CHAPTER ONE

INTRODUCTION

1.1. Background to the Study

E-tax is the process of assessing, collecting and administering the taxation process through an

electronic media. It is an online network through which the taxpayers have license to the

platform via the use of internet, in other to have entrée into the facilities provided by the tax

expert such as the registration for a tax identification number, electronic tax filing of tax returns

(Olaoye &Atilola, 2018; Wasao, 2014). Collection of government revenue through electronic

means in developing countries has obtained increasing influence in policy debates lately. Nisar

(2013) state that the recent trend in public taxation, stress the need for developing a system of tax

assessment and collection that involves internet services.

Taxes described as a compulsory levy and used by government to provide security, social

amenities and create conditions for the economic wellbeing of the society, it is imposed on a

subject and any property that might be in one’s name (Maisiba & Atambo, 2016). Governments,

through revenue so collected, can meet expenses of governance and gain economic growth

through the delivery of adequate and desirable infrastructures.

In Nigeria, taxation has been in existence even before the amalgamation in 1914 of the North

and South protectorates to form the territory now called Nigeria. The types of taxes paid in those

days are inform of homage paid to Oba’s household, contribution for maintenance of peace and

maintenance of security guards, soldiers, penalty paid for non -performance of civil right and

contribution to educational development. However, its place has not been well reorganized as it

were in other countries. According to Organisation for Economic Co-operation and Development

1
(OECD) (2017), United State government revenue from taxes accounts for over 50 per cent of all

government revenue since the past decade, and is expected to account for $5.6 million out of

$6.7 million predicted to be generated in 2018 by the government. It has been ranked as a major

source of revenue in countries such as UK, France, Sweden, Norway, and other high-income

countries.

In Africa, tax revenue has significantly contributed towards the economic growth of

different countries. According to OECD (2017) the tax-to-GDP ratios in eight African countries

namely: Tunisia, Morocco, South Africa, Senegal, Mauritius, Cote d’Ivoire, Rwanda and

Cameroon rafrom 16.1% to 31.3%, in 2014. Tunisia had the highest tax-to-GDP ratio in 2014

(31.3%), followed by Morocco (28.5%). This figure is higher than tax-to-GDP ratio of some

countries listed by Organisation for Economic Co-operation and Development as High-Income.

According to Cobham (2010) the electronic tax system was introduced globally about 30 years

ago. It started in 1986 as a little computer test program in which only five tax payers from

Cincinnati, Raleigh Durham, and Phoenix agreed to participate. Since then, electronic tax system

has become a common channel, serving various taxpayers across the global yearly. Wasao

(2014) describes electronic tax system as an online system or channel where taxpayers are able

to have access or permit to tax platform through the use of internet, in other to have access to all

the services provided by the tax authority such as the registration for a tax identification number,

electronic tax filing of tax returns, the Electronic taxation system that was introduced in Nigeria

in the year 2013 by the Federal Inland Revenue service (FIRS). FIRS for instance is one of the

financial and tax authorities in the world that conducts this electronic tax payment system

through the Business Process Improvement (BPI) and increases scope of electronic interface with

various taxpayers so as to increase the efficiency and effectiveness of staff and services.

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According to Crede (2008) governments world-wide, have invested highly in electronic systems

for the past two decades.

Ezejiofor (2014) identified e-taxation as a tax system administration carried out online. He noted

that because e-taxation is electronic tax filing system, the payment of e-tax can be made directly

through bank account and via the use of ATM via debit card or credit card. While it is believed

that the purpose of presenting e-taxation is to encourage tax compliance in the system.

It has been observed that in most countries where tax revenues significantly constitute a major

part of the economy’s revenue, they have been using Electronic Tax system for

years.Government of developing countries faces great obstacle in collecting tax revenues, which

results to gap between what they should collect and what they actually collect. Several efforts

have been made to widen the tax but whether these efforts have peaked realization of the

expected results it get on company income tax, value added tax, and capital gain tax hence

necessitating to be empirically resolved in this research.

Additionally as remarked by Ogoun (2014), taxation as a tool for public revenue generation was

systematically and methodically confined to the background in Nigeria for decades, as a result of

the massive inflow of public revenue, occasioned by not only the discovery of crude oil in

commercial quantity but also the resultant boom in the intermediate demand for crude oil in

commercial quantity.

The presidential committee on national tax policy (2008) stated that the central objective

of the Nigerian tax system is to contribute to the well-being of all Nigerians directly through

improved formulation and indirect through utilization of tax revenue generated for the benefit of

the people. However, its place in Nigeria, as observed by Ogoun (2014), taxation has not been

well reorganized as it were in other countries. For example, while most countries both in and

3
outside Africa categorized their revenues as tax-revenues and non-tax revenues, in Nigeria

federally collected revenue is categorized under oil revenue and non-oil revenue.

Tax compliance represents the degree of responsiveness of taxpayers to the

government.Tax authorities in Nigeria skeletally embrace e-taxation which significantly reduces

tax payment compliance. E-taxation is an electronic self-service platform that enables tax prayer

to file their tax details with convenience in respective of their locations once internet is available.

In other to improve the Nigeria tax system for effective tax administration the Nigeria interbank

settlement system (NIBSS) and system-specs Nigeria Limited partnered with the Federal Inland

Revenue Services (FILRS) to provide electronic payment of taxes in Nigeria in 2015. Electronic

taxation system was introduced to automate all core processes from apersonal identification

number and tax registration payment, assessment application for a comprehensive certificate

monitoring exercise, tax audit and integration, taxpayers file management and returns filling.

1.2 Statement of the Problem

Raising revenue enables many governments in developing countries achieve financial

superiority, avail basic state amenities to its people, lower dependency on external support which

in most cases has strings attached and diversify sources of revenue. On the contrary, tax

avoidance and evasion in the local scene has hampered the growth of domestic tax base (IMF

2011). Even with the increasing and persistent world-wide challenge of tax non-compliance

(McKerchar and Evans 2009), it is evident that most developing economies especially in the sub-

Saharan Africa are the worst affected (Cobham 2005; Fuest and Riedel 2009). Masinde and

Makau, (2010) assert that taxes are crucial in budgetary projections of an economy and one of

the major reasons why taxes are levied is to raise revenue for economic management and

allocation of resources for economic stabilization. Numerous interventions in the form of

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administrative initiatives have been put in place in the past by the Nigerian Government to

enhance revenue generation.

One of such intervention was the introduction of electronic tax system. Electronic tax system

was introduced into the domestic taxes service to increase revenue collection, administration,

avail services to the tax payers all the time from anywhere, reduce costs of compliance and

improve tax compliance. However, tax compliance levels remain low and tax collections are

below the targets. For instance, annual tax target for 2019 was N8,802.3860 billion and

N5,076.8518 billion in 2020, however, total collection for the period was N5,261.9163 and

N4,952.2245 for 2019 and 2020 respectively.

Empirical evidence as to whether the system has achieved its objectives of improving tax

compliance behaviour and the link between e-tax system and tax compliance has not been clearly

established (Ben, 2015; Chatama, 2013; Duke, Efiok, Yilmaz & Coolidge, 2013). Akpubiandand

Igbekoyi (2019); Oladele, Aribab, Adediran, Rashoed and Babatunde (2020); Ayodeji (2014);

Owino, Otieno and Odoyo (2017) opined that there is a strong and significant positive

relationship between e-tax and tax compliance. On the other hand, Clement and Oluseyi (2018);

Raphael, Mfon and Patrick (2020); Wasao (2014); Chijioke, Leonard, Bossco and Henry (2018)

argued that tax compliance is negatively influenced when the tax system is digitalized.

This controversy suggests that more studies needed to be conducted to affirm the place of e-

taxation in Nigeria. This study, therefore, sought to bridge this gap in knowledge determining the

effects of quality of the e-tax system on tax compliance in Nigeria by attempting to answer the

following question: To what extent does E-Tax system have an effect on company income tax,

value added tax, capital gain tax and petroleum profit tax compliance in Nigeria?

1.3 Objective of Study

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The essential target of this research is to investigate the influence of e-taxation on tax

compliance in Nigeria. While the specific objectives include to:

1. Determine the effect of e-tax system on capital gain tax compliance in Nigeria.

2. Examine the effect of e-tax System on company income tax compliance in Nigeria.

3. Ascertain the effect of E-Tax system on petroleum profit tax compliance in Nigeria.

4. Examine the effect of E-Tax system on value added Tax compliance in Nigeria.

1.4 Research Questions

In order to achieve the objectives stated above, the following research questions were

formulated:

1. To what extent does E-Tax system have an effect on capital gain Tax compliance in

Nigeria.

2. To what extent does e- tax system have an effect on company income Tax compliance in

Nigeria.

3. To what extent does e- tax system have an effect on petroleum profit Tax compliance in

Nigeria.

4. To what extent does e- tax system have an effect on value added Tax compliance in

Nigeria.

1.5 Research hypotheses

The following hypotheses were stated.

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Ho1: The implementation of E-Taxation has no significant effect on capital gain tax.

Ho2: The implementation of E-Tax has no significant effect on company income tax.

Ho3: The implementation of E-Tax has no significant effect on petroleum profit tax.

Ho4: The implementation of E-Tax has no significant effect on value added tax.

1.6 Significance of the Study

The finding of this study will be beneficial to tax administer, tax payers, tax analysts and

researchers. The deployment of electronic tax collection mechanism is expected to achieve easy

tax administration, improved tax compliance and as well as enhancee transparency. The findings

will create more awareness on e-tax system which in turn increases tax-compliance by tax

payers.

E-tax system is necessary in order to capture more taxpayer to increase the revenue of the Nation

since the governments around the world needs tax revenue to assist them in fulfilling their

societal obligations (Fagbemi, Uadiale & Noah, 2010).The implementation of automatic taxation

is aimed at fighting offences that were mainly associated with the collection of taxes like; Tax

evasion, filing of wrong tax returns and claiming of undeserved tax refunds (Wamathu, 2014).

This work is likely to reveal the strengths or fragilities associated with implementation of new

technology and its benefits not only to the authority but also to taxpayers thus, enriching

knowledge to other government institutions intending to initiate a related innovation programs.

Eventually, the recommendations made will be of great help to Tax administrators and the Tax

payers in carrying out a cost-benefit analysis on the use of technology in efficient tax

administration.The research will also contribute to the existing body of knowledge and may form

the basis for further research in the areas of technology and tax compliance in Nigeria.

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However, since the implementation of E-taxation in 2015 no empirical evidence has shown the

extent to which the new technology has achieved this purpose, hence the need for this study.

1.7 Scope of the Study

Content Scope – This research work will critically examine the effect of e-taxation and the

degree of tax compliance. The study examined the effect of e-tax system on company income

tax, value added tax, capital gain tax and petroleum tax compliance in Nigeria.

Geographical Scope – The study covers the entire Nigeria. The country measures about

1,200km from the east to west and about 1,050km from the north to south. The country’s

topography ranges from lowlands along the coast and in the lower Niger valley to high plateaus

in the north and mountains along the eastern border.

Unit of Analysis Scope – data for the study cover a period 2000 – 2020. The data is collected

from the Federal Inland Revenue Service website, Central Bank of Nigeria bulletin 2021 and the

Nigerian Bureau of Statistics annual report 2021.

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 CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1. Conceptual Review

2.1.1 E-Taxation

Electronic tax system is an online platform that enables the taxpayer access tax services through

the internet. Such services include registration for a tax identification number, filing of returns

and registration of a payment and compliance certificate application. Wasao (2014) as cited in

Night and Bananuka (2018). This component of modern IT systems, named as the 'e ‐tax system',

may include support for electronic registration, electronic filing (e-filing), electronic payment(e-

payment), information dissemination, and other functions. (Price Water house (PWH) and World

Bank (WBG), 2020; Jimenez 2013). Mascagni et.al (2018) suggest electronic tax system enables

tax administrators, to have availability of clear and verifiable information on taxable transactions

enforce compliance through other channels. Generally, better business records should make

firms’ interactions with tax officials easier and less arbitrary, as well as helping to reduce

compliance costs (Okunogbe and Pouliquen, 2017).

As explained PWH and WBG (2020) E-filing and e-payment have various benefits that have

made the tax preparation process easier for businesses, including the ability to file a tax return

from one’s office at a convenient time and the ability to prepopulate tax returns with data already

held by the tax administration.

Jimenez (2013) indicated IT is a crucial component of tax administration reform as it enables tax

administrations to better gather and analyze information, to proactively manage workload and

resources, to foster a cooperative engagement with taxpayers, and to standardize the treatment of

taxpayers and thus facilitate the uniform application of the tax law. Similarly, e-tax system

9
provides support related to automation, workflow, and authorization management. It further

provides information, education and enables deploys risk ‐based procedures to detect and deter

noncompliance, facilitates the collection and dissemination of performance information to staff

and management. compliance and administration and IT also facilitate voluntary compliance by

opening multiple interactive and electronic channels with taxpayers.

Thus, the application of information and communication technology concepts, techniques,

policies, and implementation strategies to taxing services has become a subject of fundamentals

importance and concerns to all taxing authorities and indeed a prerequisite for local and global

competitiveness in taxing authorities (Patnaik et.al 2019). Most countries today operate

automated financial management, customs, and 159 out of 193 UN member states have

automated tax systems (World Bank, 2016).

PWH and WBG (2020) indicated well-designed and efficiently implemented electronic systems

can greatly reduce the time and effort required by businesses to meet their tax obligations and

can also offer significant benefits for tax authorities. The (OECD’s) 2019 report on tax

administration confirms the increase in investments that tax authorities are making in digital

technologies to facilitate the filing and payment of taxes, increase and automate the analysis of

data from taxpayers and third parties and improve communications between taxpayers and tax

administrations.

Night and Bananuka (2018) argue that the e-tax system improves tax compliance, as it facilitates

faster accessibility to tax services without a physical visit to the tax authority premises. Haryani

et al. (2015) further state that a system that is easy to use, secure, dependable, provides easy

10
payment mode, provides a variety of services and is user-friendly boosts voluntary tax

compliance.

Jimenez (2013) suggested to facilitate voluntary compliance, modern tax administrations

proactively facilitate compliance by simplifying processes, providing information, education, and

support to taxpayers, and directing their limited compliance monitoring and enforcement

resources to the areas of greatest risk to revenues With respect to compliance monitoring and

enforcement, the 'compliance performance system' of modern e-tax systems provides support to

the tax administration's audit and collections function in collecting and managing information to

target areas, where non‐compliance poses greatest risks to revenues (Jimenez 2013).

2.1.2 Tax Compliance

Verboon and Dijk (2007) state that tax compliance is the willingness of individuals and corporate

organisations to comply with relevant tax authorities by paying their taxes. Tax compliance can

be defined as an ability of a tax liable body to submit accurate, complete and satisfactory returns

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

assessment Badara (2012). Sarker (2003) also reported that tax compliance is the degree to

which a taxpayer complies or fails to comply with the tax rules of his country. Brown and Mazur

(2005) noted tax compliance as a multifaceted measure and theoretically, it can be defined by

considering three distinct types of compliance such as payment compliance, which means timely

payment of all obligations, filing compliance, which means the timely filing of any required

return, and reporting compliance (the accurate reporting of income and of tax liability).

Allingham and Sandmo (2012), and Andreoni et al., (2008) characterize and explain tax

compliance as the output of interrelation among variables including perception of equity,

efficiency and incidence (public finance views). Tax enforcement aspects like penalties and the

11
probability of detection also relate to tax compliance while other labour market behaviour factors

including an individual’s wages and tax bracket also contribute to tax compliance (Kirchler,

2007). According to Masinde and Makau (2010), taxes play an important role in the budget of

any economy and one of the main reasons why the government imposes taxes is to generate

income to manage the economy and redistribute resources.

Over the years, the Nigerian government has undertaken various revenue administration reforms

aimed at enhancing revenue collection. However despite various administrative reforms, levels

of tax compliance have remained quite low. Nicoleta (2011) in his study says that tax

noncompliance is a substantive universal phenomenon that transcends cultural and political

boundaries and takes place in all societies and economic systems. There are many studies that

explain the behaviour of tax compliance in a more realistic situation. They focus on the

determinants of tax compliance, respectively on economic and non-economic factors. A survey

conducted by KRA, KIPPRA and the Treasury, based on 1999/2000 data revealed that VAT

payment compliance was as low as 55% while return lodgement compliance was 65% (Makau et

al., 2010).

Tax non-compliance is an area of concern for all government and tax authorities, and it continues

to be an important issue that must be addressed. Regardless of time and place, the main issue

faced by all tax authorities is that it has never been easy to persuade all taxpayers to comply with

the regulations of a tax system. In contrast to the majority of employed people - who in many

countries are paid net salaries with taxes being deducted at source –residential estate investors

often need to self-assess and self-report their income and pay taxes "out of their pocket."

Residential estate investors not only pay their income tax but need to take account of various

types of business taxes such as corporate tax, property taxes, and payroll taxes; they need to

12
collect sales taxes such as VAT; and they need to withhold taxes such as personal income taxes

in the case of having at least one employee (Christensen et al., 2001).

Jackson (2013) believes that to improve and sustain a significant level of tax compliance,

demands focus on long-run tax reform initiatives. To achieve this, authorities may be required to

start with reinforcing the structure and management of the tax collection agency, developing and

applying dynamic collection procedures (e.g., remittance and withholding procedures) and also

reinforcing the ability of the essential tax management functions (registration, filing and payment

enforcement, debt collection, audit, taxpayer services, and processing of appeals). Keen et al.,

(2013) assert that change of the legal infrastructure and judicial processes is also considered

essential in ensuring that the required controls, penalty systems, and procedures adopted to settle

any emerging differences should be in place. It is fundamental to note that advancement in

technology and investment in sophisticated communication systems, is playing a crucial role in

tax conformance administration. For instance, automatic collecting of third-party data as a by-

product of natural transactional processes; application of electronic bills to enhance in-time

transaction monitoring and verification; and evaluation of uncertainties related to tax revenue).

Prioritizing reforms in tax management and administration as a precondition to realize improved

levels of tax compliance vary from one country to another and from one economic region to

another, showing dissimilarities in stages of achievement, managerial ability, and the possibility

of tax abuse. The assumption that “One size does not fit all”, requires that any changes in tax

arrangements should to be tailored to each and every economic region’s prevailing conditions.

The significantly growing tax gaps and reduced income generation of third world economies and

other emerging economies indicate great potential for increased revenue productivity if tax

conformity initiatives are enhanced. For these countries, getting the fundamentals of tax

13
administration in place (especially taxpayer service operations and efficient audit and

enforcement) should be the first step (Machogu & Amayi, 2013).

According to the Tax Justice Network Africa, (2011), a conformance program for taxpayers is an

advanced strategy that consolidates in one document an explanation of the most essential

uncertainties relate to conformity to tax requirements which are recognized in the tax regime and

lays out a detailed plan of how the tax authority anticipates to tackle these risks. It does not

attempt to cover every aspect of a tax agency's operational activities. Programs to enhance

taxpayer compliance are ordinarily developed with regard to stratification of the taxpayers based

on their tax capacity and general tendency to comply. These segments could be large enterprise,

average level firms, small and micro businesses, and individuals. The established programs are

also tailored to mitigate compliance threats related to each specific section of the taxable

population (Spitzer, 2003).

The Organization for Economic Cooperation and Development (2001) divided

compliance into administrative compliance and technical compliance. Administrative

compliance refers to complying with administrative rules of lodging and paying. This

compliance can also be called reporting compliance or regulatory compliance.The technical

compliance refers to complying with technical requirements of tax laws. Tax compliance can be

achieved through the application of public relations, tax education, tax consultation and guidance

and examination (Abitew, 2021).

Tax compliance and tax revenue

According to Institute of Taxation and Economic Policy (ITEP, 2011), a great proportion of

revenue authorities have digressed from the traditional tax management assessment regimes

where all or to a larger extent tax reports are scrutinized or examined as a precondition for before

14
being issued to the taxpayers. According to Abubakar (2008), the Nigerian tax system has

experienced remarkable variations in recent times. The tax system is the process of taxation

which involves sets of rules, regulations and procedures with the organs of administration

intermingling with one another to generate fund for government (Agbetunde 2010). The Nigerian

tax system is of multi activities which include tax administration tax laws, and tax policies

(Adesola, 2004). Under current Nigerian law, taxation is enforced by the three tiers of

Government, that is. Federal Government, State Government, and Local Government with each

tier of Government having its sphere clearly writing out in the Taxes and Levies (approved list

for Collection) Act, 1998 (Abubakar, 2008). Based on the structure of Nigerian Tax system for

revenue generation, Naiyeju, (2010) and Odusola, (2006) opined that the system is lopsided, and

dominated by oil revenue. They further said that the most veritable tax handles are under the

control of the federal government while the lower tiers are responsible for the less buoyant

sources, meaning that the federal government collects tax from corporate bodies while state and

local governments’ tax individuals.

The taxpayers' belief and tendency to comply is always a consequence of a number of elements

of compliance that finally affect taxpayer's attitude. The conditions that affect adherence to tax

requirements and failure to voluntarily honour tax obligations by individual taxpayers are not

uniform among different economies and also are different from one tax entity to (Kirchler,

2007). These range from taxpayer attitude towards the tax regime and the tax collection agency

(Ambrecht, 1998) group pressures and or individualized practices; taxpayer awareness regarding

the workings of the tax system/tax regulations (Silvani, 1992; Le Baube, 1992). Including other

benefits such as motivational incentives (Feld, Frey and Targler, 2006) and coercive forms like

fines (Allingham and Sandmo, 1972); high penalties in case of non-compliance (Slemrod, 1992;

15
Le Baube, 1992); implementation activities that include regular tax audits; possibility of

noncompliance discovery; variance across social cultures; preconceived behaviour regulation

(Furnharn, 1983); norms/ morals by the taxpaying agents and tax administrators; fairness of the

revenue regimes; population dynamics and composition elements like gender, age, literacy levels

and the level of revenue (Murphy, 2004) and the dependency on informers.

Adherence to tax obligations has gradually developed and grown into a major field of focus for

studies in social and financial psychology. This concept has been looked at and tackled from a

variety of standpoints leading to the understanding of the varied aspects of behavioral attitudes

by the tax payers. Attitudes of a tax payer have been determined, current cultural practices

defined and the lay philosophies held by people with regard to fulfilling their yearly tax

liabilities and declarations examined (Kirchler, 2007). Experimental findings point to the fact

that adherence to taxation requirements has resulted in higher and rising levels of government

revenue and verification reports and a generally encouraging decline in the overall tax rates

based on yearly tax returns. Tax liability payment will also be highly efficient when the tax payer

anticipate improvement in provision of welfare amenities paid for by the tax revenue with any

change in percentage penalties appearing to cause minimal impact on tax liability payment

tendency (Almet et al., 1992).

To conclude, there seems to be a range of alternative tax regulation elements superior to the

normal routine of implementation activities that the state can put in place to realize and even

exceed the expected or projected level of adherence with the tax collection and administration

conditions. Essentially, a number of these fundamental strategies (increased fines) may to a

greater extent fail to trigger any increase in the levels of compliance to tax requirements. The e-

taxation is expected to enhance tax compliance because of its flexibility.

16
2.1.2 Types of Taxes

2.1.2.1 Company Income Tax (CIT)

This also refers to corporate tax. Corporate tax is a direct tax enforced by government on the

revenue of a company. Some nations enforce such taxes at the national level, and a related tax

may be enforced at state or local levels. Babatunde (2016) defined company income tax as a tax

on the incomes of incorporated entities in Nigeria. This tax also comprises the tax on the

incomes of non-resident businesses carrying on business in Nigeria. It is paid by limited liability

companies inclusive of the public limited liability companies. It is therefore usually referred to as

corporate tax. Company income taxes are charged on the incomes of business entities around the

world (Andrew, Neville & Janet, 2012).

By law, Corporations are told to pay corporate duty in Nigeria dependent on the benefit. 30% is

the sum charged on the benefit made in the first year of appraisal. Enterprises occupant in

Nigeria is obligated for CIT on their general pay and non-inhabitant corporations are at risk just

to CIT on their Nigerian-source pay (Nnubia, Okafor, Chukwunwike, Asogwa and Ogan, 2020).

2.1.2.2 Value Added Tax (VAT)

Value Added Tax (VAT) is an assessment on utilization charged at each phase of the utilization

chain and borne by the last customer of the item or administrations (Oraka, Azubike, Okegbe &

Ezejiofor, 2017). In Nigeria, VAT is required and gathered at a level pace of 7.5% from every

individual in totally invoiced sum on all merchandise and ventures not excluded from paying

VAT under Value Added Tax Act 1993, as corrected. Bird (2005) depicted Value added tax as a

multi-organized expense that is collected on merchandise and ventures in every phase of

creation. In Nigeria it was known as service tax before it was changed to value added tax. Here,

the last burden of tax or the occurrence of tax falls on the consumer; and it is an indirect tax.

17
 In a particular month, if the VAT collected for the government (output VAT) is more

than the VAT paid to other persons (input VAT), the variance is be forwarded to the government

on monthly basis, by the taxable person (Oraka, et. Al., 2017); Federal Inland Revenue Services

Information Circular No 9304). While if the improved is the situation, the citizen is qualified for

a discount of the abundance VAT paid. All exports are zero evaluated for VAT, no VAT is

payable on exports (Nnubia, Okafor, Chukwunwike, Asogwa and Ogan, 2020)..

2.1.2.3 Capital Gain Tax

Capital gain tax is an expense on benefit acknowledges on the offer of capital resource at a cost

higher than the price tag. Jones (2003) characterized capital gain tax as an assessment on capital

gains, the salary acknowledged on the offer of a non-stock resource that was more prominent

than the sum acknowledged on the deal. The most widely recognized capital additions are

acknowledged from the offer of government bonds valuable metals, and property. The rate varies

with countries. Most countries subject individuals and companies to capital gains-taxes on their

annual capital profit. In Nigeria, the amount charged is 10% of the profits from the sale of the

qualifying assets (Ogbonna & Ebimobowei, 2012).

Calculation of capital gains charge is carried out by subtracting from the sum received or

receivable from the cost of acquisition to the person realizing the chargeable gain plus expense

incurred on the enhancement of expenditures incidental to the realization of the asset. Capital

gain tax can have direct effect on operating profit of firms as it reduces the net operating profit

which return on shareholder is based. Capital gain tax though charged on gains from the sales of

capital asset is usually not consider as income from operation, can improve the net income of

firms or reduces it (capital gain loss) in a particular year (Nnubia, Okafor, Chukwunwike,

Asogwa and Ogan, 2020).

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2.1.2.4 Petroleum Profit Tax (PPT)

This is a form of tax that is imposed on the profits of companies engaged in upstream petroleum

operations in lieu of CIT. The PPT rates as follows: 50% for petroleum operations under

production sharing contracts (PSC) with the Nigerian National Petroleum Corporation (NNPC).

65.75% for non- PSC operations including Joint Venture (JVS), in the first five years during

which the company has not fully amortized all pre-production capitalized expenditure. 85% for

non- PSC operations after the first five years (PWC, 2017).

2.2 Theoretical Framework

2.2.1 TechnologyAcceptance Model (TAM):

The theory of technology acceptance was propounded by Davies in 1989 but was later modified

by Venkatesh and Bala in 2008. The theory avers that an individual’s beliefs towards using a

new system are based on perceived usefulness and perceived ease of use (PEOU). That is, the

degree to which the user expects the target system to be free of effort and more so help to

increase the degree of efficiency and effectiveness of performance. Again, the perceived ease of

use also goes a long way to influence usage. Daniel et.al (2018) noted that TAM models are

beneficial within and across organizations set up when there is a need to access the technologies

or applications and to make comparisons between user groups or applications.

Nevertheless, the limitation of TAM is when it is used outside of the workplace perceived

usefulness (PU) – further explains the extent to which an individual believes that using a given

system would enhance and improve job performance. Perceived ease of use (PEOU) –This refers

to the extent to which an individual believes that by using a specific system would be easy to use

and free from using a lot of effort (Davies, 1989). However, this theory is relevant to this study

19
because it helps to understand the behaviour of individual taxpayers to acceptance of the e-

taxation.

2.2.2 Regulatory Compliance Theory.

Erick (2007) believes that individuals who have advanced compliance theories often perceive

compliance as "planned" and not as an "automatic", response. In an attempt to concur with the

Weberian approach to describing behaviour, compliance proponents regard goal-oriented

responses as approximate indications of satisfaction for realistic response processes. This

assumption has merited a number of intuitive analyses. To date, important concerns are

unexplained, consequently, this has had a limiting effect on the uninterrupted growth of the

compliance model. Two of them call for attention (Valeria, 2004).

To start with, the compliance theory needs to provide justification for the empirically established

behaviour of the tax controllers to institute concurrently numerous, heterogeneous targets

(Jayapalan, 2003). Empirical studies confirm the possibility of having a combination of physical,

psychological and normative targets taking effect on compliance and noncompliance tendencies.

In particular, a regulatee could be focusing on enhancing his profitability, safeguard self from

any anticipated loss, derive pleasure, and respond in an appropriate manner, all at once (Karingi

et al., 2005). However, Machogu and Amayi (2013) believe that the said targets may not

necessarily translate into a generally accepted standard for utility. Therefore, the theories

advocating for voluntary compliance rely only on one kind of these motives, particularly the

rational actor theories of compliance, assume and fail to account for a substantial portion of the

empirical certainty, the way a number of experimental studies have concluded.

Numerous concepts have been suggested as explanations to this fundamental problem, although

a greater percentage of these propositions have turned out to be inadequate. The popular and

20
significant contribution by the proponents of the compliance theories is the suggestion to

combine varied formulations of response. If considered separately, each of these models puts

aside the intricacy of purposes noticeable in convincing situations. However, when considered

collectively, the models are able to convincingly provide explanations for almost all the

interpretations, based on the assumption that the actors who constitute compliers and non-

compliers can be categorized for instance as: "utilitarians” "unprincipled calculators" "bad

apples" and or "opportunists". Alternatively, they could be the dutiful "virtuous" actors, citizens,

or good apples. The popular illustrations are the assertions of Machogu et al., (2013). It

combines two conflicting theories: rational choice theory (game theory) and the perception that

norm internalization in mutual exchanges is likely to overshadow opportunistic attractions of

failure to comply. Therefore, this is generally considered a compromising position between the

logic of consequences and logic of appropriateness as representation of the many developments

to the regulation literature.

2.3. Empirical Review

A number of studies both locally and internationally have been done on the role Information

Technology plays in Tax compliance.

Masunga, Mapesa and Nyalle (2020) examined the quality of the e-tax system and its effect on

tax compliance behavior of large taxpayers in Tanzania. The data were gathered from 313 large

taxpayers from three regions in Tanzania, namely Dar es Salaam, Mwanza and Arusha. The

study employed Information System Success Model (The IS model) with constructs service

quality, system quality, information quality, user satisfaction, behavioral intention and tax

compliance behavior (actual behavior). A Partial Least Square Structural Equation Modeling

(PLSSEM) with SmartPLS3 was used to evaluate the latent variables and their indicators. The

21
results showed that behavioral intention to use the e-tax system has the strongest effect on tax

compliance behavior. Thus, service and information quality had an incredible effect on creating

eagerness to accept and utilize the e-tax system which improves tax compliance behavior.

However system quality has not shown significant effect on tax compliance behavior.

Ayodeji (2014) studied the impact of electronic tax systems on tax administration in Nigeria. The

researcher argued that the dwindling global fortune occasioned by the fall in the price of crude

oil, the major source of wealth for Nigeria shifted the attention of the government and major

stakeholders in the country to the revenue generated locally. But the daunting task of boosting

the Internally Generated Revenue necessitates the adoption of electronic tax systems

technologies to drive Tax administration and concluded that electronic tax systems play an

important role in the increase of internally generated revenue in Nigeria by ensuring compliance

thereby boosting productivity and economic activities in the country. It is a change agent for

accelerated growth and poverty reduction in Nigeria and the whole of African continent at large.

Chan, Troutman and O’Bryan (2000) in their survey compared Hong Kong and US taxpayers’

compliance behaviour. Their finding reveals that the US respondents’ decisions to obey tax laws

were driven mainly by education and their age, which in turn positively influenced moral

development and attitude.

Alade (2018) assessed the effect of E-taxation on Company Income Tax (CIT) and Value

Added Tax (VAT). Using expo facto research design was adopted, and data were sourced from

Federal Inland Revenue Service covering six (6) years and three (3) quarters, spanning from the

first quarter of 2012 to the second quarter of 2018. The data obtained were evaluated with the aid

of paired sampled t-test. The outcome revealed an insignificant positive difference between the

pre and post company income tax revenue with the measurement variables, statistics and p-value

22
reported to be 0.833 and 0.421, respectively. Also, there was an insignificant positive difference

between the pre and post-value-added tax revenue with statistics and p-value of 0.520 and 0.612,

respectively.

Oriakhi and Ahuru (2014) examined the relationship between federally collected revenue and

specific tax revenue generation sources such as custom and Excise Duties (CED), value added

tax (VAT), petroleum profit tax (PPT), company income tax (CIT). Secondary data were

collected for each of the tax sources from 1981 – 2011. The study employed advanced

econometric analysis such as regression, co-integration, error correction modelling and pair wise

granger causality tests. The various income taxes were used as the independent variables while

federally collected Revenue was used as the dependent variable. The study concludes that the

various income taxes were statistically significant and have positive relationship with federally

collected revenue. The Granger causality shows that custom and excise Duties and value-added

Tax granger causes federally collected revenue.

Jankeeparsad, Jankeeparsad, and Nienaber (2016) investigated the acceptance of electronic

method of filing returns by South African taxpayers. The study utilized the decomposed theory

of planned behaviour with factors adjusted specifically for South Africa as a developing country

to identify the possible determinants of user acceptance of the e-Filing system among taxpayers.

The study was an exploratory study and was conducted by means of a questionnaire survey. The

target population consisted of taxpayers located in Durban and Pretoria during the period 1

August 2013 to 1 October 2013. This period was specifically chosen as it was tax filing season.

Findings indicated that taxpayers using the manual method lacked facilitating conditions such as

23
access to computer and internet resources which were the most significant barrier to e-Filing

usage, while taxpayers using the electronic method reported perceived usefulness as the primary

determinant in their decision to use e-Filing.

Olaoye and Atilola (2018) examined the effect of e-tax payment on revenue generation in

Nigeria. The study period covered six (6) years and three (3) quarters, spanning from the first

quarter of 2012 to the second quarter of 2018. the period for pre e-taxation covered thirteen (13)

quarters, spanning from the first quarter of 2012 to the first of 2015 while the period for post e-

taxation covered thirteen (13) quarters, spanning from the second quarter of 2015 to the second

quarter of 2018.The analysis was carried out using Trend analysis, descriptive statistics of mean

and standard deviation, paired sampled t-test. The findings revealed that there was insignificant

positive difference between pre and post value added tax revenue with t-statistics and pvalue of

0.520 and 0.612 respectively. This connotes that e-tax payment has an insignificant positive

effect on value added tax revenue in Nigeria. Similarly, it was discovered that there was a

positive insignificant difference between pre and post company income tax revenue with t-

statistics and p-value reported to be 0.833 and 0.421 respectively. That is, e-tax payment has

negative insignificant impact on Value Added Tax (VAT) revenue. Lastly, the findings revealed

that there is a positive insignificant difference between pre and post capital Gain tax revenue

with t-statistics and p-value of 1.218 and 0.247 reported to be respectively. That is, that e-tax

payment has a positive insignificant effect on company income tax revenue in Nigeria. It was

therefore concluded that E-tax payment has not contributed to capital gain tax, value added tax

and company income tax generation in Nigeria.

In the same vein, Gotora and Samuel (2018) examined the influence of taxpayer education on

voluntary tax compliance in Tanzania, with specific reference on print and electronic media

24
taxpayer education programs on tax compliance. The study findings established that education

through print and electronic media taxpayer education programmes, website-based taxpayer

education, and tax stakeholders’ workshops impacts on the level of voluntary tax compliance in

Tanzania. The empirical literature thus reveals the focus of prior studies on various

enlightenment programme to enhance tax compliance.

Chijioke, Leonard, Bossco and Henry (2018) looked at the impact of e–taxation on Nigeria’s

revenue and economic growth: a pre–post-analysis. Using secondary data obtained from Federal

Inland Revenue Service, Central Bank of Nigeria Statistical and Economic Reports quarterly,

covering the second quarter of 2013 to the fourth quarter of 2016. The outcome revealed that

despite the implementation of electronic taxation, tax revenue has not improved in addition to

federally collected revenue & tax-to-GDP ratio in Nigeria. However, the findings also revealed

that the federally collected revenue and tax-to-GDP ratio significantly decreased following the

implementation of e-taxation. Also, Tax Revenue decreased after the implementation, but the

mean difference was not statistically significant.

Alade (2018) assessed the effect of E-taxation on Company Income Tax (CIT) and Value Added

Tax (VAT). Using expo facto research design was adopted, and data were sourced from Federal

Inland Revenue Service covering six (6) years and three (3) quarters, spanning from the first

quarter of 2012 to the second quarter of 2018. The data obtained were evaluated with the aid of

paired sampled t-test. The outcome revealed an insignificant positive difference between the pre

and post company income tax revenue with the measurement variables, statistics and p-value

reported to be 0.833 and 0.421, respectively. Also, there was an insignificant positive difference

25
between the pre and post-value-added tax revenue withl0tstatistics and p-value of 0.520 and

0.612, respectively.

Akpubi and Igbekoyi (2019) scrutinised the influence the method of electronic taxation has on

tax compliance among a selected number of fast-food restaurants in Lagos state, Nigeria

(taxpayers’ perspective). The study used a survey research design. Data gathered from the

administration of structured questionnaire on SMEs within Lagos state were analyzed using

descriptive statistics, structural equation model analysis and regression. The study discovered

that the level of awareness (LOA) depicted a level of a significant positive relationship with tax

compliance (β= 0.276; t=2.689; p=0.008). Likewise, it was revealed that the perceived ease of

use (PEU) (β = 0.249; t= 2.331; p= 0.022) has a positive influence on tax compliance but was not

statically significant. The tax compliance cost (TCC) (β=-0.289; t= -2.568; p=0.012) revealed a

non-significant negative effect on tax compliance.

Marandu, Mbekomizeand Ifezue (2014) studied the determinants of tax compliance from social

marketing point of view. The study obtained data from 18 empirical studies published between

1985 and 2012 from across the globe, the study found lack of theoretical framework to help

guide the selection of determinants of tax compliance from several researchers. The study

suggested the development and use of theory-based set of relevant determinants of tax

compliance and tax policy makers should desist from the use of conventional coercive methods

used to compel tax compliance.

Amitabh et al. (2009) did a study on the antecedents of paperless income tax filing by young

professionals in India. The objective of this study was to study how young Indian professionals

will adopt or behave towards paperless or online filing of tax returns with the aim of enhancing

26
compliance. The regression analysis carried out found that the antecedents of young Indian

professionals depended on the perceived ease of the tax system, personal innovativeness in

information technology, relative advantage, performance of filing service, and compatibility. The

implication of the findings to the current study is that for any online system to succeed whether

for small, medium or large taxpayers’ category there must be the ease of use, innovativeness and

accessibility.

In Malaysia, Ling and Nawawi (2010) carried out a survey on Integrating ICT Skills and tax

software in tax education. The respondents were the tax practitioners and the study aimed at

establishing the necessary skills required by taxpayers to fully utilize a tax online system. The

study found that three skills are needed by a taxpayer to interact well with technology-based tax

system namely, spread sheet software, word-processing software and e-mail. The findings of this

study have got implications on the current study in that in analysing the effectiveness of

electronic filing system, one must not ignore the mandatory skills that would be users of the

system need to have. Failure to consider such skills may make the intention of the system not to

be realized as confirmed by Maede (2002). He confirmed that despite the heavy investment that

the Malaysian tax authority put in new online system, only 20% of the targeted taxpayers were

able to use it after three years of implementation. This was mainly attributed to lack of necessary

user skills like computer literacy; however, taxpayer’s behaviour also played a role.

Monica, Makokha and Namusonge (2017). spreading descriptive and inferential insights,

explored the impacts of e-charge framework on tax generation capability in local taxes

department of Kenya Revenue Authority (KRA). The data applied was primary data. The study

exposed that most tax payers intensely decided that they were able to completely access and

27
operate e-Tax system. Employee competence was an important predictor of the tax generation

proficiency with the results as (t= -2.243, P=.154>5%).

Makanga (2010) did a study on the adoption of technology as a strategic tool for enhancing tax

compliance in Kenya. The case study was based on Large Taxpayers which included companies

with a turn over Kshs. 750 million and above, or government ministries and corporations. The

objective of the study was to evaluate the role Technology would play in Kenya to enhance tax

compliance among large taxpayers. The study found that in the fast-changing business world,

technology has become part and parcel of any business growth.

Muita (2010) in her MBA thesis has also done a related study on the factors that influence

adoption and use of e-filing system among Large Taxpayers in Kenya. The study examined the

skills required by the users of e-filing, the technology required and the tax authority’s

preparedness in enhancing the adoption of tax compliance-based technology. The study found

that for e-filing to effectively take off in Kenya skills, infrastructure and a conducive business

environment are needed.

On the international level, Wang (2003) conducted a study entitled ‘The Adoption of Electronic

Tax Filing Systems: An Empirical Study’ in which he stated the factors affecting the adoption of

electronic tax-filing systems. Using the Technology Acceptance Model (TAM) as a theoretical

framework, his study introduced “perceived credibility” as a new factor that reflects the user’s

intrinsic belief in the electronic tax-filing systems and examines the effect of computer self-

efficacy on the intention to use an electronic tax-filing system. The study researched to a

conclusion that computer self-efficacy was found to be an important determinant of perceived

ease of use, perceived usefulness, and perceived credibility of the electronic tax-filing systems.

28
The findings of this study provided important implications for developing effective electronic

government services in general and effective electronic tax-filing systems in particular

Baratiand (2015) inspected electronic expense framework and the difficulties confronting

kermansah territory citizens in Iran using Spearman correlation coefficient. The researcher

applied primary data obtained from questionnaires administered to resident of the province. The

study exposed that technical and infrastructural variables (95/0), social influence (90/0), the

expected effort (51/0), legal issues (40/0), expected performance (32/0), information access

(18/0) and perceived risk(11/0) are factors of significance and more effect on the affecting

factors for the acceptance of electronic tax, respectively.

Ogoun and Ekpulu (2020) interrogated the relationship between educational level and tax

compliance in Nigeria. The study employs the ex post facto research design to ascertain how

government investment in education enhances tax compliance. The study covers 17 years (2002-

2018) for both tax revenue (a surrogate for tax compliance) and education expenditure (a

surrogate for educational level). From the empirical results, the study concludes that there is a

positive nexus between government expenditure on education and tax revenue.

Oladele, Aribaba, Adediran and Babatunde (2020) examined the impact of electronic tax

administration on tax compliance and the resultant effect on tax revenue. The quantitative

research design was employed using existing data sourced from the Federal Inland Revenue

Service (FIRS). Data were tax revenue posted seven years before and after the adoption of e-tax

administration by the FIRS in 2013. Data so sourced were analyzed using descriptive statistics

and pairwise t-test to ascertain if a difference exists and or relationship between pre-and post-e-

tax revenue. The study found a strong connection between the electronic tax system and tax

compliance (tax revenue) as shown by the pairwise test (p-value of 0.012<0.05). Also, the mean

29
tax revenue during post and pre-e-tax of (4466828.5714>3051200.0000); and an average annual

variation in overall tax revenue of N1.4trillion compared with pre-electronic tax period

demonstrated a significant difference. With these, the study affirmed that a strong association

exists between electronic taxation and tax compliance.

Saad (2014) carried out a study on tax knowledge, complexity and compliance based on

taxpayers’ view so as to uncover the reasons for non-compliance. A survey research design was

used to obtain data for analysis with the aid of thematic statistical techniques. The result revealed

that tax payers have inadequate technical knowledge and perceive tax system as complex and

therefore contributing to non-compliance behavior of tax payers.

Beeson, Soondram and Jugurnath (2016) assessed the determinants of income tax compliance in

Mauritius for individual tax payers. The study adopted primary survey design to obtain data

which was analyzed with the aid of thematic statistical analysis. The study result suggests that

tax knowledge impact significantly on tax compliance and that statutory audit, penalties personal

financial constraints perceptions of government expenditure influences compliance level. The

study concluded that reduction of non-compliance should be some collaborative efforts between

tax payers and tax administrative.

Marandu, Mbekomizeand Ifezue (2014) surveyed the determinants of tax compliance from social

marketing point of view. The study obtained data from 18 empirical studies published between

1985 and 2012 from across the globe, the study found lack of theoretical framework to help

guide the selection of determinants of tax compliance from several researchers. The study

30
suggested the development and use of theory-based set of relevant determinants of tax

compliance.

Palil and Mustapha (2011) evaluated the determinants of tax compliance in Malaysia. The study

used survey method to obtained data for analysis. The result suggested that tax compliance is

strongly influenced by taxpayer’s tax knowledge which varies significantly among respondents.

It further revealed the probability of being audited, perception of government spending,

penalties, personal financial constraints, and the influence of referent groups as determinants of

tax compliance in Malaysia.

In all the studies reviewed and to the best of the researchers’ knowledge, none of them examines

taxation in a digitalized Nigerian economy with focus on the challenge of compliance. Hence,

the need for the present study.

Raphael,Mfon and Patrick (2020)examined the effect of digitalization of economy on tax

compliance in Nigeria. The researcher adopted the survey strategy and use structured

questionnaire to collect data. The data was sourced from the Federal Inland Revenue Service

(FIRS) in Akwa Ibom State. The data was collected from the entire population of the staff at the

FIRS, which was forty (40). The simple percentage, descriptive statistics, and linear regression

techniques were used to analyze the data. The results suggest that tax compliance is negatively

influenced when economy is digitalized. It is therefore recommended that the government of

Nigeria should consider developing tax policy that would aid taxing e-transactions, tax education

31
and including taxation of e-transactions in the tax laws. Doing so would likely improve tax

compliance and thus boost digital transactions contribution to government revenue.

Baratiand Bakhshayesh (2015) inspected electronic expense framework and the difficulties

confronting kermansah territory citizens in Iran using Spearman correlation coefficient. The

researcher applied primary data obtained from questionnaires administered to resident of

kermansah province. The study exposed that technical and infrastructural variables (95/0), social

influence (90/0), the expected effort (51/0), legal issues(40/0), expected performance(32/0),

information access (18/0) and perceived risk(11/0) are factors of significance and more effect on

the affecting factors for the acceptance of electronic tax, respectively.

2.4 Summary of Literature Reviewed

The use of technology (e-filing) is compulsory for the tax administration activity as large sets of

data must be processed. But the technology must not be considered the objective, quite the

opposite it must be regarded as a means to gain efficiency. To achieve the excellence in the tax

administration activity, organizations must focus on the customer/taxpayer. As a consequence,

the most important concepts are “reducing the period of time between when the tax is generated

and the moment it is paid”, “decreasing the number of the human errors by automating ordinary

procedures”, “making possible to pay the tax any time and almost anywhere”, and “allowing any

employee to help every customer at the office”.

Bearing these objectives in mind, it is easy to infer that technology in tax administration means

integrated software with a one-stop-shop implementation; comprehensive work flow systems

where every document or form is included in the information system; easy-to-use internet

32
websites with online information and payment options; customer service network connected by

fast lines; mobility to allow service in remote areas and real-time process monitoring (Andarias,

2006). Technology has been looked at from different perspectives like the role, the requirements

(including user skills), attitude of users towards the use of technology, simplicity and the

taxpayer category. The studies have unanimously established that the uptake of technology in

achieving tax compliance is a gradual process that need not be hurried.

The greatest threat to electronic taxation in Nigeria is the activities of cyber criminals, who try to

compromise the integrity of the tax revenue service portals. Electronic tax fraud (cyber tax

crime) is a major challenge to the development and sustainability of electronic tax systems.

There is a need for a more detailed discussion of the impact of cybercrime on electronic taxation

and the potential threats of electronic tax fraud on the implementation of electronic tax systems

in Nigeria.

33
 CHAPTER THREE

RESEARCH METHODOLOGY

The researchers in this chapter (three) of this investigation, discussed the research design

employed, method use in data collection, method of data analysis techniques, model specification

and pre and post-test of e-tax, regression analysis.

3.1 Research Design

This refers to the structure, strategy and plan that we intend to use in order to get a reliable

information and answers to the research questions employed in this study (Saunders, Lewis, &

Thornhill, 2012). The researcher of this research work employed Ex-post facto design in

obtaining secondary data from the statistical bulletin of the Central Bank of Nigeria (CBN) and

reports of Federal Inland Revenue Service (FIRS), in examining electronic tax system and the

degree of compliance in Nigeria.

3.2 Population

The feasible population of this study is the Nigeria economy, based on the level of compliance to

e-taxation with respect to company income tax; value added tax, petroleum profit tax and capital

gains tax.

3.3 Sample and Sampling Techniques

The sample for this study was based on the availability of secondary data. To this end, data were

collected or drawn from Federal Inland Revenue Service and Central Bank statistical bulletin

covering from 2009 to 2020 years. The pre e-tax analysis covers a period 2009 – 2014 (6 years)

34
and the post e-tax cover from 2015 – 2020 (6 years). The reason for this is that e-tax was

introduced in Nigeria in 2015.

3.4 Method of Data Collection

The study employed secondary data that range from 2009 to 2020 which was extracted from

federal inland revenue service and central bank statistical bulletin covering from 2009 to 2020

(12) years based on the availability of data while employing variables such as company income

tax; value added tax, petroleum profit tax and capital gain tax as independent variables while tax

revenue was used as the dependent variable. The data collected were on quarterly period.

3.4 Model Specification

The model specified in this investigation was based on the conceptual and theoretical foundation,

hence in order to examine electronic tax system and the degree of compliance in Nigeria. The

model adopted by Bingilar, Edoumiekumo, Kpolode, and Nkak, (2020) was employed in this

investigation as well, however with different variables and statistical data. Below is the equation

and model developed:

TR = ƒ (CIT, VAT, CGT, PPT)

The above can be express in econometric form blow:

TR = α + δ1CIT + δ₂ VAT + δ3CGT + δ4PPT + u………………………..1

Where:

TR = Tax Revenue

CIT = Company income tax

VAT = Value added tax

CGT = Capital Gain tax

35
 PPT = Petroleum profit tax

α = Constant term

u = stochastic error term

3.5 Data Analysis Techniques

The research employs only quantitative method of data analysis. This was done in four folds:

firstly, the descriptive analysis was performed using the mean, maximum, minimum, skewness,

kurtosis and the probability of jarque-berra statistics. This is with the aim of describing the data

set to determine the normality of the series. Thus, p-value of Jarque Berra statistics higher than

the acceptable level of significance of 5% implies that the series is normally distributed. Since

normality of series is one of the fundamental assumptions of performing Ordinary Least Square

(OLS) regression, all the series were tested, and if not normally distributed.

Lastly, the study employed the simple linear regression analysis was used to determine the extent

to which each of independent variables contributes to the dependent variable and coefficient of

determination (R2) was employed to know the degree to which each of the independent variable

explained the effect on economic growth in Nigeria. Also, the study performed unit root test and

bounds test was carried out through the Auto-regressive distributed lag (ARDL) model for the

multiple regression analysis and estimation of long run was determined. Furthermore, the adjusted

R- square was used to explain the degree to which the independent variables combined affect the

variations in economic growth for the period of study and post estimation tests were conducted to

determine the reliability of the specified model.

36
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

This chapter deals with the presentation, analysis of data and discussion of findings. The chapter,

in essence, deals with the detailed econometric analysis of the impact of e- taxation on tax

compliance in Nigeria. Quarterly data on tax revenue, capital gain tax (CGT) companies income

Tax (CIT), and petroleum profit Tax (PPT) and value added tax (VAT) for the period of 2009 to

2020 were obtained from Central Bank of Nigeria (CBN) statistical bulletin, Federal Inland

Revenue Service Board (FIRS) and Nigeria Bureau of Statistic (NBS). Quarterly data for pre e-

taxation was from 2009 – 2014 while quarterly data for the post e-tax was from 2015 to 2020, a

tax period of 6 years respectively.

4.1 Data Presentation

The data employed and presented where obtained from Nigeria statistical bulletin and Federal

Inland revenue services.

37
Table 4.1: Presentation of Data (Pre Electronic Taxation) 2009 – 2014
YEAR TR CGT CIT PPT VAT
2009Q1 2197.6 0.4935 600.6 939.4 468400
2009Q2 2358.025 0.6293 616.965 1074.64 351440.725
2009Q3 2518.45 0.7651 633.32999 1209.88 234481.45
2009Q4 2678.875 0.9009 649.69499 1345.12 117522.175
2010Q1 2839.3 1.0367 666.06 1480.36 562.9
2010Q2 3286.600001 3.10365 663.15705 1877.917825 586.9634
2010Q3 3733.9 5.1706 660.2541 2275.47565 611.0268
2010Q4 4181.2 7.23755 657.35115 2673.033475 635.0902
2011Q1 4628.5 9.304500001 654.4482 3070.5913 659.1536
2011Q2 4723.3 9.207525 695.977525 3103.27335 672.003975
2011Q3 4818.10001 9.11055 737.50685 3135.9554 684.85435001
2011Q4 4912.8999 9.013575 779.036175 3168.63745 697.704725
2012Q1 5007.7 8.916600001 820.5655 3201.3195 710.5551
2012Q2 4957.174999 11.601425 856.286825 3067.581001 733.5872
2012Q3 4906.649999 14.28625 892.00815 2933.8432 756.61930001
2012Q4 4856.125 16.971075 927.729475 2800.10505 779.6514
2013Q1 4805.6000001 19.6559 963.4508 2666.3669 802.6835
2013Q2 4782.8500001 15.404375 1015.960775 2613.262025 802.7538
2013Q3 4760.100001 11.15285 1068.47075 2560.15715 802.8241
2013Q4 4737.350001 6.901325 1120.980725 2507.052275 802.8944
2014Q1 4714.600001 2.6498 1173.4907 2453.9474 802.9647
2014Q2 4471.400001 6.18785 1197.362325 2162.950725 794.0569
2014Q3 4228.200001 9.72589999 1221.23395 1871.95405 785.1491
2014Q4 3985.000001 13.26395 1245.105575 1580.957375 776.2413
Note:(i) TR = Tax Revenue;
(ii) CGT = Capital Gain Tax;
(iii) CIT = Company Income Tax;
(iv) PPT = Petroleum Profit Tax;
(v) VAT = Value Added Tax.
Source: FIRS website, CBN Bulletin, 2021

38
Table 4.2 Presentation of Data (Post Electronic Taxation) 2015 - 2020
QUARTER TR CGT CIT PPT VAT
2015Q1 3741.8 16.802 1268.9772 1289.9607 767.3335
2015Q2 3633.21535001 37.45235 1185.117225 1256.92255 782.5499
2015Q3 3524.6307 58.1027 1101.26 1223.8844 797.7663
2015Q4 3416.04605 78.75305 1017.39 1190.84625 812.9827
2016Q1 3307.4614 99.4034 933.54 1157.8081 828.1991
2016Q2 3487.58235 75.34762499 3038342.15 1248.4765 813.7363
2016Q3 3667.7033 51.291850001 6075750.77 1339.1449 799.2735
2016Q4 3847.82425 27.236075 9113159.325 1429.8133 784.8107
2017Q1 4027.9452 3.1803 12150568 1520.4817 770.3479
2017Q2 4351.18175 5.5339 9113261.0301 1757.25645 854.770925
2017Q3 4674.4183 7.887499999 6075954.1647 1994.0312 939.19395
2017Q4 4997.65485001 10.2411 3038647.24705 2230.80595 1023.616975
2018Q1 5320.89140001 12.5947 1340.3294 2467.5807 1108.04
2018Q2 5306.14762501 10.940275 1406.421675 2379.252625 1128.525275
2018Q3 5291.40385001 9.28585 1472.51395 2290.92455 1149.01055
2018Q4 5276.660075 7.631425 1538.606225 2202.596475 1169.495825
2019Q1 5261.9163 5.977 1604.6985 2114.2684 1189.9811
2019Q2 5184.49335 5.3624 1522.369025 1964.94965 1275.27855
2019Q3 5107.0704001 4.7478 1440.03955 1815.6309 1360.576
2019Q4 5029.64745001 4.1332000001 1357.710075 1666.31215 1445.87345
2020Q1 4952.2245 3.5186 1275.3806 1516.9934 1531.1709
2020Q2 5314.845875 7.01395 1393.53295 1639.85755 1666.590675
2020Q3 5677.46725 10.5093 1511.6853 1762.7217 1802.01045
2020Q4 6040.088625 14.00465 1629.83765 1885.58585 1937.430225

4.2 Data Analysis

4.2.1 Descriptive Statistics

Table 4.3: Descriptive of Statistics of Pre e-taxation Data

TR CGT CIT PPT VAT

Mean 4128.729 8.028781 854.8761 2323.908 49429.33
Median 4671.550 8.965087 799.8008 2533.605 777.9464
Maximum 5007.700 19.65590 1245.106 3201.320 468400.0
Minimum 2197.600 0.493500 600.6000 939.4000 562.9000
Std. Dev. 944.6209 5.509286 220.0825 730.1092 123899.4
Skewness -0.960281 0.248984 0.513153 -0.518255 2.461971
Kurtosis 2.364611 2.249134 1.795069 1.950024 7.785400
Jarque-Bera 4.092276 0.811772 2.505162 2.176804 47.14526
Probability 0.129233 0.666386 0.285766 0.336754 0.000000
Sum 99089.50 192.6907 20517.03 55773.78 1186304.
Sum Sq. Dev. 20523098 698.1013 1114035. 12260368 3.53E+11
Observations 24 24 24 24 24
Source: Author’s computation using e-views 9

Table 4.3 revealed the descriptive statistics of the variable employed in the study. The table show

the mean of tax revenue (TR), capital gain tax (CGT), company income tax (CIT), petroleum

39
profit tax (PPT) and value added tax (VAT), for 24 quarters, from 2009 to 2014, which is 6 years

before the introduction of e-taxation.

In Table 4.3 above the first and second row shows the average value of the series as the mean

and the median values. Specifically, the mean values for TR. CGT, CIT, PPT and VAT stood at

about ₦4128.729b, ₦8.028781b, ₦854.8761b, ₦2323.908 and N49429.33b respectively. The

standard deviation values shown on Table 4.3 indicate the dispersion or spread in the data series.

The higher the value, the higher the deviation of the series from it’s mean and the lower the

value, the lower the deviation of the series from the mean. The variable with a higher degree of

dispersion from the mean is the VAT, this further explains its variations over the years under

study. TR is the least volatile of the variables with a value of 944.6209.

The asymmetry of the distribution of the series around the mean is usually measured by the

skewness. Symmetric distribution has zero skewness value. The above table indicted that TR and

PPT are negatively skewed meaning that the distribution has a long tail to the left while CGT,

CIT and VAT are positively skewed indicating that the distributions have a long right tail.

The kurtosis row in the above table measures the flatness and peakedness of the distribution of

the series. Kurtosis value of 3 is said to be the normal distribution hence, TR, CGT, CIT and PPT

with the kurtosis value of less than 3 are considered to have flat distribution (platykurtic) and

VAT is seen to have heavy tail because its value 7.78 is more than normal.

The result of Jarque Bera (JB) test for normality is given for each variable as shown in the table

above. From the result, the null hypothesis of normal distribution for TR, CGT, CIT, and PPT is

accepted due to the sufficiently high p-value while the null hypothesis for is VAT is rejected

since the p-value is reasonably low (less than 0.05).

40
Table 4.4: Descriptive of Statistics of Post e-taxation Data
TR CGT CIT PPT VAT
Mean 4601.680 23.62296 2026195. 1722.754 1114.107
Median 4974.940 10.37520 1492.100 1711.784 1065.828
Maximum 6040.089 99.40340 12150568 2467.581 1937.430
Minimum 3307.461 3.180300 933.5373 1157.808 767.3335
Std. Dev. 838.4965 27.90023 3656461. 413.2001 352.7527
Skewness -0.204819 1.498852 1.583947 0.237638 0.872679
Kurtosis 1.611769 3.945244 4.156900 1.804872 2.707516
Jarque-Bera 2.094990 9.879713 11.37397 1.654219 3.131818
Probability 0.350815 0.007156 0.003390 0.437312 0.208898
Sum 110440.3 566.9510 48628682 41346.11 26738.56
Sum Sq. Dev. 16170755 17903.72 3.08E+14 3926890. 2861993.
Observations 24 24 24 24 24
Table 4.4 revealed the descriptive statistics of the post electronic taxation variables used in the

study. The table show the mean of tax revenue (TR), capital gain tax (CGT), company income

tax (CIT) petroleum profit tax (PPT) and value added tax (VAT) for 24 quarters, from 2015 to

2020, which is 6 years after the introduction of e-taxation.

In Table 4.4 above the first and second row shows the average value of the series as the mean

and the median values. Specifically, the mean values for TR. CGT, CIT, PPT and VAT stood at

about ₦4601.680b, ₦23.62296b, ₦2026195b, ₦1722.754 and N1114.107b respectively. The

standard deviation values shown on Table 4.4 indicate the dispersion or spread in the data series.

The higher the value, the higher the deviation of the series from its mean and the lower the value,

the lower the deviation of the series from the mean. The variable with a higher degree of

dispersion from the mean is the PPT, this further explains its variations over the years under

study. CGT is the least volatile of the variables with a value of 27.90023.

The asymmetry of the distribution of the series around the mean is usually measured by the

skewness. Symmetric distribution has zero skewness value. The above table indicted that TR is

negatively skewed meaning that the distribution has a long tail to the left while CGT, CIT, PPT

and VAT are positively skewed indicating that the distributions have a long right tail.

41
The kurtosis row in the above table measures the flatness and peakedness of the distribution of

the series. Kurtosis value of 3 is said to be the normal distribution hence, only CGT and CIT with

the kurtosis value of approximately 3.94 and 4.16 respectively are assumed to have peaked

(leptokurtic) relative to normal distribution. Other series such as TR, PPT and VAT have flatter

distribution (platykurtic) with kurtosis value less than 3.

The result of Jarque Bera (JB) test for normality is given for each variable as shown in the table

above. From the result, the null hypothesis of normal distribution for TR, PPT and VAT are

accepted due to the sufficiently high p-value while the null hypothesis for CGT and CIT is

rejected since their p-value is reasonably low (less than 0.05).

4.2.2 Unit Root Test

Table 4.5 Philip-Perron Unit Root Test (Pre Electronic Taxation)

Variables Level Critical value 1st Diff Critical value Decision
TR -2.927091 -3.020686 -1.070073 -3.029970 I(I)
CGT -1.958397 -3.020686 -1.879062 -3.673616 I(I)
CIT -1.202231 -3.673616 -2.286550 -3.690814 I(I)
PPT -0.892260 -3.658446 -2.041462 -3.673616 I(I)
VAT -2.572747 -3.020686 -3.846160 -3.029970 I(I)
Source: Author’s Computation Using Eviews 9

Table 4.6 Philip-Perron Unit Root Test (Post Electronic Taxation)

Variables Level Critical value 1st Diff Critical value Decision
TR -0.391134 -2.998064 -1.909506 -3.004861 I(I)
CGT -1.554129 -2.998064 -3.665999 -3.004861 I(I)
CIT -1.625738 -2.998064 -4.116435 -3.004861 I(I)
PPT -0.659302 -1.956406 -1.805336 -1.957204 I(I)
VAT -3.542193 -1.956406 -1.180582 -1.957204 I(I)
Source: Author’s Computation Using E-views 9

42
The results of the unit root test in Table 4.5 and Table 4.6 is for pre tax nd post tax regime

respectively. The result reveals that all the variables were stationary at 1 st difference. Hence, the

study then concludes that both the dependent and independent variables used in the model were

integrated of order one, that is, I(1). Since the PP results indicate that the series are of the same

order of integration, we proceed to conduct the Johansen co-integration tests to check if there is a

long run relationship in the model.

4.2.3 Johansen Co-integration

Table 4.7 Johansen Co-integration for Pre E-Taxation Period

Unrestricted Cointegration Rank Test (Trace)

Hypothesized Trace 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.992052 155.6842 69.81889 0.0000

At most 1 * 0.838843 68.65701 47.85613 0.0002
At most 2 * 0.638179 35.80024 29.79707 0.0090
At most 3 * 0.593555 17.50135 15.49471 0.0246
At most 4 0.069460 1.295821 3.841466 0.2550

Trace test indicates 4 cointegrating eqn(s) at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
Table 4.8 Johansen Co-integretion for Post E-Taxation Period
Unrestricted Cointegration Rank Test (Trace)

Hypothesized Trace 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.838974 96.24964 69.81889 0.0001

At most 1 * 0.681446 56.07352 47.85613 0.0070
At most 2 * 0.624440 30.90635 29.79707 0.0371
At most 3 0.344559 9.360909 15.49471 0.3330
At most 4 0.003044 0.067070 3.841466 0.7956

Trace test indicates 3 cointegrating eqn(s) at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

Since all the variables were stationary at first difference as shown in Table 4.5 and Table 4.6, the

researcher performed the Johansen co-integration test to examine the existence of co-integrating

43
relationship. The p-value of the trace statistics for the null hypothesis of no co-integrating

relationship in Table 4.7 and 4.8, is less than 0.05, meaning that the null hypothesis can be

rejected. In addition, the value trace statistic (155.6842) and (96.24964) in Table 4.7 and Table

4.8 respectively is greater than the 0.05 critical values of 69.81889, affirming that the null

hypothesis that there is no co-integrating relationship among the variables cannot be accepted. In

effect, there exists at most 1 co-integrating relationship among the variables TR, CGT, CIT, PPT

and VAT as confirmed by the co-integrating test.

4.2.4 Ordinary Least Square Estimation

Table 4.9 Long-run OLS estimation of Pre E-Taxation

Dependent Variable: LOGTR
Method: Least Squares
Date: 01/03/23 Time: 11:15
Sample (adjusted): 2009Q2 2014Q1
Included observations: 20 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.

C 1.283337 0.147688 8.689527 0.0000

LOGCGT 0.013129 0.004534 2.895556 0.0111
LOGCIT 0.312068 0.010438 29.89604 0.0000
LOGPPT 0.629183 0.015891 39.59348 0.0000
LOGVAT 0.006090 0.001559 3.905956 0.0014

R-squared 0.999221 Mean dependent var 8.316815

Adjusted R-squared 0.999014 S.D. dependent var 0.257482
S.E. of regression 0.008086 Akaike info criterion -6.585129
Sum squared resid 0.000981 Schwarz criterion -6.336196
Log likelihood 70.85129 Hannan-Quinn criter. -6.536534
F-statistic 4812.995 Durbin-Watson stat 1.610220
Prob(F-statistic) 0.000000

Source: Author’s Computation Using E-views 9

From Table 4.9 the result reveals that CGT, CIT, PPT and VAT exert positive influence on TR.

This relationship was also found to be significant. CGT was positive and statistically significant

at 5%. The explanation for this is that CGT has a co-efficient value of 0.013129 with a p-value

less than 0.05 level of significance, which means that a 1 unit increase in CGT result in 1.3

percent increase in tax revenue. Further, CIT was statistically significant and positively influence

44
TR. A 1 unit change in CIT result in 31.2% increase in tax revenue. With regard to PPT, the

results show that, PPT was positive and statistically significant in explaining variations in TR.

With a coefficient value of 0.629183, it means that increase in PPT by 1% leads to an increase of

TR by 62.9%. Lastly, VAT was positive and significant, a 1 unit increase in VAT increases TR

by 0.6 percent in the period before the introduction of e-taxation.

The result further shows that the R2 adjusted was 0.999014, indicating that 99.9 percent of the

dependent variable was explained by the independent variable in the model. In addition the F-

Statistics was 4812.995 with a p-value less than 0.05 alpha which shows that the model has a

good fit. The DW statistics of 1.610220 indicated that there is relative absence of serial

autocorrelation in the model.

Table 4.10 Long-run OLS estimation of Post E-Taxation

Dependent Variable: LOGTR
Method: Least Squares
Date: 01/03/23 Time: 12:17
Sample: 2015Q1 2020Q4
Included observations: 24

Variable Coefficient Std. Error t-Statistic Prob.

C 3.041801 0.207800 14.63813 0.0000

LOGCGT -0.019172 0.005517 -3.474785 0.0025
LOGCIT 0.000600 0.001246 0.481043 0.6360
LOGPPT 0.398867 0.022465 17.75514 0.0000
LOGVAT 0.352611 0.020274 17.39214 0.0000

R-squared 0.991394 Mean dependent var 8.417442

Adjusted R-squared 0.989582 S.D. dependent var 0.189270
S.E. of regression 0.019318 Akaike info criterion -4.872493
Sum squared resid 0.007091 Schwarz criterion -4.627066
Log likelihood 63.46992 Hannan-Quinn criter. -4.807381
F-statistic 547.1992 Durbin-Watson stat 0.573208
Prob(F-statistic) 0.000000

Source: Author’s Computation Using E-views 9

From Table 4.10 the result reveals that CGT was negative and significant in explaining the

changes in TR; PPT and VAT exert positive influence on TR while CIT has no significant effect

45
on TR. CGT has negative effect on TR and statistically significant at 5%. The implication is that

1 unit increase in CGT result in 1.9 percent decrease in tax revenue. Further, PPT was positive

and statistically significant in explaining variations in TR. With a coefficient value of 0.398867,

it means that increase in PPT by 1% leads to an increase of TR by 39.8%. Lastly, VAT was

positive but insignificant in explaining the variations in TR within the period after the

introduction of e-taxation.

The result further shows that the R2 adjusted was 0.989582, indicating that 98.9 percent of the

dependent variable was explained by the independent variable in the model. In addition the F-

Statistics was 547.1992 with a p-value less than 0.05 alpha which shows that the model has a

good fit.

4.2.5. Paired Sampled T-Test

Table 4.11 Paired Sample Statistics

Mean N Std. Deviation Std. Error Mean

Pair 1 PostCGT 23.6230 24 27.90 5.69
PreCGT 8.0288 24 5.51 1.12
Pair 2 PostCIT 2026195.09 24 3656460.66 746371.91
PreCIT 854.88 24 220.08 44.92
Pair 3 PostPPT 1722.75 24 413.20 84.34
PrePPT 2323.91 24 730.11 149.03
Pair 4 PostVAT 1114.11 24 352.75 72.01
PreVAT 49429.33 24 123899.42 25290.86
Pair 5 PostTR 4601.68 24 838.50 171.16
PreTR 4128.73 24 944.62 192.82
Source: Author’s computation using SPSS 22
Table 4.12: Paired Sampled T-Test of Tax Revenue (TR), Capital Gain Tax (CGT),
Company Income Tax (CIT), Petroleum Profit Tax (PPT) and Value Added Tax (VAT)
before and after the introduction of E-Taxation

Paired Differences
Sig. (2-
Mean Std. Deviation t df tailed)

46
Pair 1 PostCGT - PreCGT 15.59 31.67 2.412 23 .024
Pair 2 PostCIT - PreCIT 2025340.22 3656560.43 2.714 23 .012
Pair 3 PostPPT - PrePPT -601.15 504.44 -5.838 23 .000
Pair 4 PostVAT - PreVAT -48315.22 124035.70 -1.908 23 .069
Source: Author’s computation using SPSS 22

It could be deduced from the table above that pair 1 has a mean value of 15.59 billion and a

standard deviation of 31.67. Based on the subtraction order, it implies that the value of post

capital gain tax revenue (after the advent of e-taxation) was 15.59 billion higher than pre capital

gain tax revenue (before the advent of e-taxation) for the periods this study covered. The t-

statistics and p-value reported to be 2.412 and 0.024 respectively implies that there is a positive

significant difference between post and pre CGT revenue. Put differently, this means that e-tax

payment has a positive significant effect on CGT revenue in Nigeria.

Similarly, the outcome in Table 4.12 revealed that pair 2 has a mean value of 2025340.22 billion

and a standard deviation of 3656560.43. Based on the subtraction order, it implies that the value

of post CIT revenue (after the advent of e-taxation) was 2025340.22 higher than pre CIT revenue

(before the advent of e-taxation) for the periods this study covered. The t-statistics and p-value

reported to be 2.714 and 0.012 respectively implies that there is a positive and significant

difference between post and pre CIT revenue. Put differently, this connotes that e-tax payment

has a positive significant effect on CIT revenue in Nigeria.

Meanwhile, it could be deduced from the table above that pair 3 has a mean value of

-601.15 billion and a standard deviation of 504.44. Based on the subtraction order, it means that

the value of post PPT revenue (after the advent of e-taxation) was -601.15 lesser than pre PPT

revenue (before the advent of e-taxation) for the periods this study covered. The t-statistics and

p-value reported to be -5.838 and 0.001 respectively implies that there is a negative significant

47
difference between post and pre PPT revenue. Put differently, this means that e-tax payment has

a negative significant effect on PPT revenue in Nigeria.

Furthermore, the result of pair 4 has a mean value of -48315.22 billion and a standard deviation

of 124035.70. Based on the subtraction order, it means that the value of post value added tax

revenue (after the advent of e-taxation) was -48315.22 lesser than pre VAT revenue (before the

advent of e-taxation) for the periods this study covered. The t-statistics and p-value reported to

be -1.908 and 0.069 respectively implies that there is a negative insignificant difference between

post and pre VAT revenue. Put differently, this means that e-tax payment has a negative

insignificant effect on VAT revenue in Nigeria.

4.2.6 Test of Hypothesis

H1: E-Taxation has no significant effect on CGT in Nigeria

From Table 4.9 above reveals that CGT has a coefficient value of 0.013129, a t-statistic value of

2.895556 with a corresponding p-value of 0.0111 in the pre e-taxation period, which is

significant at 5 percent. In the post e-taxation period in Table 4.10, CGT had a coefficient of -

0.019172 and t-statistics value of -3.474785 with a corresponding p-value of 0.0025 which is

significant at 5% alpha level. This means that CGT contributes significantly to tax revenue (TR)

in the pre and post e-taxation period covered by this study. In addition, from Table 4.11 it can be

deduced that the mean score of CGT in the pre e-taxation period was 8.0288 and 23.6230 in the

post e-taxation period. Table 4.12 indicated that the mean difference in pre and post e-taxation

period of CGT was 15.59 and a standard deviation of 31.67, t-statistics was 2.412 and p-value

was 0.024, this implies that there was a significant difference in the pre and post e-taxation CGT

revenue for the period of study. The null hypothesis that e-taxation has no significant effect on

48
CGT is rejected. It was concluded that e-taxation has a significant effect on CGT revenue in

Nigeria.

H2: E-taxation has no significant effect on CIT revenue in Nigeria.

From Table 4.9 above the result shows that CIT coefficient value was 0.312068, a t-statistic

value of 29.89604 with a corresponding p-value of 0.0001 in the pre e-taxation period, which is

significant at 5 percent. In the post e-taxation period of CIT in Table 4.10, the coefficient was

0.000600 and t-statistics value of 0.481043 with a corresponding p-value of 0.6360 which is

insignificant at 5% alpha level. This means that CIT in the pre e-taxation period contributes

significantly to tax revenue (TR) but was insignificant in the post e-taxation period covered by

this study. In addition, from Table 4.11 the result indicated that the mean score of CIT in the pre

e-taxation period was 854.88 and 2026195.09 in the post e-taxation period. Table 4.12 shows

that the mean difference in pre and post e-taxation period of CIT was 2025340.22 and SD was

3656560.43, t-statistics was 2.714 and p-value was 0.012, which means that there was a

significant difference in the pre and post e-taxation CIT revenue for the period of study. The null

hypothesis that e-taxation has no significant effect on CIT revenue is rejected. It was concluded

that e-taxation has a significant effect on CIT revenue in Nigeria.

H3: E-Taxation has no significant effect on PPT revenue in Nigeria

Analysis of result presented in Table 4.9 above indicated that PPT in the pre e-taxation period

has a coefficient value of 0.629183, a t-statistic value of 39.59348 with a corresponding p-value

of 0.0001, which was significant at 5 percent. PPT in the post e-taxation period shown in Table

4.10 had a coefficient of 398867 and t-statistics value of 17.75514 with a corresponding p-value

49
of 0.0001 which is significant at 5% alpha level. This implies that PPT contributes significantly

to tax revenue (TR) in the pre and post e-taxation period covered by this research. In addition,

Table 4.11 revealed that the mean score of PPT in the pre and post e-taxation period was 2323.91

and 1722.75 respectively. Table 4.12 indicated that the difference mean and standard deviation in

pre and post e-taxation period of PPT was -601.15 and 504.44 respectively, t-statistics was -

5.838 and p-value was 0.001, this implies that there was a negative significant difference in the

pre and post e-taxation PPT revenue for the period of study. The null hypothesis that e-taxation

has no significant effect on PPT is rejected. It was concluded that e-taxation has a significant

effect on PPT revenue in Nigeria.

H4: E-Tax has a no significant effect on VAT revenue in Nigeria.

From Table 4.9 above reveals that VAT has a coefficient value of 0.006090, a t-statistic value of

3.905956 with a corresponding p-value of 0.0014 in the pre e-taxation period, which is

significant at 5 percent. In the post e-taxation period in Table 4.10, VAT had a coefficient of

0.352611 and t-statistics value of 17.39214 with a corresponding p-value of 0.0001 which is

significant at 5% alpha level. This means that VAT contributes significantly to tax revenue (TR)

in the pre and post e-taxation period covered by this study. In addition, from Table 4.11 it can be

deduced that the mean score of VAT in the pre e-taxation period was 49429.33 and 1114.11 in

the post e-taxation period. Table 4.12 indicated that the mean difference in pre and post e-

taxation period of VAT was -48315.22 and a standard deviation of 124035.70, t-statistics was -

1.908 and p-value was 0.069, this implies that there was no significant difference in the pre and

post e-taxation VAT revenue for the period of study. The null hypothesis that e-taxation has no

significant effect on VAT is accepted. It was concluded that e-taxation has no significant effect

on VAT revenue in Nigeria.

50
Table 4.13 Hypothesis test showing decision rule
Research Hypothesis t-statistic from Probability Decision
table 4.12 rule
Hypothesis 1. (H1; Post CGT – Pre CGT) 2.412 0.024 Rejected
Hypothesis 2. (H2: Post CIT – Pre CIT) 2.714 0.012 Rejected
Hypothesis 3. (H3; Post PPT – Pre PPT) -5.838 0.001 Rejected
Hypothesis 4. (H4; Post VAT – Pre VAT) -1.908 0.069 Accepted
Source: Author’s Computation using SPSS 22
The data generated in Table 4.13 shows that from the t-statistic value for post CGT- pre CGT,

post CIT – pre CIT, post PPT – pre PPT and post VAT – pre VAT was 2.412, 2.714, -5.838 and -

1.908 respectively with a p-value of 0.024, 0.012, 0.001 and 0.069 respectively. From the result,

it is clear that three (3) null hypotheses (H 1, H2 and H3) were rejected and one (1) null hypothesis

(H4) was accepted.

4.2.7 Post Estimation Post

The diagnostic test is conducted to determine if the series fulfilled the assumption of normality

of distribution, autocorrelation (Breusch-Godfrey Serial Correlation LM Test) and

heteroscedasticity (Breusch-Pegan-Godfrey Test). The result of the diagnostic test is presented

below.

4.2.7.1 Post Estimation Test

Figure 4.1 Test of Normality

6
Series: Residuals
Sample 2009 2020
5 Observations 12

4 Mean 3.89e-11
Median 2447.206
Maximum 204707.0
3 Minimum -199776.8
Std. Dev. 93319.36
Skewness -0.009404
2
Kurtosis 4.495469

1 Jarque-Bera 1.118391
Probability 0.571669
51
0
-200000 -100000 1 100001 200001
Source: Author’s Computation using E-views 9

Normality test is important to determine the distribution of data in the model. From figure 4.1 it

can be deduced that the null hypothesis that the variables are not normally distributed can be

rejected because of the reasonably high p-value of the Jarque-Bera statistics which is greater than

0.05, at 0.571669. The implication is that the residuals are normally distributed and has not

violated the assumption of normality.

4.2.7.2 Serial Correlation LM Tests

One assumption the OLS model must not violate is no serial correlation of the residuals. If they

become serially correlated, parameter estimates are still linearly unbiased and consistent, but

they are no longer having minimum variance as expected. The Lagrange Multiplier (LM) version

is applied in this study.

Table 4.14 Residual Serial Correlation LM Test

Breusch-Godfrey Serial Correlation LM Test:F-statistic1.759920 Prob.
F(2,5)0.2638Obs*R-squared4.957614 Prob. Chi-Square(2)0.0838Source: Author’s
Computation using E-views 9

In the LM testing for serial correlation, the null hypothesis of no serial correlation is rejected if

the probability value (p-value) is smaller than 0.05 alpha level of significance. From the result in

Table 4.14 the null hypothesis is accepted at 5% level of significance because the LM-Stat

corresponding to 2 lags used in this study is 1.759920 and the p-value is 0.2638 (26.38%) which

is more than 5%.

52
Table 4.15: The Heteroscedasticity Test Result
Heteroskedasticity Test: Breusch-Pagan-GodfreyF-statistic18.15719 Prob.
F(4,7)0.0008Obs*R-squared10.94510 Prob. Chi-Square(4)0.0272Scaled explained
SS6.509221 Prob. Chi-Square(4)0.1642

Source: Author’s Computation using E-views 9

The null hypothesis of no heteroscedasticity cannot be rejected if the p-value of the Breusch –

Pagan statistic is greater than the specified 5% levels of significance. The result in Table 4.15

Shows p-value greater than 0.05 indicating our model is devoid of heteroscedasticity.

4.2.7 Stability Diagnostic Test

Figure 4.2 Cusum of Squares Test

1.6

1.2

0.8

0.4

0.0

-0.4
From the figure
2014 above,
2015the dotted
2016 red lines
2017indicate
2018the critical
2019 bounds.
2020The figure above shows

that the residuals of long-run TR of

CUSUM areSquares
relatively stable. This is especially the case over the period
5% Significance

2009 – 2020. The results imply that the null hypothesis of no stability of the long-run TR can be

rejected at 5% significance level.

4.3 Discussions of Findings

The finding about the null hypotheses formed that major plank of the discussion:

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4.3.1 Pre and Post E-Taxation Effect on CGT in Nigeria

From Table 4.9 above the result indicated that a one unit change in CGT in pre e-taxation period

will cause a 1.3 increase in TR. The result reveals that CGT has a p-value of 0.0111 which

indicated that was significant at 5 percent. In Table 4.10, a one unit increase in CGT will cause

1.9% decrease in TR, with p-value of 0.0025 which is significant at 5% alpha level. This means

that CGT contributes significantly to tax revenue (TR) in the pre and post e-taxation period

covered by this study. Meanwhile, in Table 4.12, the result show a mean difference in pre and

post e-taxation period of CGT was 15.59 and a standard deviation of 31.67, t-statistics was 2.412

and p-value was 0.024, this implies that there was a significant difference in the pre and post e-

taxation CGT revenue for the period of study. The null hypothesis that e-taxation has no

significant effect on CGT is rejected. It was concluded that e-taxation has a significant effect on

CGT revenue in Nigeria.

The findings is in tandem with Jankeeparsad, Jankeeparsad, and Nienaber (2016) and Gotora

and Samuel (2018) who reported that e-taxation has improved the tax filling and tax compliance

in Nigeria. However, the finding is in contrast with that of Chijioke, Leonard, Bossco and Henry

(2018); Olaoye and Atilola (2018); Alade (2018) who reported that e-taxation has not

significantly improves tax compliance.

4.3.2 Pre and Post E-Taxation Effect on CIT in Nigeria

Result presented in Table 4.9 indicated that a unit increase in CIT significantly increases TR by

31.2 percent in the pre e-taxation period while in the post e-taxation period CIT in Table 4.10

was insignificant at 5% alpha level. This means that CIT in the pre e-taxation period contributes

significantly to tax revenue (TR) but was insignificant in the post e-taxation period covered by

this study. In addition, from Table 4.11 the result indicated that the mean score of CIT in the pre

54
e-taxation period was 854.88 and 2026195.09 in the post e-taxation period. Table 4.12 shows

that the mean difference in pre and post e-taxation period of CIT was 2025340.22 and SD was

3656560.43, t-statistics was 2.714 and p-value was 0.012, which means that there was a

significant difference in the pre and post e-taxation CIT revenue for the period of study. The null

hypothesis that e-taxation has no significant effect on CIT revenue is rejected. It was concluded

that e-taxation has a significant effect on CIT revenue in Nigeria. The result agreed with the

findings of Jankeeparsad, Jankeeparsad, and Nienaber (2016) and Gotora and Samuel (2018) that

e-taxation significantly enhance tax filling and tax compliance in Nigeria. However, the finding

is at variance with that of Chijioke, Leonard, Bossco and Henry (2018); Olaoye and Atilola

(2018); Alade (2018) who reported that e-taxation has not significantly improves tax compliance.

4.3.3 Pre and Post E-Taxation Effect on PPT in Nigeria

In Table 4.9 the coefficient of PPT in the pre e-taxation period indicated that a unit increase in

PPT increases TR by approximately 63% with a corresponding p-value of 0.0001, which was

significant at 5 percent. PPT in the post e-taxation period shown in Table 4.10 had a coefficient

of 398867 and t-statistics value of 17.75514 with a corresponding p-value of 0.0001 which is

significant at 5% alpha level. This implies that PPT contributes significantly to tax revenue (TR)

in the pre and post e-taxation period covered by this research. In addition, Table 4.11 revealed

that the mean score of PPT in the pre and post e-taxation period was 2323.91 and 1722.75

respectively. Table 4.12 indicated that the difference mean and standard deviation in pre and post

e-taxation period of PPT was -601.15 and 504.44 respectively, t-statistics was -5.838 and p-value

was 0.001, this implies that there was a negative significant difference in the pre and post e-

taxation PPT revenue for the period of study. The null hypothesis that e-taxation has no

55
significant effect on PPT is rejected. It was concluded that e-taxation has a significant effect on

PPT revenue in Nigeria.

The result agreed with the findings of Jankeeparsad, Jankeeparsad, and Nienaber (2016) and

Gotora and Samuel (2018) that e-taxation significantly enhance tax filling and tax compliance in

Nigeria. However, the finding is at variance with that of Chijioke, Leonard, Bossco and Henry

(2018); Olaoye and Atilola (2018); Alade (2018) who reported that e-taxation has not

significantly improves tax compliance.

4.2.4 Pre and Post E-Taxation Effect on VAT in Nigeria

From Table 4.9 and Table we saw that VAT was statistically significant in explaining the

variations in TR, in the pre and post e-taxation era. This means that VAT contributes

significantly to tax revenue (TR) in the pre and post e-taxation period covered by this study.

Also, from Table 4.11 it can be deduced that the mean score of VAT in the pre e-taxation period

was 49429.33 and 1114.11 in the post e-taxation period. Table 4.12 indicated that the mean

difference in pre and post e-taxation period of VAT was -48315.22 and a standard deviation of

124035.70, t-statistics was -1.908 and p-value was 0.069, this implies that there was no

significant difference in the pre and post e-taxation VAT revenue for the period of study. The

null hypothesis that e-taxation has no significant effect on VAT is accepted. It was concluded

that e-taxation has no significant effect on VAT revenue in Nigeria. The finding is in line with

Chijioke, Leonard, Bossco and Henry (2018); Olaoye and Atilola (2018); Alade (2018) who

reported that e-taxation has not significantly improves tax compliance but opposed to the finding

of Jankeeparsad, Jankeeparsad, and Nienaber (2016) and Gotora and Samuel (2018) that e-

taxation significantly enhance tax filling and tax compliance in Nigeria.

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 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Summary of Findings

The aim of the study was to examine the effect on e-taxation on tax compliance in Nigeria. For

this purpose, four research questions and hypotheses were formulated to guide the study. Data

were collected from the FIRS website, CBN Statistical bulletin and the NBS website. The data

covered a period of 12 years (6 years before the introduction of e-taxation and 6 years after the

introduction of e-taxation). The data collected quarterly data of capital gain tax (CGT), company

income tax (CIT), petroleum profit tax (PPT), value added tax (VAT) and tax revenue (TR). The

ordinary least squares (OLS) and the pair sample t-test method was used in analysing the data.

The finding is summarised as follow.

(1) Implementation of e-taxation has a significant effect on capital gain tax in Nigeria. From

Table 12 the t-stat for post CGT – Pre CGT e-taxation was 2.412 with p-value of 0.024 <

0.05. Null hypothesis (H1) was rejected.

(2) Implementation of e-taxation has a significant effect on company income tax in Nigeria.

From Table 12 the t-stat for post CIT – Pre CIT e-taxation was 2.714 with p-value of 0.012 <

0.05.The null hypothesis (H2): was rejected.

(3) Implementation of e-taxation has a negative significant effect on petroleum profit tax in

Nigeria. From Table 12 the t-stat for post PPT – Pre PPT e-taxation was

-5.838 with p-value of 0.001 < 0.05. The null hypothesis (H3): was rejected.

(4) Implementation of e-taxation has a negative insignificant effect on value added tax in

Nigeria. From Table 12 the t-stat for post VAT – Pre VAT e-taxation was -1.908 with p-

value of 0.069 > 0.05. The null hypothesis (H4): was accepted.

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5.2 Conclusion

In line with the findings from our investigation, we therefore concluded that E-taxation system

has a great statistical effect on Nigeria system. This study employed tax revenue, capital gain tax,

company income tax, petroleum profit tax and value added tax. The findings revealed that three

out of the explanatory variables were significant while on was statistically insignificant. Our

conclusions are based on the analysis of secondary data drawn from statistical bulletin and

Federal Inland Revenue web-site.

5.3 Limitations of the Study

As it is the case with all studies, this study is associated with some limitations. The findings of

this study are therefore to be considered in light of the following limitations:

(i) The study covers only 12 years (6 years quarterly data for pre e-taxation and 6 years

quarterly data for post e-taxation) and used only five (5) variables. This may have

affected the outcome of the study since some other tax components like custom and

excise duties, education tax etc. were not included.

(ii) The continued depreciation of the value of the naira may also have affected the outcome

of the study since the strength of the naira in the pre e-taxation period is not what it is

today that there is e-taxation in place.

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5.4 Recommendation

Our recommendations are based on the outcome of the reseach, hence based on the outcome, we

therefore recommended that:

i. Monetary authorities in Nigeria should strengthen the e-taxation so as to reduce evasion

in the area of value added tax and petroleum profit tax where findings have indicated

lapses.

ii. Small and Medium Scale entity should be brought into the net of e-tax compliance, this is

because they pool a major sources of inflow to any economy;

iii. Training and retraining should be given to tax personnel in order to avoid the occurrence

of malware, hackers and tax evasion.

iv. State and local government should imbibe the e-tax method as it will further boost

revenue generation and economic development in the long-run.

5.5 Contribution to Knowledge

1. This study will serve as source of literature for scholars who intend to undertake research

in similar area.

2. The study has further strengthen the fact that the introduction of e-taxation is good for the

Nigerian economy as it has increase federally generated revenue. It has also shown that

there are lapses in the PPT and VAT. This knowledge will enable the collecting body

make necessary adjustment.

3. The timing of the study further gives a contemporary position of e-taxation in the country

and for other aims of government to adopt it.

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5.6 Areas for further studies

Since one study can exhaust all areas that require examination, we recommend the following

areas for further investigation:

1. Studies should be carried out to examine the effects of e-taxation on education tax,

custom and excise tax, stamp duties etc.

2. Studies should also be conducted on the impact of e-taxation on listed manufacturing and

other firms in Nigeria as this will help ascertain the difficulties they face in terms of e-

taxation.

3. Studies should be carried out also on the strengthen and weakness of the e-taxation

system to identify areas of improvement.

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