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

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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. A sample size of 320 taxable adults were selected from four (4) states in Nigeria as representative of the taxpayers 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 as 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

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.

Inspite 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).

Inspite 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. Inspite 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 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 to 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 scruntize 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:

1.      Does family pressure affect attitude to pay tax?

2.      How does income level influence attitudes to pay tax?

3.      Does the level of Education determine pay attitude?

4.      To what extent do religious beliefs attitude to pay tax?

5.      What is the procedure of tax assessment in Nigeria?

6.      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 extend of this research.

1.7    SIGNIFICNACE 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 the 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:  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 Judgement (BOJ):  This is the use of tax agent initiatives in determining the estimated amount of tax payable.



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