Determinants of tax compliance behaviour of SMEs in Nigeria : the moderating role of perceived service orientation and perceived corruption

The issue of low compliance among small and medium enterprises (SMEs) has become a serious concern in Nigeria. This is particularly evident when the number of SMEs who did not pay tax rose from 22.2% in year 2014 to 65% in year 2015. In respond to this issue, this study examined the determinants of tax compliance behaviour (TCB) among SMEs in Nigeria. The study examined the effects of work- family financial commitment (WFFC), fuel subsidy removal (FSR), and the role of perceived service orientation (PSO) and perceived corruption as potential moderators of the relationship between economic factors, psychological factors and TCB. Partial Least Squares path modeling was employed to test the study hypotheses. Based on a sample of 281 SME's owners/managers, the results provided support for most of the hypothesized relationships of the study. In particular, WFFC, FSR and tax complexity were significantly and negatively related to TCB. The findings suggest that the variables are important in further explaining the puzzle of TCB. The probability of detection, incentives and public governance quality (PGQ) were significantly and positively related to TCB. However, tax rates and tax knowledge were found to be insignificant. Furthermore, the results of the moderating effect indicated that six of the 12 hypotheses were significant. Perceived corruption showed a significant moderating effect on the relationship between tax rates, the probability of detection, incentives, tax knowledge and TCB. In addition, PSO also moderate the relationship between incentives, PGQ and TCB. The results indicate that PSO could assist in reducing the climate of deterrence between the taxpayers and the relevant tax authorities. Thus, relevant tax authorities should integrate these variables into their processes in order to enhance the level of tax compliance. An enhanced level of tax compliance could lead to the overall improvement in the revenue collection of the states and the country at large.