THE STUDY

The determinants of tax payers’ 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: Imo, Enugu ,Anambra and Abia and basically the study will focused on concept of tax ,types of tax , classification of tax, determinant of tax payers’ attitude, reasons of tax, value added tax , capital gain tax ,sale tax, determinant of tax compliance and tax payer obligation and compliance.

1.7    LIMITATIONS OF THE STUDY

As part of the research experience by researchers all over the globe, certain limitations hindered the effective and smooth collection of data for the work. These in specific terms include:

•    Lack of Time: One of the reasons for restricting the area of the study to enugu state is time, some of the places where data and relevant information could have been obtained were not visited.

•    Nonchalant Attitude: Another limitation in the course of carrying this study was the nonchalant attitude of the respondents in supplying the necessary information. This was probably due to their ignorance of the main purpose of this study.

•   Financial constraint

A lot of money is required in data collection, analysis and interpretation, the researcher is constrained financially .Owing to these constraint the researcher could not cover all the state in Nigeria.

1.8      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.

1.9       DEFINITION OF TERMS

Tax Audit: Is the examination and investigation of the field company tax return to ascertain the truth in the amount asserted (Ani,1996:43).

Tax Avoidance: It is defined as a deliberate and legal act of the taxpayer to pay less than the ought to pay (Ipaye, 1996:12)

Tax Delinquency: This refers to a failure to pay taxes on the due date( Oyedele :2005).

Tax Evasion: This is usually a fraudulent effort by a taxpayer to escape his legal tax obligations (Giwa,1996:43).

Tax Capacity: Is the extent to which the tax basis can bear the burden of taxation without a rupture of the fiscal symbiosis (Ruge,2004:97)

Tax Compliance: Is the act or process of subjecting oneself, one’s incomes, business asset or expenditure to the demands of the tax law (greenberg1989:21).

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