Tax Morale and Taxpayers’ Compliance among SMEs in Nigeria

Abstract

This research delved into the dynamics of tax compliance among Small and Medium Enterprises (SMEs) in Nigeria, focusing on the influence of tax morale. The study examined key dimensions of tax morale, including religious beliefs; trust in governance, income levels, financial literacy, and educational attainment. Adopting a descriptive survey design, the investigation encompassed the entirety of the 386,655 registered SMEs across selected Nigerian states. Utilizing Taro Yamane's statistical formula and a multistage sampling method, a representative sample of 400 SMEs was meticulously selected. The ensuing regression analysis revealed compelling insights. Religious convictions, trust in governance, and higher income levels emerged as substantial and positive determinants of taxpayer compliance, encompassing both voluntary and enforced aspects. Financial literacy exhibited a positive influence on compliance, though statistically insignificant, hinting at a potential impact that lacks statistical robustness. Educational attainment, while positively affecting compliance, demonstrated significance primarily in enforced compliance, with no statistically significant impact on voluntary compliance. In conclusion, the study underscores the pivotal role of tax morale in shaping compliance behaviour among SMEs in Nigeria. The findings advocate for governmental initiatives aimed at augmenting transparency and accountability in tax administration to cultivate a positive tax morale, consequently fostering enhanced compliance within the SME sector.