ABSTRACT
This
study examined tax knowledge, tax attitude, and perception of tax fairness as
predictors of tax compliance among income earners in Lagos state. A total of
three hundred working class adults were selected purposively from Lagos state
to participate in the study.
Result
from the study indicated positive relationship between tax attitude and tax
compliance (r = 0.71, p<.05). This implies that participants who had
positive attitude towards tax also had high scores on tax compliance, tax
perception and tax compliance (r = 0.63, p<.05). This implies that
participants who had positive perception towards tax also had high scores on
tax compliance, and significant positive relationship between tax knowledge and
tax compliance (r = 0.47, p<.05). This implies that participants who scored
high in tax knowledge reported high scores on tax compliance. Also, tax
attitude significantly predicts tax compliance, ? = 0.71, t (286) = 12.62, p<0.05. Tax attitude explained 48% of
variance in tax compliance scores, R2
= 0.48, F (1,286) = 159.23, p<0.05. Similarly, result indicated
that tax perception significantly predicts tax compliance, ? = 0.80, t(286) =
16.83, p<0.05. Tax perception
explained 26% of variance in tax compliance scores, R2 = 0.26, F
(1,186) = 283.39, p<0.05. In the
same vein, result indicated that tax knowledge significantly predicts tax
compliance, ? = 0.58, t(286) = 20.67, p<0.05.
Tax knowledge explained 43% of variance in tax compliance scores, R2 = 0.43, F (1,286) = 410.80, p<0.05.
Findings
from this study suggests that feelings of unfairness and liability from tax
need to be addressed before effective tax compliance can be realized.
Keywords:
tax knowledge, tax attitude, tax compliance, perceived tax fairness
LIST
OF TABLES
Table 1: Table
of Mean and standard deviation of variables
Table 3.1a: Pearson r correlation between tax attitude
and tax compliance
Table
3.1b: Regression analysis for predictive relationship between tax attitude and
tax compliance
Table 3.2a: Pearson r correlation between tax perception
and tax compliance
Table
3.2b: Regression analysis for predictive relationship between perception of
fairness and tax compliance
Table 3.3a: Pearson r correlation between tax knowledge
and tax compliance
Table
3.3b: Regression analysis for predictive relationship between tax knowledge and
tax compliance
LIST
OF FIGURE
Figure
1: Influence of Tax Attitude, Perception of Fairness, and Tax Knowledge on Tax
Compliance. Based on Fallan (1999), Schisler (1995), Gillingham and Richardson (2005)
CHAPTER
ONE
INTRODUCTION
There is a popular saying attributed to Benjamin
Franklin that goes thus: “the only things inevitable are death and taxes”. The
inevitability of taxes is tainted by the fact that people can choose to either
comply or evade tax. To this end, the concept of tax compliance has been
constructed and studied with a view to understand tax payers behaviour towards
tax payment. The psychology behind taxation is a relatively new field of
inquiry under the domain of economic psychology and by extension
industrial/organisational psychology. This research is an inquiry into
determinants of tax compliance in Lagos state with tax attitude, perception of
tax fairness, and tax knowledge serving as explanatory variables.
Kirchler
(2007) defined tax compliance as the willingness of tax payers to pay their
taxes. According to Alm (1991), tax compliance is the accurate reporting of
income and claiming of expenses in accordance with the stipulated tax laws. Franzoni
(1999) defined it as a true reporting of the tax base, correct computation of
the liability, timely filing of the return; and timely payment of amounts due. Tax compliance refers to the willingness of people to
comply with tax authorities by paying their taxes (Peter & Dijke, 2007). According
to Brown and Mazur (2003), tax compliance is multi-faceted measure and it can
be defined by considering three distinct types of compliance such as payment
compliance, filing compliance, and reporting compliance.
Failure
to report or pay tax is referred to as tax noncompliance. Tax compliance is a complex set of behaviour which has
been researched from two major perspectives: economic and psychological. Psychological
research into tax compliance considers the impact of several factors. The
underlying reason is that any behaviour has more than one explanation, tax
compliance appears to be an important construct with more than one dimension.
The relevance of tax attitude to the study of tax
compliance is underlined by Kirchler et al. (2008) who proposed that taxpayer
who has favourable attitude towards tax evasion is expected to be less
compliant and equally taxpayer with unfavourable attitude is likely to be more
compliant. Perception of tax fairness plays a fundamental role in tax
compliance because people who feel a tax law is unfair are more likely to evade
tax than those who feel the tax law is fair. Perception of tax fairness is
often viewed from a social comparison standpoint. Individuals compare their
situations with other groups and select information from those that are similar
to theirs. Gcabo & Robinson (2007) distinguished between internalization,
identification and compliance, and specified how these determine tax evasion
behaviours namely: the individual exchange relationship with the government,
social orientation, and opportunities for tax evasion. These factors have both
direct and indirect effects on tax attitudes.
Knowledge of tax enables taxpayers to know how their
taxes are computed and how to report taxes. It has been observed that some
people do not know how to file tax reports that’s why they do not comply with
taxes. The complexity of tax systems in many countries have been criticised,
most laws are usually too complex to be understood and studies show that
knowledge about taxes is generally limited among the general populace. This
influences compliance because the individual may not know exactly how much to
pay, how to go about payment, when payment is due etc.