ABSTRACT

The study on ethnic diversity, culture and tax compliance in Nigeria aimed to determine the effect of ethnic diversity on tax compliance in Nigeria, to determine the effect of culture on tax compliance in Nigeria, to determine the factors affecting tax compliance in Nigeria, to determine the extent to which ethnic diversity and culture affect tax compliance in Nigeria. The study made use of primary data which are gotten from the distribution of the research questionnaires; the sample size for the study is 100. The study made use of the Pearson correlation method for the analysis. The study therefore concluded that there is a statistically significantly (0.00) strong relationship (0.876) between the responses of the respondents that said that there is significant relationship between culture and tax compliance in Nigeria and those that said that there is a significant relationship between  culture and tax compliance in Nigeria. The study also made useful recommendation to assist the federal government in decision making.

CHAPTER ONE: INTRODUCTION

1. Background Of The Study

Governments over the world require funds to finance its policies and objectives. It requires sufficient resources to finance and carry out its functions and duties and one of the ways it can achieve these is through the imposition of taxes on its citizens. Taxes from the major source of revenue to the government in most countries, especially those that are developed (Alabede, 2001). Taxation can be seen as the act by government authorities in imposing a levy on the income, profit, or wealth of individuals, partnerships, and corporate organizations.

According to Ola (2001), tax is a compulsory payment made by citizenry upon demand by the government. It serves as a means of pooling resources needed for the operationalization of government policies and developmental agendas. Nightingale (2001) opines that taxes are compulsory levies by government for which taxpayers may or may not receive any returns directly proportionate to the amount paid nevertheless; they enjoy the benefits for which the money may be put to use in the society. Eiya (2012) asserts that the imposition of taxes by the government is premised primarily on revenue generation and economic stability. In the words of the researcher, taxes are levies imposed on personal income, business profit, interest, dividend, and discount, or royalties for the purpose of raising revenue.

According to the Chartered Institute of Taxation of Nigeria (CITN, 2010), Kiabel and Nwokah (2009) and Nzotta (2007) the proportion of personal income taxes to the Nigerian government’s total revenue has been appalling and on the decline and one of the reasons for this has been attributed to poor tax compliance. Modugu, Eragbhe and Izedonmi (2012) assert that this poor tax compliance behaviour has been captured in literature as the “compliance puzzle” and is a challenging phenomenon experienced across countries, especially the less developed economies.

Tax compliance has become a great concern to both developed and developing countries worldwide (Alabede, Ariffin & Idris, 2011b; Igbeng, Tapang & Usang, 2012; Torgler, 2003). This compliance issue may be seen from the time taken by taxpayers to even comply with taxes, or the actual amount collected as taxes when compared to the budgeted. Bergman (1998) suggests that tax compliance ‘is what the state assumes is legally owed by taxpayers, but the state and taxpayers do not necessarily share the same interpretation’. The extent to which taxpayers dispute the meaning of the tax law can depend on a number of things, including their basic willingness to comply with a tax system.

The basic concept of the ‘tax gap’ of non-compliance seems to be inadequate. The ‘tax gap’ definition and measure are far too simplistic for practical policy purposes since successful tax administration requires taxpayers to cooperate in the operation of a tax system rather than to be forced to carry out every aspect of their tax obligations. Tax law cannot cope with every eventuality (see for example James and Wallschutzky, 1995) and therefore has to be supplemented with supporting provisions. Administrative procedures and decisions as well as appeal arrangements all have a part to play but the tax system cannot work properly without a reasonable degree of willing compliance on the part of taxpayers themselves.

1. Statement Of The Problem

Low tax compliance is a matter of serious concern in many developing countries. This is because it limits the capacity of government to raise revenue for developmental purposes. This implies that the higher the revenue, the more likely government will put in place developmental plans for the enhancement of the living standard of the people, but due to most cultural beliefs and ethnic diversity that does not see the need of paying their taxes to the government as at when due, this in turn tends to affect the government in accomplishing most state or even federal government projects, since the government depends on the taxes from the citizens of the country; therefore the level at which most people comply to tax payment will determine the how effective to government will be in carrying out most projects. Finally, several research has been carried out on tax compliance but not even a single research has been carried out on ethnic diversity, culture and tax compliance in Nigeria.

1. Objectives Of The Study

The main objective of the study is to examine ethnic diversity, culture and tax compliance in Nigeria. Other specific objective of the study includes:

1. to determine the effect of ethnic diversity on tax compliance in Nigeria.
2. to determine the effect of culture on tax compliance in Nigeria.
3. to determine the factors affecting tax compliance in Nigeria.
4. to determine the extent to which ethnic diversity and culture affect tax compliance in Nigeria.
5. to proffer possible solutions to the problems.
   1. Research Question

1      What is the effect of ethnic diversity on tax compliance in Nigeria?

1. What is the effect of culture on tax compliance in Nigeria?
2. What is the factors affecting tax compliance in Nigeria?
3. To what extent has ethnic diversity and culture affect tax compliance in Nigeria?
4. What are the possible solutions to the problems?
   1. Research Hypothesis

Hypothesis 1

H0       Ethnic diversity and culture has no significant effect on tax compliance in Nigeria.

H1       Ethnic diversity and culture has a significant effect on tax compliance.

Hypothesis 2

Ho: there is no significant relationship between culture and tax compliance in Nigeria.

Hi: there is significant relationship between culture and tax compliance in Nigeria

Hypothesis 3

Ho: culture has no significant effect on tax compliance in Nigeria.

Hi: culture has significant effect on tax compliance in Nigeria

Hypothesis 4

Ho: there is no significant relationship between culture and tax compliance in Nigeria.

Hi: there is significant relationship between culture and tax compliance in Nigeria

1. Scope Of The Study

The study on ethnic diversity, culture and tax compliance is limited to Nigeria.

1. Significance Of The Study

The study on ethnic diversity, culture and tax compliance will be of immense benefit to the entire country in the sense that it will enable the Government to ensure proper and transparent use of tax revenue as this will help increase tax compliance because it will be seen that the tax paid is contribution towards the general good and welfare of the entire citizens. The study will also enable tax filling procedure to be made less complex by providing relevant and understandable guideline about tax information with respect to self assessment system. Finally, the study will contribute to the body of existing literature and knowledge to this field of studies and basis for further research.

1. Operational Definition Of Terms

Ethnic:    Ethnic; relating to a population subgroup (within a larger or dominant national or cultural group) with a common national or cultural tradition.

Diversity:        diversity is a range of different things.

Culture:   Culture is the social behavior and norms found in human societies.

Tax  Tax is a mandatory financial charge or some other type of levy imposed upon a taxpayer (an individual or other legal entity) by a governmental organization in order to fund various public expenditures.