ASSESSMENT OF TAX COMPLIANCE MOTIVATING FACTORS AMONG

INDIVIDUAL TAX PAYERS IN ONDO STATE, NIGERIA

Ayomiposi Peter AKINRINLOLA

MATRIC NO: 170601059

A PROJECT SUBMITTED TO THE DEPARTMENT OF ACCOUNTING, FACULTY OF

ADMINISTRATION AND MANAGEMENT SCIENCES, ADEKUNLE AJASIN

UNIVERSITY, AKUNGBA-AKOKO, ONDO STATE, IN PARTIAL FULFILMENT OF THE

REQUIREMENTS FOR THE AWARD OF BARCHELOR OF SCIENCE (B.Sc.) IN

ACCOUNTING.

MARCH, 2023.

1
 DECLARATION

I, Ayomiposi Peter Akinrinlola with matriculation number 170601059, declare that this
research was carried out under the supervision of the Department of Accounting, Adekunle Ajasin
University, Akungba Akoko, Ondo State. I attest that this dissertation has not been presented either
wholly or partly for the award of any degree elsewhere.

____________________________
AYOMIPOSI PETER AKINRINLOLA Signature & Date

2
 CERTIFICATION

This is to certify that Ayomiposi Peter Akinrinlola with matriculation number 170601059

carried out this dissertation under our supervision in the Department of Accounting, Faculty of

Administration and Management Sciences, Adekunle Ajasin University, Akungba – Akoko, Ondo

State, Nigeria.

_______________________________ ___________________
Dr. Igbekoyi O. E Date
Supervisor

_________________________ ____________________

Dr. Alade M. E Date

Head of Department

3
 DEDICATION

This project work is dedicated to God Almighty, who in his love and grace gave me the

opportunity to complete this research work.

4
 ACKNOWLEDGEMENTS

To the God of possibilities, I give all glory to God almighty for making this journey a

possible and achievable one for me. I am eternally grateful Lord and I will worship you forever.

My sincere gratitude goes to my supervisor, Dr. Igbekoyi O.E. for her motherly love,

guidance, assistance and tolerance throughout the course of this research work. God bless her and her

family more abundantly. I also appreciate Dr. Alade, M.E., the head of department of accounting,

Prof. Felix Olurankinse, Dean faculty of Administration and Management Sciences, Dr. Agbaje

W.H, Dr. Oladutire E.O, Dr. Adegbayibi A.T, Dr. Adeusi S.A, Dr. Ayesan O.O, Dr. O.V Ologun,,

Mr. Olabisi O.S., Mrs. Gbemigun C.O, Mr. Adegboyegun A.E, Mr. Oluruntoba S.R, and Mrs.

Odugbemi O.M for their support and advice throughout my academic program and during the course

of this research work.

I want to sincerely appreciate my parents Mr. & Mrs. Akinrinlola, I am grateful for your love

and support.

To my friends Bukola, Olawale, Dally, Nath, Kolade, Mayowa, Ayomide, Blessing, also

extend my gratitude to my colleagues that I could not mention their names, I appreciate everybody. I

thank them all.

5
 TABLE OF CONTENTS

Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
Table of Content vi
Abstract ix

CHAPTER ONE: INTRODUCTION

1.1 Background to the Study 1

1.2 Statement of the Problem 2

1.3 Research Questions 4

1.4 Objectives of the study 4

1.5 Research Hypotheses 5

1.6 Significance of the Study 5

1.7 Scope of the Study 6

1.8 Operational Definition of Terms 6

CHAPTER TWO: LITERATURE REVIEW

2.1 Conceptual Review 7

2.1.1 Tax Compliance 7

2.1.2 Tax Compliance Motivating Factors 8

2.1.3 Social Psychological Factors 11

2.1.4 Demographical Factors Affecting Tax Compliance 13

2.1.5 Economic Factors 17

2.2 Theoretical Review 20

6
 2.3 Empirical Review 23

CHAPTER THREE: METHODOLOGY

3.1 Research Design 27

3.2 Sources of Data 27

3.3 Population of the Study 27

3.4 Sample technique 28

3.5 Sources of Data 28

3.6 Research Instrument 28

3.7 Reliability and Validity of Research Instrument 28

3.8 Methods of Data Analysis 29

CHAPTER FOUR:

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

4.1 Background Information of Respondents 31

4.2 Data analysis 31

4.3 Interpretation of Results 34

4.4 Test of hypothesis 39

4.5 Discussion of Findings 40

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary 42

5.2 Conclusion 43

5.3 Recommendations 43

5.4 Study Limitation 44

7
 REFERENCES 45

APPENDIX 53

ABSTRACT

Any country's government is burdened with enormous duties, many of which are directly related to
the revenue the government receives from various sources, including taxes. The Nigerian

8
government depends heavily on taxes to fund its operations. Taxes, which are typically imposed by
the government, must be paid by people or businesses to the government. This study examines the
Assessment of tax compliance motivating factors among individual tax payers in Ondo State,
Nigeria. 100 tax payers in Ondo State were selected as a sample. A self-made questionnaire was used
to collect the data, and the results were analyzed using the basic percentage approach and chi square
to test the hypothesis. The instrument's reliability and validity were confirmed. The study's findings
show that the fear of being penalized will propel tax payer to file accurate and timely return has
helped to increase the rate of tax compliance in Ondo State. Based on these findings, government
should make tax fair among the tax payers in Ondo State, there should be leniency in the rules,
guidelines and regulations to be followed by tax payer in Ondo State.

9
 CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Taxation is seen as a burden which every citizen must bear to sustain his or her government because

the government has certain functions to perform for the benefits of those it governs. In developing

countries, tax non-compliance is a serious challenge facing income tax administration and hindering

tax revenue performance. Despite the various tax reforms undertaken by successive governments to

increase tax revenue over the years, prior statistical evidence has proven that the contribution of

income taxes to the government’s total revenue remained consistently low and is relatively shrinking

(Alabede, Zainol & Kamil, 2011).

Tax compliance can be described as the process of fulfilling the tax payer’s civil obligation for tax

payment and filing of tax returns including the provision of necessary documents and explanations

required by the tax authority in a timely manner (Oyedele, 2009). Achieving high levels of voluntary

tax compliance and/or maintaining current compliance rates as well as increasing the marginal levels

are issues of concern to fiscal policy makers in developed and developing countries alike. This is the

case because, irrespective of the nature of the economy, the principal objective of taxation is one and

the same: to raise revenue towards the financing of public goods and services, and funding of

governments (Martina, Silvia, Eric & Alfred, 2008).

The complex regulatory system and opaque in tax administration and enforcement makes tax

compliance unduly burdensome and often have a distortionary effect on the development of small

introduction.

The complex regulatory system and opaque in tax administration and enforcement makes tax

compliance unduly burdensome and often have a distortionary effect on the development of small

scale businesses as they are tempted to morph into forms that offer a lower tax burden or no tax

10
burden at all, based on their demographical characteristics (Masato, 2009). This results in a tax

system that imposes high expenses on the society. A poorly executed tax system also leads to low

efficiency, high collection charges, waste of time for taxpayers and the staff, and the low amounts of

received taxes and the deviation of optimum allocation of resources (Farzbod, 2000). Existing

empirical evidence clearly indicates that small and medium sized businesses are affected

disproportionately by these costs; when scaled by sales or assets, the compliance costs of small scale

businesses are higher than that of large businesses (Weichenrieder, 2007). This high cost of tax

compliance has affected the small scale businesses to develop various forms of non-compliance of

taxes based on their perceived social psychological factors.

According to Gillingham & Richardson (2005), the tax system that is perceived unfair by the citizens

will encourage them to engage in non-compliant behaviour. Abati (2006) noted that the state of

decay in Nigeria’s public infrastructure and economic activity are a reflection of poor public

governance with the low tax morale and non-compliance may have become the aftermath effect. In

developing countries, the income tax compliance has been constrained by the significant number of

changes to the tax laws, that are now so complex and only a handful of tax experts can understand

them. This creates additional problems for compliance by different categories of taxpayers’ who do

not have access to sophisticated tax specialists (Oberholzer, 2008).

1.2 Statement of the Problem

Tax compliance is a major problem for many tax authorities. Taxpayers always tend to avoid or

reduce their tax liability either through tax evasion or tax avoidance which is as a result on the tax

law set in place for the individuals. This may give rise to non-registration or incorrect filling of their

tax returns and loss of revenue to the government. The increase in tax may cause the taxpayers to

find means of tax avoidance by the taxpayers.

According to Akpubi and Igbekoyi (2019), the government introduced electronic taxation to make

payment of taxes easy for tax payers, thus ensuring compliance.

11
Extant literature, most especially in the emerging economies have confirmed that most tax payers do

not comply with tax provisions because of lack of trust and even sometimes inability to meet certain

obligations (Oyedokun, 2015).

As observed by Ayua (1999) these persons blatantly refuse to pay tax by reporting losses every year.

According to him, many of these professionals live a lifestyle inconsistent with reported income,

which is usually unrealistically low for the nature of their businesses. Civil Servants and their

salaried workers are the only class of people that actually pay tax in Nigeria. However, even among

the salaried workers, he added, many have turned the statutory personal allowances and relief into a

fertile ground for tax evasion. Almost all Nigerian taxpayers are married with four children!

Similarly, despite the tax provision meant to plug loopholes through which taxable persons can

minimize tax liability the self-employed persons employ all kinds of avoidance schemes to minimize

or escape tax liability and makes you wonder whether there are still any tax officials working in that

capacity. Such scenarios, no doubt, say a lot about tax administration system in Nigeria both in its

design and in the disposition of some taxpayers towards taxation. While it immediately presupposes

that there are legal framework put in place to punish tax evaders it perhaps raises a poser on the

efficiency and effectiveness of tax laws and tax administration in Nigeria. Some state governments in

an effort towards solving this problem had even gone to the extent of engaging the services of tax

consultants.

In view of this problems, there is need for the government and the tax authorities to revisit the tax

law in other for the taxpayer to be able to payer their tax with ease. And the reduction in the amount

of tax to be paid by the taxpayer should be bearable for them.

The need for the reform of tax law in favour of the taxpayers is to enable the taxpayers to pay up

their tax as at when due and this will reduce the level of tax avoidance in the country.

The reduction in the amount of tax to be paid by the taxpayers is very importance for the government

and the tax authorities to look into the amount by which the taxpayers do pay as tax. The lower the

12
amount of tax the high the rate and wiliness of the taxpayers to pay their tax with no problem

involve.

1.3 Research Questions

From the forgoing, the following questions have been put forth:

(i) What is the effect of tax penalty on tax payer compliance in Ondo State?

(ii) How does perceived fairness tax system affect tax payer compliance in Ondo State?

(iii) To what extent does awareness level of tax payers affect tax compliance in Ondo State?

1.4 Objectives of the Study

The broad objective of this study is to examine tax compliance motivating factors among individual

tax payers in Ondo State, Nigeria. The specific objectives of the study are:

(i) determine how taxpayers’ social psychological factors influence tax compliance level

(ii) establish how taxpayers’ demographical factors affect tax compliance level

(iii) examine how taypayers’ economical factors affect tax compliance level

1.5 Research Hypotheses

H01: Taxpayers’ social psychological factors have no significant influence on tax compliance level

H02: Taxpayers’ demographical factors have no significant effect on compliance level.

H03: There is no significant relationship between tax fairness and tax compliance in Nigeria.

1.6 Significance of the Study

The study will be of great significance to the tax authority, tax administrators and taxpayers as well

as various administrative factors hindering the full compliance of personal income taxpayers in

13
Nigeria, which will boost the revenue of the government, and also help to put in place measures that

will enhance tax fairness in Nigeria.

Tax administration: the study will be of benefit to the tax administrators by boosting the revenue

generation of the government, since the study examines the activities of the taxpayers that result to

negative compliance attitude of personal taxpayers thereby making the tax administrators to adjust in

their activities and maximally achieve their stated objectives,

Tax authorities: the result of the study will be of help to tax authorities by adopting the best

practices that will correct all negative practices among tax payers in Nigeria.

Tax payers: the study will be of great benefit to tax payers by making the tax administrators to

adjust their activate and maximally achieved their stated objectives

Researchers: Lastly, this study will also help researchers in the field of taxation, accounting and

macroeconomics in practice and in decision making.

1.7 Scope of the Study

This study is within the area of the assessment of tax compliance motivating factors among

individual tax payers in Ondo State, Nigeria. The study will be making use of the individual tax

payers in Ondo State to know the level of tax compliance in Ondo State in 2022. This study is

covering the tax payment from 2017-2021 as study by Akubo Daniel et al,. (2016). this study will

focus on the assessment of tax compliance motivating factors among individual tax payers in Ondo

State, Nigeria.

1.8 Operational Definition of Terms

Tax Compliance: it refers to taxpayers' decision to comply with tax laws and regulations by paying

tax timely and accurately.

14
Tax Payers: A taxpayer is a person or organization subject to pay a tax. Modern taxpayers may have

an identification number, a reference number issued by a government to citizens or firms. The term

"taxpayer" generally characterizes one who pays taxes.

Assessment: Assessment is the systematic basis for making inferences about the learning and

development of something. It is the process of defining, selecting, designing, collecting, analyzing,

interpreting, and using information to increase students' learning and development.

15
 CHAPTER TWO

LITERATURE REVIEW

This chapter provides the relevant and related literature on the assessment of tax compliance

motivating factors among individual tax payers in Ondo State, Nigeria. The chapter is grouped into

three sections, section one presents the conceptual framework, the second section presents theoretical

framework on the study under review and the last section reviews empirical.

2.1 Conceptual Review

2.1.1 Tax Compliance

Tax compliance can be defined as the ability of a tax liable body to submit accurate, complete returns

in conformity with tax laws and regulations of the state to the authority for the purpose of tax

assessment (Badara, 2012). Tax compliance is the degree to which a tax payer complies with the tax

rules of his country (Ahmed & Kedir, 2015). Failure to declare all incomes and payment of taxes

according to the provisions of the laws, obeying the court judgments and payment of the tax at the

right time will amount to tax non-compliance. The payment of tax is an obligatory duty for all

citizens as their civic responsibility, which they are expected to comply willingly with, but that is not

16
the case with some citizens (Alabede, Ariffin & Idris, 2011). According to Eiya (2012), personal

income tax can be viewed as a compulsory levy paid to the government by individuals in gainful

employment and those that are self-employed as well as corporate entities on their earnings. The

current law guiding the taxation of personal income in Nigeria is the Personal Income Tax

(Amendment) Act 2011.

Tax compliance is affected by social norms as well as public services, trust in government

institutions, subjective cultural characteristics of the person, the fairness of the tax system, perception

of others, awareness of how tax revenues have been utilized, taxpayers’ confidence in the country’s

administration of tax policy (Randlene, 2012). Tax compliance is a serious challenge for many tax

authorities and it is not an easy task to persuade taxpayers to comply with tax requirements even with

the existence of tax laws (James & Alley 2004). Abiola and Asiweh (2012) noted that only few

people are enthusiastic about paying tax because many people abhor tax payment due to its effect on

their income. The concept of tax compliance can be viewed from different ways. McBarnett (2003)

classified compliance into three forms: committed compliance, creative compliance. Committed

compliance is described as the willingness to discharge tax liability by tax payer without

complaining while creative compliance refers to engagement to reduce taxes by taking advantage of

possibilities to redefine income and deduct expenditures within the confine of the law, while

capitulative compliance is the reluctance of the tax payer in discharging his tax liability. Reducing

non-compliance can be effective if the reasons for non-compliance by taxpayers are investigated,

detected and addressed. In the opinion of the researchers, having examined some of the definitions as

put forward by other researchers, tax compliance would be described as total obedience both willful

and forced, to the relevant tax laws and regulations by both taxpayers and tax authorities.

2.1.2 Tax Compliance Motivating Factors

17
2.1.2.1. Demographical Factors

Public positions/statutes of taxpayers like their gender, marital status, age, education level, and

monthly income have an impact on their approach to tax issue. There can be a positive or negative

impact between these factors and tax compliance of taxpayers. It is inevitable for the education of

taxpayers not to influence tax compliance. As the level of education will have an impact on whether

arrangements made relating to taxation have been learned or not, they will influence tax compliance.

As the educational level increases and taxpayers get more conscious as regards to the function of

taxation relating with public issues, the tendency for evasion reduces, Fallan (1999). Income level of

taxpayers also influences tax compliance. As researches made as regards to the impact of income

level and tax ratios on voluntary compliance of taxpayers were analysed, it is seen that as income

rises tax evasion also rises, Tuay and Güvenç (2007). Marital status and age of taxpayers also

influece voluntary compliance. But there is no consensus as regards to whether marital status hasa

positive or negative impact on voluntary compliance with taxation. According to some studies

married people have higher tax compliance than single ones, Torgler and ve Schneider (2004),

whereas according to other studies, single people show higher tax compliance, İpek and Kaynar

(2009a), İpek and Kaynar (2009b).

2.1.2.2. Legal Factors

As the legal arrangements relating with taxation are more clear, understandable, and persuading and

as relating with tax amnesties, tax compliance of taxpayers is directly influenced. In this respect,

“expanding tax controls” and “persuading with tax penalties” can be seen as important tools for

providing tax compliance of taxpayers as voluntarily. Tayfun (2012)

2.1.2.3. Economical Factors

Taxpayers would like to see the reflection of taxes for which they have made payment directly on

themselves. If taxpayers believe that this condition is not met, they will show resistance as per

economical reasons. Similarly if taxpayers don’t believe that tax load is justful, this would create a

18
situation where taxpayers would evade tax in a reasonable way as per psychologic reasons. Uçak

(1997).

2.1.2.4. Political-Managerial Factors

Just like in other areas to be successful in tax management, functionality of organisation and its

effectiveness play an important role. Tax administation can realise the heavy work load expected

from them only with a strategic organisation. This kind of a structure would also have a positive

impact on the taxpayer and it will facilitate compliance. Managerial issues like sources allocated for

tax management, organisational structure of administration and taxpayers, keeping taxpayers as

recorded, defining the types of taxation as per the structure of the country, and complexity of tax

systemare important factors having impact on tax compliance, Tunçer (2002). Controls made by the

tax administration also play an important role in tax compliance. Taxpayers’ thinking that they may

be audited one day will increase their tendency for acting in line with the laws,Çelikkaya (2002).

2.1.2.5. Factors Related with Tax Ethics

Ethics is one of the basic institutional infrastructures required for social order. Ethical standing of

both the tax administration and the individuals play an important role on tax compliance.

An important factor influencing voluntary compliance of individuals to tax issue is tax ethics, Aktan

(2006). Compliance shown as relating with tax ethics is a compliance that is independent of legal

obligations relating with taxation.

2.1.2.6. Factors Relating with Accounting Applications

Accounting applications has an important role in voluntary compliance of taxpayers with tax issue. If

the accounting applications are transparent, applicable, and understandable by the taxpayers,

compliance with taxation will be facilitated. As accounting systems are insufficient in many

19
developing countries, it becomes difficult to improve transparency, Tunçer (2002). This situation

influences voluntary compliance of taxpayers to taxation in a negative way.

2.1.3 Social Psychological Factors

2.1.3.1 Tax Complexity: Tax complexity is another identifiable important taxpayers’ compliance

variable that influences compliance behaviour and it may be the genesis of tax avoidance (Isa, 2012

and Sapiei & Kasipillai, 2012). Moreover, Loo, McKerchar & Hansford (2010) stressed that tax laws

are too complicated for taxpayers’ to keep abreast considering the frequent changes in the tax law.

The authors perceived tax complexity as complication in the tax law and frequent changes in the law.

These issues may possibly be the reasons why some corporate taxpayers’ deploy the services of

external tax professionals when they experience difficulties in tax issues (Sapiei, 2012).

However, Isa (2012) found that corporate taxpayers perceived tax computation, tax ambiguity and

record keeping as tax complexity. Even though, Massarrat-Mashhadi & Sielaff (2012) stressed that

taxpayers’ understand the tax complexity. In another study conducted by Saad (2012) it was noted

that taxpayers’ are aware and compliant with their respective responsibilities. In contrast, the

argument by Loo et al (2010) argued that when the tax laws are complex and tedious the taxpayers’

may find it difficult to comprehend. This is compounded more when the taxpayers’ have no

knowledge on tax related issues. In the other argument by Isa (2012) which pointed out that tax

computation, record keeping and ambiguity are complicated to the taxpayers’ also seem logical.

Because they have to understand the process before they would be able to do the tax computation as

well as record keeping. If both arguments are critically analysed, it all lies on tax knowledge because

both tax law and computation of tax and others cannot be feasible without tax knowledge.

Moreover, Pope (1993) found that “simplification of tax is likely to lead to significant economic

resource saving”. The taxpayers’ and the tax authority need to stand up to these challenges and face

it squarely. Tax education is important for tax compliance, it is also important for the tax authority to

seriously look into the issues of tax knowledge and other compliance variables for effective tax

20
compliance. However, Doran (2009) found that tax complexity has a positive relationship with tax

knowledge and compliance behaviour.

2.1.3.2 Tax Penalties/Fines and Tax compliance

The degree of penalty system may be different from one country to another: The rate of penalty is

usually applied by the various tax authorities to determine penalty payable by defaulting tax payers

(Ladi & Henry, 2015). Also, the types of evasion depend on penalty rate to be applied. For example,

late filling of returns, normal filing with shortened‐reporting, refusal to keep records of source

documents like invoices and receipts attract different penalty rate behaviour (Chirkos, 2015). With

intentional evasion, the rate of penalty is greater than those of non-deliberate evasions (Hyun, 2005).

This system might play an important role in increasing the level of penalty rates for the behaviour of

tax evasion.

There has not been correlation between statistics and theoretical findings as regards the effect of

fines on tax compliance. Hyun (2005), confirmed that relationship between fines and tax compliance

also shows inconsistent findings. The study of Park and Hyun (2005) indicated that tax compliance

reacts better to fines than it does to audit possibility. Friedland, Maital and Rutenberg (1978), posited

that holding constant the anticipated tax but altering audit probabilities with fines for non-

compliance, compliance moves up appropriately with risen fines, but not with higher audit

probabilities. Other result of similar studies post different pictures. Brautigam, Old-Heldge and

Mick’s (2008) result showed that fines and tax compliance are not related, but audit probabilities and

tax compliance are. In an antagonistic climate, fines can be a part of the game of “cops and robbers”.

In a synergistic climate, they can be perceived as an adequate retribution for behaviour that harms

the community. Fines react to trust and power.

2.1.4 Demographical Factors Affecting Tax Compliance

Tax compliance determinants from demographic perspective relates to taxpayers’ willingness to

comply with tax laws in response to their demographic status. Demographic factors, according to

21
Salam (2010), are the variables used in the study of human populations and he stressed that they play

an important role in the compliance behavior of taxpayers. Demographic factors include gender, age,

education background and occupation, among others.

2.1.4.1 Gender and Tax Compliance

Several studies have been conducted on the attitudes of men and women towards tax compliance. For

instance, studies by Boyd (1981) and Hoffrnan (1998) found that women are more ethical than men,

while the studies conducted by Barnett and Karson (1987) and Weeks, More, McKinney and

Longenecker (1991) found that men are more ethical than women. Oxley (1993) conducted a

comprehensive study and reported that women in New Zealand were often more compliant in

comparism with men. There is evidence from the tax compliance literature showing the tendency that

men are less compliant and have lower tax morale than women. For instance, Devos (2006)

investigated the ‘relationship between demographic variable of gender and the attitudes of Australian

and New Zealand tertiary students towards tax non-compliance. The finding indicates that for

Australian respondents, gender variable held statistically significant relationship at the five percent

level with the incidence of tax non -compliance. Also, from New Zealand respondents, the gender

variable held important implication for tax non-compliance. This demographic variable was tested

for statistical significance at 5 percent.

Similarly, a common finding amongst studies reviewed for instance by Richardson and Sawyer

(2001) and Jackson and Million (1986) was that female taxpayers were more compliant than their

male counterparts. However, Richardson and Sawyer noted that this compliance gap between males

and females appear to be narrowing with the emergence of a more independent, non traditional

generation of women. Also, the research carried out by Houston and Tran (2001) showed a higher

proportion of non-compliance was by women rather than men.

Consequently, Kasipillai and Jabbar (2003) investigated whether gender difference occurs in relation

to tax compliance attitude and behaviour. A personal interview approach is used to obtain

22
information from taxpayers in urban towns in Malaysia and A + test conducted suggests that males

and females were found to have similar compliant attitude. Also, results of regression analysis from

the same study indicate that gender was statistically significant as determinants of noncompliant

attitude. The differences in the studies conducted as discussed above may be as a result of different

statistical tools used in analyzing the data. It could be seen from above that empirical studies carried

out previously have suggested that the gender of tax payers has influence on tax compliance.

2.1.4.2 Age and Tax Compliance

Alm and Torgler (2006) found that people have more respect for government and for authority as

they get older. In addition, Mc Gee and Tyler (2006) tested the assumption of Alm and Torgler by

comparing the scores for the three age groups that the human beliefs and value surveys gathered.

They used Mannwhitney U test to determine whether the differences were significant. The test result

comparing the 16 – 29 and 30 – 49 year old groups was significant at the 1 percent level (P< =

0.003), a comparison of the 30 – 49 and 50 above age groups was also found to be significantly

different at 1 percent level (P< = 3.2104e.05). These findings confirmed the belief that people have

more respect for government and authority as they get older and that the percentage of people who

think that tax non-compliance is always unethical rises as they get older. Similarly, Jackson and

Million (1986) in their study found a positive link between age and taxpayer compliance, such that

older taxpayers are found to be less willing to take risks and are more sensitive to sanctions.

In the same vein, Richardson (2006) also carried out a survey of post graduate business students to

investigate demographic variable of age on tax compliance behavior in Australia using the OLS

multiple regression statistical technique and the result revalued that respondents relating to the 20 –

29 age group are significantly correlated (P< 0.01) with tax compliance behavior. The research

revealed that for Australian respondents, the age group above is strongly a determinant of tax

noncompliance. Similarly, Bojuwon (2010), who focused his study on the impact of tax fairness and

23
demographic factors on tax compliance in Nigeria, used multiple regression analysis and find out

that age has positive significant relationship with tax compliance.

Meanwhile, Salam (2010) that investigated the impact of demographic variables on personal income

tax compliance in Kwara State- Nigeria, collected data by means of questionnaire and employed

ANOVA technique for analysis. The study found that demographic factors such as age have no

significant effect on tax compliance while other variables such as employment status have significant

effect on tax compliance.

2.1.4.3 Education and Tax Compliance

According to Jackson and Million (1986), education as a demographic variable relates to the

taxpayer’s ability to comprehend and therefore comply or not to comply with the tax laws. Greenland

and Veldhoven (1983) distinguished two aspects of education; the general degree of fiscal

knowledge and the degree of knowledge involving evasion opportunities. General degree of fiscal

knowledge, according to his work is the formal education while the latter is the knowledge of

consequences of non complance of individual taxpayer. The effect of education on taxpayer

compliance is also unclear, based on the study of Wallschutzky (1993) in which he indicated that

education is the variable likely to improve compliance, Beron, Tanchen and Witte (1992) indicated

that inconsistent results are produced as education is highly correlated with income level.

The reasons given for these conflicting findings are varied. First, there can be difficulty in

determining which aspect of education is being measured. Jackson and Million identified four

measures of education - the general degree of fiscal knowledge, knowledge involving evasion

opportunities, general education attainment and specific tax knowledge. These different dimensions

may assist in explaining the confusion surrounding the effect that the education variable has on tax

payer compliance.

In a survey of American taxpayers, Hite (1997) focused on the interaction between gender and

education; he found that female respondents with college degrees tended to be more tolerant of non-

24
compliance than females without college degrees. In a similar manner, survey of compliance

behaviour in the US and Hongkong, Chau, Troutman and O’Bryan (2000) reported that the US

respondents’ decisions to comply with tax laws were primarily driven by their education, which in

turn has positively influenced moral development and attitude. In contrast, Hong Kong respondents

have shown a negative link between education and tax compliance. Furthermore, Palil (2010) who

carried out his studies in Malaysia focused on the level of individual taxpayer’s knowledge and

explores how tax knowledge levels influence tax compliance behaviour. The study found that tax

knowledge has a significant impact on tax compliance even though the level of tax knowledge varied

significantly among respondents. It is widely observed from the previous studies that educational

background have significant impact on compliance level of taxpayer

2.1.5 Economic Factors

2.1.5.1 Income Level and Tax Compliance

According to Andreoni et al (1998) almost all the theoretical model indicate that as income raises,

tax non- compliance should increase over most ranges. Ritsema et al (2003) investigating the

participants in the 1997 Arkansas Tax penalty Amnesty program , find that income level is

positively related to the tax non - compliance. Similarly, Vogel (1974) finds that respondents who

reported an improvement in individual income status during the past 5 years are more likely prone to

tax non -compliance than those who report a deterioration of their financial/income status during the

same period. He argued further that tax non compliance attitude increases as income statues

increases and concluded that control measure that will focus on high level income taxpayers should

be introduced to enhance their level of compliance.

Moreover, Mc Gee and Tyler (2006) indicated that the lower income group tends to be more opposed

to tax non-compliance than the upper income group. Their finding indicated that the percentage of

people who viewed that tax non -compliance is always unethical declines as income increases. A

comparison of the scores for lower and middle income groups found the difference is significant at

25
10 percent level (p<=0.088).Thus, Comparing the scores for middle and upper income groups found

the difference not to be significant (p<0.276) while a comparison of the lower upper income scores

found the difference to be significant at the 1 percent level (p<=0.005). Meanwhile, Houston and

Tran (2009) also reported that the respondents in the lower income group do have a lower proportion

of tax compliance by under-reporting income and by over-claiming expenses than their counterpart

in the higher income group. They concluded that non –compliance attitude is more prone to low

income taxpayers.

Hite (1997) confirmed earlier findings of Jackson and Milliron (1986) that the evidence on the

income level variable is mixed and unclear, because prior researches have found supporting evidence

for three contrasting views on this variable: encompassing positive - Smith (1992), negative - Baldry

(1987) and no correlation - Worsham (1996) with taxpayer compliance. This reason for these mixed

results could be the different methodology adopted by these researchers.

2.1.5.2 Tax Audit and Tax Compliance

One of the determinants of tax compliance that determines the level of tax compliance which attracts

prominence in tax compliance literature is tax audit. The degree of tax audit relies on two factors: the

number of taxpayers flagged for audit and, its intensity and thoroughness of the audit.

The first element is measured as the number of taxpayer audit conducted divided by the overall

number of taxpayers. Tax audit is employed to determine the degree of tax audit for practical

comparison and analysis (Adeniran, Alade & Oshode, 2013; Ladi & Henry, 2015). Administration

cost is required during tax audit. An increase in the level of tax audit is advocated to reduce the

amount of other administrative activities, such as taxpayer service, collection of taxes (Ibrahim,

2016).

Mahfar (1994) and Oyedokun (2015) averred that tax audit becomes expedient, going by the rising

degree of non-compliance prevalent among developing countries of the world. Tax audit is required

to compel defaulting corporate bodies, individuals and even charities organizations to drag them

26
back to full compliance. Non-compliance is feasible in failure to remit tax deduction, not filing tax

returns, under-reporting of income, over-statement of deductions, or failure to pay the correct tax

liabilities (Oyedokun, 2015; Ojonta, 2011; Mahfar, 1994). Tax audit is therefore an established tool

to ventilate tax compliance.

According to Okonkwo (2014), as cited by Onuoha and Dada (2016) refers to tax audit as an

independent examination of book of accounts, tax returns, tax payments and other records of a

taxpayer to confirm compliance with statutory tax requirement, rules and regulations and accuracy

and correctness of tax paid and adhering to the relevant generally accepted accounting principles and

standards. Anah & Nwaiwu (2018), sees tax audit as an examination of an individual or entity’s tax

report by the relevant tax authorities in order to find out compliance with applicable tax laws and

regulations of the state. However, the rate of recurrence of tax audits and investigations, in recent

times, by the Federal Inland Revenue Service (FIRS) and the various State Boards of Internal

Revenue (SBIR) have been on the increase (Ibrahim, 2016).

2.1.5.3 Tax Rate and Tax Compliance

Economic models of rational compliance decisions provide either mixed predictions of the effect of

the marginal tax rate on compliance, or predict that increased tax rates would increase compliance

(Allingham and Sandmo, 1972). On the contrary, most empirical research finds that higher tax rates

decrease compliance or provides mixed results. Some studies (Pommerehne and Weck Hannemann,

1996) demonstrate that evasion increases with increasing marginal tax rates. Also Clotfelter (1983)

and Slemrod (1985) found that the marginal tax rate has a significant effect on underreporting. In

Porcano’s (1988) study, the tax rate had no effect on evasion and underreporting (Kirchler e al.,

2008).

Laboratory experiments with varying tax rates frequently found that tax rate increases leading to

higher tax evasion (Alm, Jackson and McKee, 1992). However, Alm, Sanchez and deJuan (1995)

found the opposite in a Spanish sample, and Baldry (1987) did not find a significant effect on any

27
experiment. Within the current framework, the impact of the tax rate would depend on the degree of

trust. When trust is low, a high tax rate could be seen as an unfair treatment of taxpayers, as an

attempt at taking from the taxpayers what is rightly theirs. When trust is high, the same level of tax

rate would be interpreted as contribution to the community, which in turn again profits each

individual. In the first case, the tax rate would be interpreted as the wielding of power by some tax

offices and in the second case, as a joint agreement within the community (Kirchler et al., 2008).

A theoretical model for tax compliance shows that the tax rate has an ambiguous effect on the level

of tax compliance, depending upon taxpayer’s attitude toward risk. Furthermore, there have been

contradictory empirical evidences on the effect of tax rate on the level of tax compliance. Thus it is

so difficult to discuss the impact of tax rates on the level of tax compliance for achieving a

comparative analysis (Hyun, 2005). For the individual income tax, diverse countries may have the

similar structures in the statutory tax rate: flat tax system or the progressive tax system with multiple

rates and instalments. If there is a little difference in the tax rates between two countries, we can

assume that the effect of tax rate on the level of tax compliance is negligible (Hyun, 2005).

2.2 Theoretical Review

2.2.1 Economic Utility/Deterrence Theory

The contemporary revival of the economic analysis of crime began in 1968 with Becker’s’ classic

article on crime and punishment. While Becker mentioned tax evasion as an area of application for

his general model, Allingham and Sandmo (1972), provided the analysis. Generally, this approach

treats noncompliance as a rational individual decision based upon probabilities of detection,

conviction and levels of punishment. Deterrence theory is concerned with the effects of sanctions

and sanction threats on criminal or undesirable behaviour. Deterrence theory was used as a basis to

examine many types of criminal behaviour including tax evasion (Mohammed, 2015).

2.2.2 Neoclassical Theory

28
Before, neoclassical theorists had discussed tax amnesty in length economist, neoclassical

economists have examined the impact of tax amnesties from various perspectives. Alm and Beck

(1993) equally demonstrated that amnesties may influence compliance and tax collections, most

especially if it is the social norm of the tax payers to pay taxes and the amnesty is subsequently

followed by effective enforcement drives. Amnesty may truncate tax revenues in the long-run

because of the likely reduction in tax compliance. Ability of tax amnesties to generate tax revenues

in the long run is ambiguous, vague and unclear hence, tax amnesties are short-term revenues

oriented. The study of Andreoni (1991) examined tax amnesties and tax compliance and found that

evasion increases during the amnesty periods but tax revenue does not necessarily fall. Reasons, tax

evasion graduates to the extent to which people expect and are willing to participate in the tax

amnesty and they will be to be recaptured new evader not the existing one who do not participate at

all in the amnesty. From the above, the substance of the two theories; deterrence and neoclassical

theories are both concerned about ensuring compliance, hence the study is anchored on these

theories.

2.2.3 Fiscal Exchange Theory

This theory advocates that the presence of government’s judicious use of tax monies may motivate

compliance and also cause an increase in compliance if public goods, which citizens prefer, are made

available (Moore, 2004). The main thrust of this theory is that compliance will be motivated when

citizens get returns for the taxes paid in terms of public goods and social amenities (Fjeldstad et al,

2012). That is, taxpayers will be obliged to pay taxes because they appreciate the efforts by the

government to provide public goods and recognize that this is made possible because of the

contribution they make in terms of taxes (Fjeldstad & Semboja, 2001). Deduction from this theory

brings to light the fact that compliance has nothing to do with coercion and everything to do with

government’s accountability and effective service provision and delivery as well as the level of

satisfaction or lack of satisfaction of taxpayers with the actions of the government. Nevertheless,

29
critics of this theory argue that its assumptions are unnecessarily simple and that in reality;

behavioural factors tend to have a huge impact on compliance and not just the fiscal exchange and

relationship between taxpayers and tax authorities (D'Arcy, 2011).

2.2.4 Theory of Crime

The theory of crime is set out on the deterrence doctrine which can be traced back to the classical

works of Jeremy Bentham and Cesare (Murphy 2008). Their classical utilization theory of crime is

that people are rational actors who behave in a manner that will maximize their expected utility.

Becker (1968) argued that authorities needed to appropriately balance between detection of non-

compliers and sanctions to the point where non-compliance becomes irrational. For more than

decades Alligham and Sandmo (1972) extended Becker’s work on the economics of crime to the

taxation context. They examined taxpayer’s decision to evade taxes when they were filling out their

tax returns and examined the relationship between penalty rate for tax evasion at the time, the

probability of detection, and degree of tax evasion engaged in. What they found was that there was a

relationship between these variables; with a higher penalty rate and probability of detection deterring

individuals from evading their taxes. In the 1980s, therefore, many scholars began to question the

value of deterrence alone in regulating behavior. They began to focus their attention on researching

compliance rather than deterrence and began to realize the importance of persuasion and cooperation

as a regulatory tool for gaining compliance.

2.3 Empirical Review

Alabede et al, (2011) investigated the determinants of tax compliant behaviour using public

governance quality as variables for tax compliance. They found that perception of the taxpayers

about the public governance quality has a significant positive relationship with tax compliance.

Modugu et al., (2012) examined the relationship between government accountability and voluntary

tax compliance in Nigeria. They found that there is a positive indication that the citizens’ perception

30
of government accountability is a factor that shapes the existence and maintenance of tax morale

resulting in voluntary tax compliance.

Akintoye and Tashie (2013) investigated the effect of tax compliance on economic growth and

development in Nigeria using trust in government, provision of infrastructural amenities, tax

knowledge and accountability by the government as the variables of tax compliance. They found that

tax knowledge, trust in government, provision of infrastructural amenities and government

accountability have a significant positive relationship with tax compliance.

Onyewuchi and Njemanze (2016) carried out an empirical analysis of tax leakages and economic

growth in Nigeria. They found that the most fundamental challenges concerning tax leakage are

expedited by the lack of good governance on the part of the government which highly discourages

the populace from complying willingly with their tax obligations. From the studies stated above, it

could be seen that excellent governance through judicious government spending plays a major role in

promoting the level of tax compliance.

Beesoon et al, (2016) assessed the determinants of income tax compliance in Mauritius and found

that tax knowledge has an important impact on tax compliance and the probability of being audited,

perceptions of government spending, penalties, personal financial constraints also have significant

influence on tax compliance. But they found that tax rate has a negative significant relationship with

tax compliance.

Umar et al, (2016) investigated income tax noncompliance in Nigeria and the moderating effect of

public governance quality using tax knowledge, perceived audit probability and public governance

quality as variables for tax compliance. They found that public governance quality has a significant

positive relationship with tax compliance. They also found that perceived audit probability has a

positive relationship with tax compliance.

Okoye, Isenmila and Oseni (2018) good governance is accountable, taxes will be paid voluntarily by

a lot of people, which lowers the need for coercion and generally increases tax compliance. The

31
government at the federal, state and local levels should spend taxpayers’ money wisely to give the

taxpayers maximum benefits for what they contribute to the government.

Nivakan, Salawati and Cheuk (2017). The aim of this study is to clarify the role of social factors on

individual taxpayers’ tax compliance behaviour in Malaysia. Studies with similar topics express the

fact that there still exists a gap in the developing countries that impact the decision making on tax

compliance. The outcome of the study reveals that changes in government policies, referral groups,

the role of LHDN, and political affiliation are the main important variables that determine individual

taxpayers’ tax compliance behaviour. This paper studied social factor variables, which finally fills

the gap that existed in the literature and helps tax administration to develop effective compliance risk

treatment

Akubo et al, (2020). The study examined tax compliance behaviour of small scale enterprises in

Bassa Local Government Area and assesses how taxpayers’ social psychological factors influence

tax compliance level. Also, to establish how taxpayers’ demographical factors affect tax compliance

level. The study therefore, recommends that the tax authority should take tax education a routine

responsibility, to enable the taxpayers’ to know the need to pay tax to the government. The tax

authority should also increase the level of tax audit. There should also be a stiffer penalty on any

taxpayer who is found wanting in sharp practices, to increase the level of compliance of taxpayers’

and reduce the disparity among all categories of taxpayers’.

Olurankinse and Oloruntoba (2021). This study is to examine the good governance and personal

income tax compliance in Nigeria. It was discovered that there is significant relationship between tax

fairness and personal income tax in Nigeria and also there are perceptions of tax payers towards good

governance and personal income tax compliance in the country. Specifically, tax fairness enhances

the personal income tax compliance among the sampled respondents and perception tax payer of a

good governance contribute significantly to the personal income tax compliance. The study

concluded that if tax fairness is well enhanced, tax payer will be highly interested in paying their

32
personal income tax. The problem of lack of compliance is common among the informal sector who

often bear the brunt of the bad governance. It is obvious that tax compliance will increase if good

governance can be perceived by the people. Respondents are ready to comply with the law but the

revenue collected must be judiciously used.

Akpubi and Igbekoyi (2019). This study assessed the effect of level of awareness on electronic tax

on tax compliance by small and medium scale enterprises (SMEs) in Lagos state; it also examined

the effect of perceived ease of use on tax compliance and determined the effect of electronic tax

filing system cost on tax compliance among SMEs in Lagos state; This was done with a view to

determine the effect of electronic tax filing system on tax compliance among SMEs in Lagos state

Nigeria. The study therefore concludes that the level at which the tax payers are aware of the

electronic tax filing system will determine their compliance rate and the compliance cost may

discourage the tax payers from using the system if it is higher. Although the effect of ease of use is

non-significant, the positive effect it has indicates that it has the potential to influence tax

compliance. The study therefore recommends that government should increase its tax awareness

efforts; review the electronic tax filing system to reduce cost of usage and provide a user friendly

avenue for using the system.

33
 CHAPTER THREE
METHODOLOGY

This chapter on methodology attempts to describe all the activities involved in the collection of all

relevant data and information required. It explains the procedure adopted and the instruments used in

the data collection.

3.1 Research Design

The Research Design approach adopted in this work is the survey research technique. The survey

approach appeared best suited for this work since it is not feasible to interview the entire population.

Furthermore, in surveys, there are fixed set of questions, and responses are systematically classified,

so that quantitative comparisons can be made. This research is in form of structured and non-

structured question using 4- point Likert scales.

3.2 Population

The population size of this study consists of all the individual paying tax in Ondo State. The

population size covers 100 tax payers in Ondo State.

3.3 Sample Size

The sample size of this study was selected from the individual tax payers in Ondo State, Nigeria.

One hundred (100) sample sizes were randomly selected of the respondents from the population of

the tax payer in Ondo State.

3.4 Sampling Techniques

34
The sampling technique adopted for this study was sampling random techniques and it was used due

to the objective of the study, the nature of the work, and the necessary degree of precision.

3.5 Sources of Data

Primary data will be sourced from randomly selected individual tax payers generated by the

researcher within Ondo State through the use of a well-structured questionnaire.

3.6 Research Instrument

Research is generally a process of finding out the answer to a problem. It is also the process of

arriving at dependable situation to find solution to problems through planning and systematic

collection, analysis and interpretation of data. For the purpose of this research work, questionnaire

was used.

3.7 Reliability and Validity of Research Instrument

The research instrument administered to the population were reliable because the respondent were

consistent in answering the questions, that is if the result obtained were consistent then the

respondent gave the same answers to many of the research questions. The questionnaire is designed

to elicit responds on the assessment of tax compliance motivating factors among individual tax

payers. The measuring instrument is valid because the researcher succeeded in achieving the

objective which is to test whether the research design is capable of eliciting the required response

from the respondent.

3.8 Methods of Data Analysis

The data collected were analyzed using weighted mean and chi-square. For easy computation of the

data collected, simple percentage was used in the computation on the questions related to the,

35
background information. The questionnaire was analyzed using weighted mean based on 4 point

summated likert scale

The points were so designed for items that were positively cued and reserved for item negatively

cued. The mean response on each item was computed by multiplying the frequency for each response

mode with the appropriate nominal values as indicated above. The total number of respondents to get

the mean divided the sum of the value obtained for each item.

The formula used was:

x = Efx
N
Where:
X = Mean of the score

F = Frequency of response

E = Summation
In each case, the mean score for each item was calculated thus:

X = (4xSA) + (3xA) + (2xD) + (lxSD)

In order to arrive at a decision to the interpretation of result, the grand mean of the response options

were computed by adding all scale values for each of the response options and dividing the sum by

the number of options.

Thus: 4 + 3 + 2 + 1
4
Interpretation was based on the mean, taking due consideration of class limits of the mean obtained.

An average score less than 2.5 is interpreted as disagreed and above is interpreted as strongly agreed.

36
Chi-square will be used in testing the hypothesis, this method is used to compare frequencies

observed and expected from a given theoretical derivation of the phenomenon under investigation

that is;

2 2
sX =(O-E)
E
2
X = Chi-square

O = Observed Frequency or response obtained

E = Expected Frequency

37
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Background Information of Respondents

Copies of the questionnaire were distributed to and collected from respondents by using Google

form. A total of 100 responses were finally retrieved from the respondents, representing 100% return

rate. The data were analysed using frequency counts, percentage, item analysis, and chi square

analysis. For purposes of analysis of the research questions, strongly agree and agree were coded 4, 3

while disagree and strongly disagree were coded 2 and strongly disagree coded 1. Consequent upon

that, any mean value of 1.5 and above meant effective/adequate while any mean value of less than

1.5 meant ineffective/inadequate. The results for the study are presented in tables.

4.2 DATA ANALYSIS

Table 1: Gender of Respondents

Valid Cumulative

Frequency Percent Percent Percent

Valid Male 64 64.0 64.0 64.0

Female 36 36.0 36.0 100.0

Total 100 100.0 100.0

Table 2: Age of Respondents

Frequency Percent Valid Percent Cumulative

38
 Percent

Valid 20-25 30 30.0 30.0 30.0

26-30 22 22.0 22.0 52.0

31-35 30 30.0 30.0 82.0

36 and
18 18.0 18.0 100.0
above

Total 100 100.0 100.0

Table 3: Level of Education of Respondents

Valid Cumulative

Frequency Percent Percent Percent

Valid BSc/ND 45 45.0 45.0 45.0

MSc/PhD 27 27.0 27.0 72.0

Professional 28 28.0 28.0 100.0

Total 100 100.0 100.0

Table 4: Position Status of Respondents

Valid Cumulativ

Frequency Percent Percent e Percent

39
Valid TOP 40 40.0 40.0 40.0

MIDDLE 50 50.0 50.0 90.0

LOW 10 10.0 10.0 100.0

Total 100 100.0 100.0

Table 5: Year of Experience of Respondents

Valid Cumulative

Frequency Percent Percent Percent

Vali 1
1 1.0 1.0 1.0
d

2 10 10.0 10.0 11.0

3 13 13.0 13.0 24.0

4 19 19.0 19.0 43.0

5 23 23.0 23.0 66.0

6 10 10.0 10.0 76.0

7 5 5.0 5.0 81.0

8 6 6.0 6.0 87.0

9 3 3.0 3.0 90.0

10 and above 10 10.0 10.0 100.0

Total 100 100.0 100.0

Tables 1 – 5 above show the bio-data of the respondents. Specifically, table 1 shows that of the 100

respondents, 64 were males while 36 were females.

40
Table 2 shows the age range of the respondents which 20-25 years and 31-35 years had 30%

showing that most of the respondents are within this range while 26-30 years and 36 and above had

22% and 18% respectively.

Table 3 reveals the education level of respondents which the BSc/ND certificate holder had the

most respondents of 45% while MSc/PhD and Professionals had 27% and 28% respectively.

Furthermore, table 4 shows the position status of respondents which middle position has the highest

respondent with 50% and top position had 40% while 10% for the low position.

And table 5 show the years of experience of the respondents which the respondent with 5 years’

experience had the highest number of respondents with 23, 4 and 3 years had 19 and 13

respectively. 2, 6 and 10 years’ experience had 10 each and 8, 7, 9 and 1 years’ experience had 6,

5, 3 and 1 respectively.

4.3 INTERPRETATION OF RESULTS

Research Question 1: What is the effect of tax penalty on tax payer compliance in Ondo State?

Table 6: Respondents opinion on the effect of tax penalty on tax payer compliance in Ondo State.

Question Factors Value Frequency Percentage

(%)

1 Fear of being penalized will propel Strongly Agreed 67 67

tax payer to file accurate and timely Agreed 22 22
return Disagreed 6 6
Strongly Disagreed 5 5
Total 100 100

2 Tax offenders will choose to pay tax Strongly Agreed 10 10

penalty rather than payment of actual Agreed 24 24
tax liabilities Disagreed 28 28
Strongly Disagreed 38 38
Total 100 100

41
3 Tax penalties will bring lasting Strongly Agreed 65 65
solution to noncompliance problem Agreed 21 21
Disagreed 10 10
Strongly Disagreed 4 4
Total 100 100

4 Sealing up tax payer properties as a Strongly Agreed 31 31

form of penalty increases tax Agreed 43 43
compliance Disagreed 17 17
Strongly Disagreed 9 9
Total 100 100

5 Good numbers of tax payers are not Strongly Agreed 42 42

familiar with tax penalties otherwise Agreed 31 31
they would have complied Disagreed 20 20
Strongly Disagreed 27 27
Total 100 100

Table 6 shows the distribution of the respondents on the effect of tax penalty on tax payer

compliance in Ondo State. Majority of the respondents representing 67% unanimously strongly

agreed that fear of being penalized will propel tax payer to file accurate and timely return. However,

large percentage of the respondents representing 38% did strongly agree that tax offenders will

choose to pay tax penalty rather than payment of actual tax liabilities. It reveals that 65% of the

respondents strongly agreed that tax penalties will bring lasting solution to noncompliance problem.

However, 43% of the respondents agreed that sealing up tax payer properties as a form of penalty

increases tax compliance. And lastly it shows that 42% of the respondents strongly agreed that good

numbers of tax payers are not familiar with tax penalties otherwise they would have complied.

Research Question 2: How does perceived fairness tax system affect tax payer compliance in Ondo

State?

Table 7: Respondents opinion on the perceived fairness tax system affect tax payer compliance in

Ondo State.

42
Question Factors Value Frequency Percentage
(%)

6 The amount of tax paid is Strongly Agreed 65 65

unreasonably high compared to with Agreed 24 24
the benefit it provided Disagreed 5 5
Strongly Disagreed 6 6
Total 100 100
7 It is fair that high income earners pay Strongly Agreed 44 44
more tax Agreed 36 36
Disagreed 17 17
Strongly Disagreed 3 3
Total 100 100
8 Some legal tax deduction are not fair Strongly Agreed 65 65
because only the wealthy are in Agreed 21 21
position to use them Disagreed 10 10
Strongly Disagreed 4 4
Total 100 100
9 Special provisions in income tax law, Strongly Agreed 60 60
apply to only few Agreed 22 22
Disagreed 10 10
Strongly Disagreed 8 8
Total 100 100
10 The tax paid by the high income Strongly Agreed 56 56
earners is much more than a fair Agreed 22 22
share of the income tax burden Disagreed 16 16
Strongly Disagreed 6 6
Total 100 100

Table 7 shows the distribution of the respondents on how does perceived fairness tax system affect

tax payer compliance in Ondo State. Majority of the respondents representing 65% strongly agreed

that the amount of tax paid is unreasonably high compared to with the benefit it provided. However,

large percentage of the respondents representing 44% strongly agreed that it is fair that high income

earners pay more tax. It reveals that 65% of the respondents strongly agreed that some legal tax

deduction are not fair because only the wealthy are in position to use them. However, 60% of the

respondents strongly agreed that special provisions in income tax law, apply to only few. And lastly

it shows that 56% of the respondents strongly agreed that the tax paid by the high income earners is

much more than a fair share of the income tax burden.

43
Research Question 3: To what extent does awareness level of tax payers affect tax compliance in

Ondo State

Table 8: Respondents opinion on the

Question Factors Value Frequency Percentage

(%)

11 Tax payers in ondo state understand Strongly Agreed 16 16

their rights and obligations Agreed 18 18
Disagreed 46 46
Strongly Disagreed 20 20
Total 100 100

12 Among the tax payers in ondo state Strongly Agreed 57 57

most of the tax payers does not know Agreed 30 30
the functions of tax Disagreed 13 13
Strongly Disagreed 0 0
Total 100 100

13 Tax payers in ondo state are able to Strongly Agreed 10 10

calculate their taxes Agreed 4 4
Disagreed 65 65
Strongly Disagreed 21 21
Total 100 100

14 Tax payers in ondo state are able to Strongly Agreed 14 14

pay their taxes Agreed 19 19
Disagreed 47 47
Strongly Disagreed 20 20
Total 100 100

15 Good numbers of tax payers who Strongly Agreed 52 52

have lack of awareness of tax do find Agreed 20 20
it hard to comply Disagreed 15 15
Strongly Disagreed 13 13
Total 100 100

Table 6 shows the distribution of the respondents on the awareness level of tax payers affect tax

compliance in Ondo State. Majority of the respondents representing 46% strongly disagreed that tax

payers in Ondo State understand their rights and obligations. However, large percentage of the

44
respondents representing 57% did strongly agreed that among the tax payers in Ondo State most of

the tax payers do not know the functions of tax. It reveals that 65% of the respondents disagreed that

tax payers in Ondo State are able to calculate their taxes. However, 47% of the respondents disagreed

that tax payers in Ondo State are able to pay their taxes. And lastly it shows that 52% of the

respondents strongly agreed that good numbers of tax payers who have lack of awareness of tax do

find it hard to comply.

4.4. Testing of Hypothesis

4.4.1 Testing of Hypothesis 1

Decision Criterion

Accept Ho: There is significant relationship between tax fairness and tax compliance in Nigeria.

Reject H1: There is no significant relationship between tax fairness and tax compliance in Nigeria.

Hypothesis one: There is no significant relationship between tax fairness and tax compliance in

Nigeria.

Table 9: Chi- Square Test Statistics

Test Statistics

It is fair that high income earners pay more tax

Chi-Square a 41.200

Df 3

Asymp. Sig. .000

a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 25.0.

The Chi-Square results in table 9 show that with chi-square stat of 41.200 and a degree of freedom of

3, the test statistics is significant at 1% level since the p-value is less than 0.01. This indicates that

there is significant relationship between tax fairness and tax compliance in Nigeria. Therefore, this

45
study rejects the null hypothesis stating that there is no significant relationship between tax fairness

and tax compliance in Nigeria and accepts the alternate hypothesis.

4.5. Discussion of Findings

The first research question of this study is on the effect of tax penalty on tax payer compliance in

Ondo State. Finding from the table 6 based on the respondent’s response show that the fear of being

penalized will propel tax payer to file accurate and timely return has helped to increase the rate of tax

compliance in Ondo State.

With the second research question of this study on how does perceived fairness tax system affect tax

payer compliance in Ondo State. Finding from the table 7 based on the respondent’s response show

that the amount of tax paid is unreasonably high compared to with the benefit it provided, it is fair

that high income earners pay more tax, even some legal tax deduction are not fair because only the

wealthy are in position to use them. And lastly, the tax paid by the high income earners is much more

than a fair share of the income tax burden in Ondo State.

The last research question of the study is on the awareness level of tax payers affect tax compliance

in Ondo State. The result from table 8 based on the respondent’s response show that that tax payers

in Ondo State do not understand their rights and obligations towards paying of tax in the State,

among the tax payers in Ondo State most of the tax payers do not know the functions of tax, it also

show that tax payers in Ondo State are not able to calculate their taxes due to unawareness of the tax

law set in place. And lastly, tax payers in Ondo State are not able to pay their taxes.

The Chi-Square results in table 9 show that with chi-square stat of 41.200 and p-value of 0.001

which is significant at 1% significant level, indicating that there is significant relationship between

tax fairness and tax compliance in Nigeria.

CHAPTER FIVE

46
SUMMARY, CONCLUSION, RECOMMENDATIONS AND STUDY LIMITATION

This study was undertaken to examine tax compliance motivating factors among individual tax

payers in Ondo State, Nigeria. Chapter one provides background to the study, it also explains

statement of the problem which arises as a result of challenges and issues that have been within the

context of the concept of the variables and the diverse opinions of scholars relating to the study and

the specific problem which this study wants to solve. The research questions and objectives of this

study were also formulated. Chapter two focused on the review of various existing literature to

elucidate on the variables contained in the study by defining the concepts, as well as reviewing

existing literatures on researches that have been conducted both in Nigeria and other countries in the

world in the area of this study in order to reveal the gap to be filled by this study. Chapter three

revealed the methodology adopted where this study engaged a descriptive and cross-sectional

research design with the use of questionnaire as research instrument. The study population was all

the individual paying tax in Ondo State. The copies of administered questionnaire were gathered and

analyzed using the Statistical Package for Social Sciences (SPSS). Chapter four involves the

presentation, analysis and interpretation of data obtained. At the end of the study, summary of

findings, conclusion and recommendations were made as follows:

5.1 Summary of the Findings

The first research question of this study is on the effect of tax penalty on tax payer compliance in

Ondo State. Finding from empirical analysis, it was found that the fear of being penalized will propel

tax payer to file accurate and timely return has helped to increase the rate of tax compliance in Ondo

State.

With the second research question of this study on how does perceived fairness tax system affect tax

payer compliance in Ondo State, result show that the amount of tax paid is unreasonably high

47
compared to with the benefit it provided, it is fair that high income earners pay more tax, even some

legal tax deduction are not fair because only the wealthy are in position to use them.

The third research question of the study is on the awareness level of tax payers affect tax compliance

in Ondo State. From this result, it was deduced that tax payers in Ondo State do not understand their

rights and obligations towards paying of tax in the State, among the tax payers in Ondo State most of

the tax payers do not know the functions of tax, it also show that tax payers in Ondo State are not

able to calculate their taxes due to unawareness of the tax law set in place. And lastly, tax payers in

Ondo State are not able to pay their taxes.

5.2 Conclusion

In concluding the main objective of this study is to examine tax compliance motivating factors

among individual tax payers in Ondo State, Nigeria. From the empirical findings, it was found that it

is fair that high income earners pay more tax, even some legal tax deduction are not fair because only

the wealthy are in position to use them. And lastly, it was found that the fear of being penalized will

propel tax payer to file accurate and timely return has helped to increase the rate of tax compliance in

Ondo State. Therefore, this study concludes that there is significant relationship between tax fairness

and tax compliance in Nigeria.

5.3 Recommendations

Base on the findings of this study, the researcher recommended the following:

1. Government should make tax fair among the tax payers in Ondo State.

2. There should be leniency in the rules, guidelines and regulations to be followed by tax payer

in Ondo State.

3. Government should make the tax payer aware of the benefit behind paying of taxes in the

state.

5.4. Study Limitation

48
The time frame for the conduct of this research is short considering the fact of the issue ravaging the

education sector presently. In addition, the cost involved in undertaking the research was

borne solely out of the pocket of the researcher. The study in addition is limited to Nigeria and

therefore the findings may only be applicable and thus useful in Nigeria. This study is limited to the

individual paying tax in Ondo State which might not be provide enough justification for the findings

of this study. Finally, the study is constraint by a limited data available on various volumes of the

report and articles sometimes conflict with one another which could be really devastating. In spite of

these, the transparency and significance of this study are not affected.

49
REFERNCES
Abati, R. (2006). Nigeria's Deplorable Roads. The Guardian, p. 2.

Ahmed, A. and Kedir, S. (2015). Tax compliance and its determinant the case of Jimma Zone,
Ethiopia. International Journal of Research in Social Sciences, 6(2), 7-21.

Alm, J. and Togler, R. (2006). Culture differences and tax morale in United State and Europe.
Journal of European Psychology.27,224-246

Andreoni J, Erard B, Feinstein J (1998). Tax Compliance, J. Econ. Literature, 36: 818-860.

Baldry JC (1987). Income Tax Evasion and the Tax Schedule: Some Experimental Results. Public
Financ. 42: 357-83.

Boyd, D.P., (1981). Improving Ethical Awareness Through the Business and Society Course
Business and Society, 27-31.

Brautigam, D., Odd-Helge, F., & Mick, M. (2008). Taxation and state-building in developing
countries: capacity and consent. Cambridge: Cambridge University Press.

Bojuwon, M. (2010). The Impact of Tax Fairness and Demographic Factors on Tax Compliance in
Nigeria, An Msc thesis in Accounting, University of Utara, Malaysia.

Chirkos, A.Y. (2014). A Comparative study of compliant and non-compliant individual taxpayers in
Ethiopia evidence from Amhara region. Journal of Economic and Sustainable Development.
5(24) 10

Doran, M. (2009). Tax Penalties and Tax Compliance. Harvard Journal on Legislation, Vol.46,
pp.111-161

Eiya, O. (2012). Taxation at a glance. Benin City: Nigeria, Otoghagua Enterprise.

Farzbod, J. (2000). Investigation of the Effective Factors in the Tax Efficiency. Unpublished
Master’s Thesis, Governmental Management Training Center, Tehran

Ipek, S. and Kaynar, I. (2009) Effect of Demographic Factors on Tax Compliance: Results of a
Survey. Journal of Finance, 157.

Gilligan, G. & Richardson, G. (2005). Perceptions of Tax Fairness and Tax Compliance in Australia
and Hong Kong: A Preliaminary Study. J. Fin. Crime, 12(4), pp. 331-343

Hite,P.,(1997). Identifying and Mitigating Tax Compliance. Australian Tax Forum,13,155-180.

50
Honsten, J., and Tran, A., (2001). A Survey of Tax Evasion using the Ramdomised Response
Technique in the Journal of Advance taxation,13; 69-94.

James, S. and Alley, C. (2004). Tax compliance, self-assessment and tax administration. Journal of
Finance and Management in Public Services, 2(2), 27-42.

Ladi, O.M. & Henry, I.T. (2015). Effects of tax audit on revenue generation: Federal Inland Revenue
Service.

Oyedele, T. (2009). Tax incentive as tools for compliance. Lagos: The Chartered Institute of
Taxation of Nigeria.

Palil, M.R., and Mustapha, A,F., (2011). Determinants of Tax Compliance in Asia: A Case Study of
Malaysia in the European Journal of Social Sciences, 24(1) ; 9-32.

Pope, J. (1993). The Compliance Costs of Taxation in Australia and Tax Simplification: The Issues
Australian Journal of Management, Vol. 18(1), pp. 70-75

Richardson, M., and Sawyer, A.J., (2001). A Taxanomy of the Tax Compliance Literature: Further
Findings, Problems and Prospects. Australian Tax Forum,16(2) ; 137-320.

Saad, N. (2012). Perceptions of Tax Fairness and Tax Compliance Behaviour: A Comparative Study.
Journal Pengurusan , Vol. 36, pp. 89-100

Salam, M.O., (2010). Personal Income Tax Compliance in Kwara State: A Demographic Analysis.
Unpublished Msc Thesis Department of Accounting, Bayero University, Kano.

Sapiei, N. S. (2012). External Tax Professionals’ Perception of the Corporate Taxpayers’

Compliance Costs and Behaviour under the Self-Assessment System. Monash University
Sunway Campus, Malaysia, Kuala Lumpur

Slemrod, J. (2007). Cheating Ourselves: The Economics of Tax Evasion, Journal of Economic
Perspectives. Vol. 21(1), Pp. 25–48

Torgler, B. and Schneider, F. (2004) Does Culture Influence Tax Morale? Evidence from Different
European Countries. CREMA Working Paper No. 17.
http://www.crema-research.ch/papers/2004-17.pdf

Tunçer, M. (2002) Effect of Government-Individual Relations on Tax Compliance and Turkey.

Faculty of Political Sciences, Ankara University, 57-53

51
Vogel, J. (1974). “Taxation and Public Opinion in Sweden: An Interpretation of Recent Survey
Data”. National Tax Journal, Vol. 27, pp. 499-513

Uçak, C. (1997) Psychology of Taxation. Tax World Magazine, No. 89, 13-37.

Yahaya, L. (2014). Tax Determinants towards Self-Assessment System: A Case of Corporate

Taxpayers in Nigeria. Masters Dissertation, Department of Accounting, International Islamic
University Malaysia

52
 APENDIX

QUESTIONNAIRE

INSTRUCTION: Please fill in the space provided by ticking (-----) against the

information that is applicable to you.

SECTION A

i. Sex: Male ( ) Female ( )

ii. Age: 20 – 30 ( ) 31 – 40 ( ) 41 – 50 ( ) 50 years and above ( )

iii. Marital status: Married ( ) Single ( ) Divorced ( )

iv. Status;

 Top level ( )

 Middle level ( )

 Lower level ( )

v. How long have you served in this work?

 1 – 5 years ( )

 5 – 9 years ( )

 10 years and above ( )

vi. Educational qualification;

 MBA/MSC ( ) BSC/HND ( ) OND/NCE ( )

53
SECTION B

SA – Strongly agreed

A – Agreed

D - Disagreed

SD – Strongly disagreed

i) Fear of being penalized will propel tax payer to file accurate and timely return

 SA ( ) A ( ) D ( ) SD ( )

ii) Tax offenders will choose to pay tax penalty rather than payment of actual tax liabilities.

 SA ( ) A ( ) D ( ) SD ( )

iii) Tax penalties will bring lasting solution to noncompliance problem

 SA ( ) A ( ) D ( ) SD ( )

iv) Sealing up tax payer properties as a form of penalty increases tax compliance

 SA ( ) A ( ) D ( ) SD ( )

v) Good numbers of tax payers are not familiar with tax penalties otherwise they would have

complied.

 SA ( ) A ( ) D ( ) SD ( )

vi) The amount of tax paid is unreasonably high compared to with the benefit it provided

 SA ( ) A ( ) D ( ) SD ( )

vii) It is fair that high income earners pay more tax.

 SA ( ) A ( ) D ( ) SD ( )

viii) Some legal tax deduction are not fair because only the wealthy are in position to use them.

54
  SA ( ) A ( ) D ( ) SD ( )

ix) Special provisions in income tax law, apply to only few.

 SA ( ) A ( ) D ( ) SD ( )

x) The tax paid by the high income earners is much more than a fair share of the income tax

burden.

 SA ( ) A ( ) D ( ) SD ( )

xi) Tax payers in ondo state understand their rights and obligations.

 SA ( ) A ( ) D ( ) SD ( )

xii) Among the tax payers in ondo state most of the tax payers does not know the functions of

tax

 SA ( ) A ( ) D ( ) SD ( )

xiii) Tax payers in ondo state are able to calculate their taxes.

 SA ( ) A ( ) D ( ) SD ( )

xiv) Tax payers in ondo state are able to pay their taxes.

 SA ( ) A ( ) D ( ) SD ( )

xv) Good numbers of tax payers who have lack of awareness of tax do find it hard to comply.

 SA ( ) A ( ) D ( ) SD ( )

55