Title: ENHANCING TAX COMPLIANCE AND REVENUE GENERATION IN NIGERIA: STRATEGIES AND CHALLENGES
Authors:
Adenike Moronke Lawal, Olusola Esther Igbekoyi (Ph.D) and Muyiwa Emmanueldagunduro
Abstract:
Tax compliance and revenue generation are critical components of any nation’s economic development agenda. In Nigeria, as in many other countries, the effective collection of taxes plays a pivotal role in funding public services, infrastructure development, and social welfare programs. The purpose of this study was to evaluate the impact tax compliance on Nigeria’s capacity to collect taxes. An ex-post facto research design was employed in this study. The Central Bank of Nigeria Statistical Bulletin and the Federal Inland Revenue Service Management were the main sources of the secondary data used in this study. The dataset used in this study spanned the years 2001 through 2021, and it was evaluated using Johansen’s co-integration test and descriptive statistics. The findings indicated that as the tax rate and penalty rate increase over time, Nigeria’s tax revenue tends to rise as well, suggesting that elevated tax rates and stricter penalties are associated with increased tax revenue generation. The study also discovers that increased audit penalty rates may discourage taxpayers from adhering to tax regulations, leading to a reduction in tax revenue, while lower audit penalty rates may encourage compliance and result in higher tax revenue. The study concludes that there exists a statistically significant positive long- and short-term relationship between Nigeria’s tax revenue and the tax rate and penalty rate. Based on the findings, it is recommended that policymakers carefully consider the implications of audit penalties on tax collection efforts. Efforts should be made to strike a balance between enforcing tax laws and maintaining an environment conducive to voluntary compliance among taxpayers.
Keywords: Tax compliance, Tax rate, Tax revenue, Tax penalty. Tax audit penalties.
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