In Nigeria, the need to improve voluntary payment of taxes or voluntary tax compliance has resulted in the various tax reform attempts by various successive governments. Suffice to mention that these reforms have not been able to stimulate the expected increase in tax revenue over the years, and this has snowballed into an unarguable tax gap as revealed in the share of income taxes in total revenue profile of the country.
This poor tax compliance behavior often referred to in the literature as the “compliance puzzle” is a challenging experience across countries but suspected to be more critical in developing economies.
In modeling tax compliance, the answer under the traditional theory of compliance is fear of detection and punishment. However, this model has been found to be inadequate in explaining the motives and intentions for tax compliance. The argument is that tax compliance may be subdivided into compliance resulting from enforcements or influence of tax authorities and voluntary compliance.
This leads to a logical question which interestingly extends the compliance issue; what would lead citizens to behave more honestly, provide correct information and improve the tax compliance rate voluntarily?
One answer to this question is the existence of an intrinsic motivation to pay taxes, which have been sometimes called, “tax morale”. Tax morale has evolved as an instrumental component in understanding voluntary tax compliance using a more integrated approach with a bias for non-economic factors. This study argues that the citizens’ perception of government accountability is an instrumental factor that shapes the emergence and maintenance of tax morale resulting in voluntary tax compliance. The underlining framework is that there is a social contract that defines the relationship between the government and the governed.
Table of Contents
1. Introduction
2. The Economics-of-Crime Approach to Tax Compliance
3. The Concept of Tax Morale and Intrinsic Motivation
4. Socio-Demographic Factors and Tax Compliance
5. Governance, Accountability, and the Social Contract
6. Conclusion
Research Objectives and Themes
The primary research objective is to examine the nexus between citizens' perception of government accountability and their willingness to engage in voluntary tax compliance, moving beyond traditional economic deterrence models to explore the role of the social contract.
- The influence of government accountability on tax morale.
- The limitations of the Allingham-Sandmo deterrence model in explaining voluntary compliance.
- The role of the fiscal contract and the reciprocal relationship between taxpayers and the state.
- Socio-demographic determinants affecting taxpayer behavior.
- The impact of public service delivery on citizens' trust and tax compliance.
Excerpt from the Publication
Effect of Good Governance on Voluntary Payment of Taxes
In Nigeria, the need to improve voluntary payment of taxes or voluntary tax compliance has resulted in the various tax reforms attempts by various successive governments. Suffice to mention that these reforms have not been able to stimulate the expected increase in tax revenue over the years, and this has snowballed into an unarguable tax gap as revealed in the share of income taxes in total revenue profile of the country.
The evidence from statistical records shows that the proportion of income taxes to the government’s total revenue has been abysmal. This poor tax compliance behavior often referred to in the literature as the “compliance puzzle” is a challenging experience across countries but suspected to be more critical in developing economies. In retrospect, the prevailing orthodoxy in modeling tax compliance behavior has been in line with the economics-of-crime approach based on the expected utility maximization calculus model by Allingham and Sandmo. The model presents and specifies the extent of compliance as positively correlated with the probability of detection and the degree of punishment and identified tax rate, penalty and detection probability as factors influencing taxpayers’ behaviour. In modeling tax compliance, the answer under the traditional theory of compliance implied by the Allingham and Sandmo’s model is fear of detection and punishment. However, this model has been found to be inadequate in explaining the motives and intentions for tax compliance.
Summary of Chapters
1. Introduction: Outlines the persistent tax gap in Nigeria and introduces the concept of voluntary tax compliance as a critical alternative to traditional enforcement mechanisms.
2. The Economics-of-Crime Approach to Tax Compliance: Critically analyzes the Allingham and Sandmo model, focusing on how reliance on deterrence, punishment, and detection fails to explain the full spectrum of compliance behavior.
3. The Concept of Tax Morale and Intrinsic Motivation: Explores the psychological and moral drivers of compliance, defining tax morale as a key factor in taxpayer honesty that exists beyond simple cost-benefit analyses.
4. Socio-Demographic Factors and Tax Compliance: Reviews how variables such as gender, religiosity, and social norms influence an individual's propensity to comply with tax laws.
5. Governance, Accountability, and the Social Contract: Investigates the relationship between the state and its citizens, arguing that accountability and the delivery of public goods are essential for maintaining the fiscal contract.
6. Conclusion: Summarizes the findings that voluntary compliance is significantly shaped by the perception of government accountability and the quality of the reciprocal relationship between taxpayers and the state.
Keywords
Voluntary tax compliance, tax morale, good governance, government accountability, social contract, fiscal contract, tax evasion, deterrence theory, intrinsic motivation, public goods, Nigeria, compliance puzzle, tax reform, socio-demographic factors, procedural fairness.
Frequently Asked Questions
What is the core focus of this research?
The research focuses on why citizens voluntarily pay taxes and how their perception of government accountability impacts this compliance behavior, specifically in the context of Nigeria.
What are the central themes of the study?
The central themes include the limitations of economic deterrence models, the role of tax morale, the significance of the social contract between the state and citizens, and the impact of public service delivery on tax compliance.
What is the primary research goal?
The goal is to determine the nexus between citizens' perception of how accountable their government is and their willingness to comply with tax obligations voluntarily.
Which methodology is employed in this work?
The study utilizes a qualitative literature review and synthesis of existing economic and behavioral theories to establish a non-economic framework for understanding tax compliance.
What does the main body of the text cover?
The main body examines the theoretical shortcomings of traditional deterrence models, introduces the concept of tax morale, and discusses how political and social factors—like accountability and public infrastructure—influence tax behavior.
How can the work be characterized by keywords?
The work is characterized by terms such as tax morale, government accountability, voluntary tax compliance, social contract, and the economics of tax evasion.
How does the author define the "compliance puzzle"?
The "compliance puzzle" refers to the phenomenon where taxpayers often comply with laws to a degree that traditional economic deterrence models—based only on the probability of punishment—cannot fully explain.
What role does the "fiscal contract" play in tax compliance?
The fiscal contract is a reciprocal relationship where citizens pay taxes in exchange for public goods and services; if taxpayers perceive this transformation rate as low, their tax morale and compliance decline.
Why is government accountability linked to tax compliance?
Accountability is linked to compliance because citizens are more likely to view tax payment as a moral obligation when they perceive that the state is using their contributions effectively to protect their human dignity and welfare.
- Citar trabajo
- Agu Okezie David (Autor), 2018, The effect of good governance on the voluntary payment of taxes, Múnich, GRIN Verlag, https://www.grin.com/document/427240
