Tax non-compliance among small corporate taxpayers in Nigeria : the influence of tax tribunal and tax compliance costs

This study investigates the determinants of small corporate taxpayers’ tax non-compliance in Nigeria. This study develops a model of small corporate taxpayers’ non-compliance, which is underpinned by the theories of deterrence and social exchange. The model contains both economic (audit, complexity, penalty and tax compliance costs) and non-economic (bribery, fairness perception, public goods supply, perception of the tax tribunal and tax rate perception) determinants of tax non-compliance. This study extends the current literature by investigating the direct effect of perception of the tax tribunal and incorporating the mediating effect of tax compliance costs. The study administered questionnaires to a sample of 450 small corporate taxpayers operating in Kano state of Nigeria. PLS-SEM was used to test the hypotheses. This study found that audit, complexity, fairness perception, perception of the tax tribunal, tax compliance costs and tax rate perception have significant direct effects on tax non-compliance. Tax compliance costs are found to mediate the influence of audit, complexity, perception of the tax tribunal and tax rate perception on tax non-compliance. The findings of this study provide important insights to the tax authority, policy-makers and future researchers in understanding the tax non-compliance of small corporate taxpayers. To curtail tax non-compliance in Nigeria, the tax authority should widen its audit net and make the information about detecting tax evaders public to serve as a warning to potential evaders. The tax system should be fully automated to reduce the complexity and high compliance costs borne by the taxpayers. The tax authority should make the procedures of the tax tribunal available to the public through the mass media to increase positive perceptions about the tribunal and reduce non-compliance accordingly. The current tax rate structure should be made fairer by giving a lower rate to small corporate taxpayers to eliminate the perception of unfair tax burden.